What 2017’s Autumn Budget Does and Doesn’t Do for Charities

This week’s budget made few mentions of the voluntary sector, and you might be forgiven for thinking the Chancellor had forgotten all about it.  Scratch beneath the surface, however, and some changes can be found that will impact on charities which we explore below.

What the budget does for charities

• Gift Aid – perhaps most significantly for charities, the Gift Aid regime will be simplified. The middle threshold of the scheme will be scrapped, meaning charities can claim a higher level of benefit on donations up to £100.  New legislation will formalise existing extra-statutory concessions.  These changes have been welcomed by the Charity Tax Group, although some have suggested that removing small benefits from the scheme entirely would have been more helpful for smaller charities.

• VAT Recovery – an “Accident Rescue Charities Grant Scheme” is introduced, to help accident rescue charities to recover VAT.  For context, the charity sector as a whole currently suffers an estimated £1.5bn in irrecoverable VAT each year.  Some rebate schemes already exist for certain types of charities, and this scheme will expand the relief further.  Recovery will remain an unaddressed issue for the remainder of the sector.

• VAT Threshold – The freezing for 2 years of the threshold at which organisations must register for VAT purposes at £85,000 will be of comfort to smaller charities (the fear had been that it will be dropped).  Similarly, the current rates of Insurance Premium Tax (IPT) will remain fixed despite fears that they might be increased.

• Libor Charity Funding Scheme – The scheme’s last tranche (of £36 million) has been released and will be spent on charities supporting the armed forces and emergency services.

• Indirect assistance – Less directly, extra budget funding pledged to the NHS and to address homelessness may relieve pressure on health-related and homelessness charities.  That said, the budget promised very little to the voluntary sector in the way of specific extra grants or funding.

What the budget doesn’t do

The government has ignored many of changes proposed by the voluntary sector.  These include:

• Charity Commission funding – No increase to the Commission’s annual grant – could this result in charities being levied an annual fee?

• European Social Fund – No replacement offered for the fund, which will come to an end in 2020 following Brexit.

• Dormant assets – No direction has been made on the expenditure of dormant assets in the voluntary sector.

• Tech investment – No investment for programmes providing charities with training in finance and technology, in which they would greatly benefit from support.

• Business Rates Relief – The Charity Finance Group and others have long been calling for the rates relief available to charities to be extended, to assist those occupying commercial property.

• Local authorities and social care – No extra support has been made available for local authorities or social care services, which puts extra pressure on charities to help vulnerable groups in society such as the elderly, the disabled and the homeless.

Overall, the budget provides some concessions and stability in relation to taxation, but promises little in the way of additional funding, and has avoided a number of concerns raised by the sector.  The financial pressures that many charities face continue to be exacerbated by austerity policies, which increase demand for charities’ services, and high levels of inflation, which both decrease the value of donations received and make it more difficult for donors to give to charity.  This week’s budget does little to acknowledge or address these issues.

If you would like more information on any of the above issues or how best to manage your charity’s finances following the Budget, please do get in touch with Ben Brice in the Charities team.