The 2009 Budget was an opportunity for the Chancellor to announce a package of defined measures that would have specifically targeted charities that play a vital role in times of recession, such as those aimed at alleviating social deprivation and poverty. Whilst the focus of press commentary has been on the ‘headline grabbers’ such as the new 50% tax rate, and though many of the announcements made in the Chancellor’s Budget 2009 Report will have an impact on charities, hidden behind these were a number of clear ‘nods’ to the sector.
Gift Aid: Higher-rate tax donors
The Treasury is “exploring ideas to improve Gift Aid.” Whilst many organisations continue to lobby the Government with ideas to make Gift Aid simpler, such as the introduction of an ‘opt-out’ scheme, the Government has commissioned research into the effect of redirecting higher-rate relief from donors to charities.
For the so-called ‘non-dom’ taxpayers, it is also intended that the remittance basis rules will be changed to ensure that for those paying on the remittance basis, tax relief under Gift Aid is available where the individual pays the £30,000 Remittance Basis Charge.
Substantial donors
The Government has considered its response to the consultation on the anti-avoidance rules around substantial donors to charity. The Budget helpfully announced a further informal consultation with the sector to develop new rules based around an effective anti-avoidance purpose test. Whilst this is good news, the Government does not intend to legislate for these rules until 2010.
More encouraging, however, was the news that, with effect from 23 April 2009, the threshold of relievable gifts which a person may make before becoming a substantial donor has increased. The threshold of £100,000 in a period of six years will be increased to £150,000 in the same period.
Social Investment Wholesale Bank
To support the long-term growth of a thriving third sector, the Government will consult on a Social Investment Wholesale Bank. The Office of the Third Sector has confirmed that they will report back with proposals. A Social Investment Wholesale Bank would be a wholesaler of social investment finance, designed to provide long-term support to the third sector.
Hardship Fund
A new £20 million Hardship Fund has been launched to provide grant support to third sector organisations, delivering front-line services to the most vulnerable and disadvantaged in society, that have been affected by the recession, with demonstrable resource constraints due to cash-flow difficulties This came as a welcome supplement to the £42.5m action plan announced in February.
Charity authorised investment funds
The Government will consult shortly in conjunction with the Charity Commission on ways to bring Common Investment Funds and Common Deposit Funds more fully under the FSA’s regulation, whilst preserving their existing tax reliefs.
Loss-making charitable companies
The Finance Bill 2009 provides for a temporary extension to the rules for carrying back trading losses. Losses incurred in accounting periods ended between 24 November 2008 and 10 November 2010 can be carried back 3 years (rather than just one year). The carry-back to the 2 earlier years is restricted to a maximum of £50,000.
VAT rate
The temporary reduction in the standard rate of VAT to 15% will continue until the end of 2009.
Conclusion
The Budget 2009 was one of the most eagerly awaited in recent years. As the economy struggles to sustain the growth of the ‘green shoots’ some commentators have detected, it was up to the Chancellor to take action through targeted policy announcements. Many announcements made in the Pre-Budget Report 2008 that would have increased the tax burden on certain entities were, in fact, deferred. Whilst hidden, a set of announcements specifically target to help the third sector were made. Although the measures are clearly welcome, we await the results of the research and consultations which the Government announced.
Click here to download a copy of Vantis' full summary of the Chancellor's Budget 2009 Report.
For further information, please contact Helena Kanczula or Vantis’ Charity & Not for Profit Group. Alternatively, please complete the online enquiry form below.