Much has already been done to provide tax support to businesses affected by the current Coronavirus. The extension of business rate relief for retailers to include the leisure & hospitality sector, VAT deferral, furloughing of employees and Time to Pay arrangements will all help the charity sector.
However, the Charity Tax Group (“CTG”) are pressing for more to be done on behalf of the sector. In a letter to Chancellor Rishi Sunak, the group, which represents the interests of all charities, is asking for six key steps to be taken to support the sector: -
1. Allowing Gift Aid to be claimed on donations in lieu of cancelled events
Many charities are having to cancel fundraising events because of the requirements of social distancing. While Gift Aid would not ordinarily be available on the cost of a ticket to an event, the CTG is asking HMRC to allow Gift Aid claims as a temporary measure where events have been cancelled.
It is hoped that this will encourage charity supporters not to request ticket refunds for cancelled events, but rather to leave their cash with the charity by providing a tax incentive to the public to do so, thereby aiding cashflow for the charity.
2. Provide urgent confirmation that Gift Aid can be claimed on donations made via Facebook
There is a long running debate about the ability of charities to claim Gift Aid on donations made through social media platforms, such as Facebook Donate. This is because the audit trail is difficult to track, and charities are often unable to associate cash received with specific Gift Aid declarations made to Facebook.
It is estimated that millions of pounds of historic donations currently have not had Gift Aid claimed on them because of this uncertainty.
The CTG have asked the Treasury to confirm that such donations are eligible, to unlock significant cash tax refunds to the sector.
3. Confirm simplified audit processes for SMS/text donations
A similar issue exists in respect of historic SMS/text donations. Again, there are significant amounts of Gift Aid that could be released to the sector which cannot currently be claimed, dating back several years.
In this case, the CTG is aware that there is draft updated guidance from HMRC which has not yet been published. The draft guidance dates back as far as 2016, following work by the Association for Interactive Media and Micropayments (AIMM) to establish an acceptable audit trail for SMS/text donations. The CTG is calling on HMRC officials not to delay the release of this guidance any further, in order to support the sector.
4. Confirm that no HMRC action will be taken to collect VAT on digital advertising
The supply of advertising to charities is zero rated. However, HMRC has recently indicated that it wants to exclude social media advertising from this charity zero rate, on the basis that it targets individuals by a digital address.
The CTG is asking for HMRC not to change these rules for the period of the COVID-19 crisis and to review the technical basis for the changes, which CTG believes is incorrect and not in line with Parliamentary intention that advertising services to charities should be zero rated.
5. Further expansion of the Business Rate Relief support to charities
Charities will obtain some benefit from the existing support provisions – for example where they have charity shops – but the provisions announced do not support other forms of charity property. Charities and Community Amateur Sports Clubs receive 80% business rate relief, and in some cases local authorities extend this to 100% at their discretion.
This creates a patchwork of relief across the country, depending on the view of individual local authorities and the authorities own financial position.
The CTG is calling on the government to extend the mandatory relief to 100%.
6. Confirm flexibility over filing deadlines
Many charities have 31 March year end dates, and the CTG are calling for HMRC to confirm they will have a flexible approach to filing deadlines where charities have difficulty in filing returns due to changes in working practices caused by Coronavirus.
The flexibility is being sought for all returns such as Corporation Tax, VAT and Gift Aid. VAT returns in particular can be complex for charities who are often partially exempt and/or will have non-business income, and the request is for a further soft-landing period for charities in respect of Making Tax Digital.
These are all sensible potential measures which could help a sector which is fundamental to the fabric of British society.