The Spring Statement this year comes at a time when all of us are suffering from increasing costs of living due to soaring energy prices and rising inflation. On top of this, although there have been calls for the previously announced rise in National Insurance contributions to be scrapped, it is thought that this will be implemented, which will increase the cost of employing staff and reduce take-home pay for employees.
Charity income is unlikely to keep up with inflation and, therefore, charities need to consider the impact of all of this on their ability to deliver their charitable activities. In addition, it is likely that the demand for charity services will continue to rise.
The last two Spring Statements were made in the backdrop of the Covid pandemic and provided assistance to organisations and workers to help them get by.
This week, we expect the Chancellor to provide an update on the economy’s health and the progress made since the Autumn Budget. Although there are unlikely to be any significant tax or spending announcements, we may see some smaller, more targeted funding pledges or policies. For example, we may see funding packages for organisations that assist the most vulnerable in society. The Chancellor has said that the Government will be “putting in place policies to help families meet the rising costs of living”.
Some industry bodies are calling for an extension to the reduced VAT rate for hospitality to provide a lifeline for businesses that continue to struggle due to changes in demand following the end of the pandemic and, now, due to increased costs.
Hopes for the future
Although I do not predict any immediate announcements relating to the tax reliefs available to charities, a few hopes for the future are set out below:
- A more simplified Corporation Tax Return CT600E for charities, so that the information provided to HMRC is meaningful
- Exemption for charities from Making Tax Digital for Corporation Tax
- An increase in the small trading exemption from the current level of £80k
- An increase in the Gift Aid Small Donation Scheme limits
- Resolution to the irrecoverable VAT issue for the charity sector
Summary
Charities need to prepare budgets that take account of the increased costs of operating and scenario plan the options available to them to deliver their activities and maximise their impact. To be sustainable, charities need to broaden their range of income streams and ensure that they operate in a tax-efficient structure.
For more information or assistance, please get in touch with Rachelle Rowbottom at rachelle.rowbottom@bhp.co.uk.
