In the Chancellors’ budget for growth, with plans to halve inflation and reduce debt, it was pleasing that the sector was specifically mentioned in the budget speech.
Top of the announcements for the sector was the £100m support package for local charities and community organisations who are doing “brilliant work” to “help people struggling in tough times” – it was acknowledged that local charities “reach people in need that central or local government cannot”. An additional £10m was also pledged over the next 2 years to assist the sector in playing a more significant part in suicide prevention, and £63m was provided for public leisure centres, many of which are operated by charities.
Cultural industry reliefs – increased rates applicable for a further two years
In a move to protect theatres, orchestras, museums and galleries from continuing economic challenges, it is pleasing to see that the increased rates of tax relief for qualifying costs incurred on productions and exhibitions will continue for a further 2 years. This will mean that for the period from 1 April 2023 to 31 March 2025, Theatre Tax Relief (“TTR”) and Museum and Galleries Exhibition Tax Relief (“MGETR”) will continue to be available at the increased rates of 45% for non-touring and 50% for touring productions, while Orchestra Tax Relief (“OTR”) will be available at 50%. From 1 April 2025, the rates will fall to 30%/35%, and from 1 April 2026, the rates of relief for TTR and MGETR will fall again back to their ‘normal’ levels of 20%/25%, and OTR will return to 25%. This should assist relevant charitable organisations to continue their production activity for the public to enjoy. As the Chancellor said, they “do such a brilliant job at attracting tourists to London and the UK”.
MGETR extended to 31 March 2026
The MGETR previously had a sunset clause within the legislation meaning that it was available until 31 March 2024; however, thankfully, this has been extended to 31 March 2026. It is important that qualifying organisations claim this relief as and when they are eligible to demonstrate its importance to the sector.
Cultural industry reliefs – definition of qualifying expenditure
As a result of Brexit, there will also be changes to the definition of qualifying expenditure which will be amended to ‘expenditure on goods and services that are used or consumed in the UK.’ However, for ongoing productions that have not concluded by 1 April 2024, organisations may continue to claim EEA expenditure until 31 March 2025.
Charity tax reliefs
Charity tax reliefs will be restricted to UK charities from April 2023, rather than the current position, where they are available to charities that meet the relevant criteria and are based in the UK, EU or EEA. Any charities already registered as a charity for tax purposes in the UK will have a transitional period until April 2024, when it is expected the reliefs will no longer apply.
The reliefs for Community Amateur Sports Clubs will also apply to UK clubs only going forwards with similar transitional provisions.
For UK donors, this will also impact the availability of Gift Aid on donations to EU and EEA charities.
Social investment tax relief expiry
Social investment tax relief will expire on 5 April 2023, so the income tax and CGT reliefs will no longer be available from 6 April 2023.
VAT
Ironically on the eve of VAT’s 50th birthday in the UK, there was no mention of it in the Chancellor’s main speech.
There are not many mentions of VAT in the background documents either, but it was good to see the proposed consultation on VAT reliefs for energy-saving materials will include consideration of restoring the relief to relevant charitable buildings.
Previously announced measures:
Personal tax allowance and thresholds
The personal allowance and personal tax thresholds are frozen, which means that more people will start paying tax and therefore, there may be donors that can Gift Aid their donations when previously this was not the case.
Corporation tax rate
The corporation tax rate will increase from 19% to 25% for companies with profits in excess of £250,000 from 1 April 2023. This means that companies that make donations to charities will benefit from 25% tax relief rather than the previous 19%.
Business rates relief
Charity trading subsidiaries may benefit from changes to business rates relief for retail, hospitality and leisure businesses which is being extended and increased from 50% to 75% up to £110,000 per business in 2023/24.
VAT
The VAT registration threshold of £85,000 and the deregistration threshold of £83,000 will not change at least until 1 April 2024, meaning that more charities may be required to register on a compulsory basis.
If you have any questions in relation to what we have mentioned above, please get in touch with your normal BHP contact.