Budget 2018 – How will it impact on charities?

In his Autumn Budget speech, Chancellor Philip Hammond announced some positive tax changes which will be of benefit to the sector. The key changes include:

 

Increase to charities’ small trading exemption limits from April 2019.

Where a charity undertakes a trading activity which does not relate to its primary purpose or fall within another charity exemption, for example if a charity sells goods in order to raise additional funds, then provided the turnover does not exceed the small trading exemption limit, any profits will be exempt from tax.

The government announced an increase to this limit with the aim of helping charities undertake more trading activities to support meeting their charitable aims. It is good news in that it offers some greater flexibility to charities without generating a tax charge or having to consider restructuring the charity’s operations e.g. setting up trading subsidiaries.

The current limits are as follows:

 

Annual charity income Current Limit on non-primary purpose trading
Under £20,000 £5,000
£20,001 – £200,000 25% of the charity’s total annual turnover
Over £200,000 £50,000

 

The extended limits which will apply from April 2019 are:

 

Annual charity income Current Limit on non-primary purpose trading
Under £32,000 £8,000
£32,001 – £320,000 25% of income
Over £320,000 £80,000

 

Retail Gift Aid Scheme

The Government announced changes aimed at reducing the administrative burden faced by charity shops using the retail gift aid scheme which will become effective from April 2019.

Currently charities must send a letter to their donors every year which  includes a summary of the net proceeds raised from the sale of their donated goods. These rules have been relaxed so that where a donor’s goods raise less than £20 a year the charity will only be required to send a letter to the donor every 3 years.

 

Gift Aid Small Donations Scheme (GASDS)

GASDS allows charities to claim gift aid on small cash and contactless donations without the need for Gift Aid Declarations from the individuals who have made the donation.

Currently the limit on the amount an individual can donate under GASDS is £20. However, the government has increased this limit to £30 so it is inline with the maximum contactless card payment amount. This will take affect from April 2019.