Budget 2018 – what do charities need to know?

Any charity hoping for evidence of a strategic approach to helping the sector may well have been disappointed by the Budget presented to Parliament by “Fiscal Phil” – as the Chancellor of the Exchequer, the Rt Hon Philip Hammond MP, decided to style himself – on Monday this week.

However, the sector did not go entirely unmentioned. Those who enjoy keeping count of the number of mentions of the words “charity” or “charities” in the Budget (as I do) will have noted that on this occasion “charity” appeared three times, and “charities” six times.

So, the Budget did contain some news for charities – including some specific giveaways to charities and other organisations working in certain areas:

• £10m to support veterans with mental health needs;
• £1.7 million for educational programmes in schools to mark the 75th anniversary of the liberation of the Bergen-Belsen concentration camps;
• £10m of capital funding for air ambulances in England;
• up to £8 million to help with the cost of repairs and alterations to village halls, Miners’ Welfare facilities and Armed Forces organisations’ facilities; and
• £15 million to charities and others to distribute surplus food that would otherwise go to waste.

In addition, the Government committed to support the credit union sector, by launching a pilot of a new prize-linked saving scheme for credit unions.

Announcements relevant to charities regardless of cause

There were also a number of other commitments that charities across the sector may find either reduce their administrative burden, or costs, or both, as follows:

• An increase to the upper limit for trading that charities can carry out without incurring a tax liability from:
  • £5,000 to £8,000 where turnover is under £20,000, and
  • £50,000 to £80,000 where turnover exceeds £200,000;
• Allowing charity shops using the Retail Gift Aid Scheme to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year;
• An increase to the individual donation limit under the Gift Aid Small Donations Scheme to £30, which applies to small collections where it is impractical to obtain a Gift Aid declaration;
• Apprenticeship Levy: the co-investment rate applicable to small businesses(including small charities wanting to employ an apprentice) will be halved from 10% to 5%; and
• Business rates: retailers in England with retail properties with a rateable value below £51,000 will benefit from their business rates being cut by a third, which may affect some charities with retail operations.

Areas of “no change”

In relation to VAT, there was confirmation that the threshold for registration would remain the same, at £85,000, until 31 March 2022. This may have the unfortunate effect of pulling more smaller charities into the regime, that might otherwise have escaped registration if the threshold had been indexed, for example.

There was also no change in relation to fuel duty or in the rate of Insurance Premium Tax - a rate that many in the sector see as vulnerable to increase.

Major caveat to the Budget…

This Budget does, however, come with a significant warning. If a “no deal” Brexit becomes a reality, then the OBR forecasts upon which this Budget relies will need to be dramatically revised, and the Spring Statement next year will become a “full fiscal event”.

So, while charities will want to note the contents of this Budget, the actual situation next year may vary considerably, depending on the outcome of the Brexit negotiations. For more on preparing for Brexit, head over to our Brexit hub.