Tax Update for Charities – June 2020

19th June 2020

Tax Update for Charities – June 2020

Various taxation updates affecting the Not for Profit sector have been announced, including VAT, Gift Aid, and the impact of the coronavirus pandemic.

VAT

  • Zero rating of e-publications was brought forward to 1 May 2020, but it was rushed so the legislation is quite vague.  In particular, there are questions around:
    • E-learning resources, and whether there is a limit to the amount of audio/video that can be included in the teaching before it is no longer zero rated
    • Music manuscripts, which seem to be excluded unless they are “printed as part of a booklet”, which of course isn’t possible if the resource is digital
  • E-publications do not need to have been printed in the past to now be zero rated
  • Making Tax Digital soft landing (particularly around digital links) has been extended to April 2021
  • The VAT deferral is not going to be extended, so organisations must submit VAT returns as normal and pay the VAT in full on payments due after 30 June 2020.
  • Any VAT payments deferred between 20 March and 30 June must be paid in full by 31 March 2021.

Coronavirus

  • HMRC are being quite unforgiving where charities have had a change of activities that have resulted in, say, a significant change to partial exemption (eg, charity shops had no income in the quarter).  The Charity Tax Group (CTG) are trying to get some concessions on this, especially where activities changed as a result of an organisation offering exceptional support to the NHS or the vulnerable, but for now there are no allowances.  There may be some clawback of input VAT, especially around buildings.
  • Where events have been cancelled (NOT postponed) but the payee has agreed to donate the amount instead of receiving a refund, this can now be gift aided without needing to be refunded and re-donated (provided there is a valid gift aid declaration)
  • Large charity retailers are suffering due to state aid restrictions (generally only applicable where charity has >40 shops) but a briefing paper has been put through and the government are in discussions to push through an exemption on the basis that charity shops don’t significantly distort competition

Gift Aid

  • No update on the issue with claiming gift aid on donations made through Facebook Donate – HMRC maintain that the audit trail is not clear enough
    • Claims will be approved and paid, but there is a danger of clawback at a later date if there is an investigation
    • However, CTG have stated that they would be willing to support a charity that was being investigated and so do encourage charities not to shy away from making a claim. It is important to note though that the charity must believe that they have sufficient documentation and can reconcile amounts to specific donors, particularly during the Covid-19 crisis when cashflow may be an issue.

Other

  • There is still an intention to review business rates this year, but it is unclear currently what effect that is likely to have on businesses.

Please contact our Taxation Team for further guidance on any of the above issues.

About the Author

Liv Burrell

Tax and Audit Manager

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