Five things charities need to know about budget 2015

The spending cuts headlines

The chancellor announced £30bn in cuts over the next year, the bulk of which will come from departmental budgets (£13bn) and welfare spending (£12bn). CLG Local Government’s budget is due to fall £13.7bn to £10.5bn by 2015/16 and there’s also £200m coming out of the Cabinet Office’s budget, which may mean bad news for the Office for Civil Society – watch this space.

Gift Aid

The cap on gift aid claims under the small donations scheme will rise from £5,000 to £8,000 from April 2016, which is expected to lead to a further £15m claimed by the sector. Currently, claims are well below initial projections when comparing the government’s impact assessment (PDF, 72KB) to HMRC’s provisional data on the costs of tax relief for charities (PDF, 20KB); £6m out of £50m was claimed in 2013/14 (88% underspent) and £23m out of £85m was claimed in 2014/15 (73% underspent).

Raising the cap will help those already benefiting from the scheme, but it’s unlikely to address the restrictive claiming requirements that have stopped people signing up so far. We’ve covered the problems with the scheme before in our joint briefing (PDF, 470KB). There’s a review of GASDS planned for 2016, which we’re told is waiting on full and final data from the scheme’s first year of operation. We’re going to continue pushing to get this happening as soon as possible.

Also reannounced were the government plans for gift aid digital. Legislation expected later this year will aim to make it easier for people to allow intermediaries (eg Just Giving) to complete gift aid claims on their behalf for their donations. We’ll continue talking to HMRC to make sure this proposal achieves its potential.

LIBOR and VAT giveaways

If any rabbits were pulled out of hats for the sector, it was for military charities. A further £75m of LIBOR fines will be going to veteran support and regimental charities over the next year.

Blood bike and search and rescue charities will also be added to the VAT refunds scheme announced in the last Autumn statement. These are obviously very welcome, but the expansion of the scheme also speaks to the fact that EU law is no true barrier to a wider reform of VAT exemptions for charities, where the political will exists.

Diverted profits tax

There’s been some talk (see Civil Society) about the new diverted profits tax potentially having an impact on charities’ trading subsidiaries. There’s mention in the budget papers of ‘specific exclusions’ for some groups, but precious little detail. We should get a clearer picture when legislation is published next week alongside the finance bill.

Charity Authorised Investment Funds

Missing from the chancellor’s speech (possibly because it’s such a mouthful), was the news that the government is in the early stages of stakeholder consultation over developing a structure that would bring new investment funds established for charitable purposes under FCA regulation. There’ll evidently be a balance to be struck here between improving confidence in social investment and not placing too many burdens on the market as it tries to make itself more accessible to smaller charities.

 

And now read Karl’s five things I wish the chancellor had said.

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Michael Birtwistle Michael is our senior policy officer, covering issues around charity tax and finance (including social investment) and the impact of the economy on the sector.

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