Update from Kubernesis Partnership: Charities and the Budget 2020

Thursday, March 12, 2020 10:13 AM | Farah Mendlesohn (Administrator)
  1. BUDGET 2020 AND CHARITIES

    This year’s UK Budget was the first for many years to say nothing specific to charities – or least not in relation to charities as a whole. So there are no changes to gift aid, charity tax reliefs, to the inheritance tax rules for gifts to charities or anything similar.

    There is no mention at all of “charities” in terms of anything changed in either the Budget Red Book or in the Treasury’s Overview of Tax Legislation and Rates except in the context of (a) some changes which affect all businesses including charities, (b) a specific grant of £10M (which the Chancellor mentioned in his speech) to the Armed Forces Covenant Trust to support veterans’ mental health needs and (c) confirmation that a change announced previously is now taking effect to exempt medical rescue charities from vehicle excise duty.

    But this does not mean charities are unaffected by the Budget! On the contrary, many of the wider changes announced, especially the big increases in numerous areas of public spending, have the potential to benefit the sector substantially and hence to enable charities to do more with their beneficiaries.

    A £3,000 grant to most small organisations which occupy business premises

    As part of the measures to help businesses cope with the effects of Coronavirus – e.g. reduced sales and/or staff off sick (see more below) the Chancellor announced a £3,000 grant to all organisations subject to business rates in England where the rates bill is currently zero as a result of small business rate relief (SBRR).

    This means that many charities which occupy small offices, charity shops etc could suddenly find themselves in receipt of a £3,000 government grant! For many charities that do not normally get public sector funding, this could mean actual grant funding from the public purse for the first time. It will also apply to charity trading subsidiaries that occupy premises.

    However, it seems it will only help those charities (and businesses) which:

    • occupy premises that are subject to business rates and

    • where the charity itself is the occupier, liable to pay the rates where applicable, and

    • the size of the premises is such that they currently meet the rules for SBRR – in general this means the charity occupies a single property with a rateable value of £12,000 or less (in England). (If your organisation is subject to business rates, look at your last bill to see the rateable value of your premises – or you can look up the rateable value of any business property on the VOA site at www.gov.uk/correct- your-business-rates.)

      A similar relief applies in Scotland up to a rateable value of £15,000 – it’s known as the Small Business Bonus Scheme (SBBS). As business rates are a devolved issue, it will be up to the Scottish government whether to offer the same grant as in England, although it seems likely that something similar will apply as the funding decisions made by the Chancellor will also apply on a pro-rata basis in Scotland.

    The government is also announcing 100% rate relief for many businesses in the retail and hospitality sectors even if their rateable value is above the limit for SBRR. This may help charities with larger shops and charities running restaurants, cafes and residential conference centres (either directly or through a subsidiary). However, if your premises are above the SBRR level you won’t get the £3,000 grant as well. But since there is mandatory 80% business rate relief for charities, this will only save you the remaining 20%.

    It seems the £3,000 grants will be administered by local authorities through the business rates system – effectively it will be like paying negative rates! Obviously it will take a while for local authorities to get their systems set up for this so it’s not yet clear when it will be paid, and it is only a one-off grant for 2020/21.

    So – whilst a number of charities will get a £3,000 boost from this, it’s worth noting that it won’t help:

    • charities which don’t occupy business premises at all – for example charities run entirely from trustees’

      homes

    • charities which occupy premises that are wholly exempt from business rates – this includes places of worship and church halls, it also includes buildings used for training or welfare of disabled people (though if only part of your charity’s work fits into one of these categories, there could be a case for giving up the exemption and paying business rates as normal – though bear in mind the £3,000 grant is only promised for one year)

    • charities which do not occupy premises in their own right but which simply sub-let from another organisation where any rates are included as part of the rent (this includes most cases of serviced offices, desk rental arrangements, occasional room rentals, etc). However, if your landlord will get the benefit of extra rate relief or the £3,000 grant you could try suggesting to them that they should pass a share of this on in the form of a reduced rent!

    This Bulletin is prepared primarily for charities and professional advisers who belong to the Kubernesis Charity Advice Service – but may be used by others on an “as is” basis. Legal, tax and other policy issues are reported only in summary form and are not a full statement of the law. Although this document is copyright, it may be freely forwarded or reproduced provided the source is acknowledged

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