Budget Day 2021: Charity Sector Key implications

Whilst the budget brought some good news for Charities; policy to address sector specific issues was again thin on the ground under this second budget for Rishi Sunak.

As many expected, the focus was on trying to put the economy back onto its feet again and encourage investment whilst also starting to explain how we will pay for the government borrowing.   The 3 major themes were in general, “support”, “pay back” and “building the future economy”.   The tax raising measures announced were focused on Corporation Tax only with an emphasis instead of freezing current rates and allowances across other taxes.

The key measures announced which will assist the charities sector equally came in three formats:

Direct support announced included:

  • Support for Armed Forces charities – with the government providing up to £475,000 in 2021-22 to support the development of a digital and data strategy for the sector. The aim is to improve the ability of charities to work together and with the government so that members of the Armed Forces can access the right support as and when they need it.
  • Support for Veteran mental health through funding of £10m in 2021-22 to the Armed Forces Covenant Fund Trust. This will enable this Trust to deliver UK-wide charitable projects and initiatives to support the mental health needs of Armed Forces Veterans.
  • Support to help tackle domestic abuse through an additional £19m of funding, with £15m to be provided in England and Wales in 2021-22 to fund perpetrator programmes that work with offenders to reduce the risk of continuing abuse. £4m was earmarked across 2021 – 2023 to trial a network of “Respite Rooms” within England to support homeless women facing sever disadvantage. This support is in addition to the existing £125m announced in the 2020 spending review for local authorities to deliver the new statutory duty to support victims.
  • Support for National Museums and cultural bodies through the provision of £90m of targeted funding.
  • Additional £300m funding for the £1.6bn Culture Recovery Fund to enable this fund to support key arts and cultural organisations in England through the pandemic.
  • A three month extension of the Zoo Animals Fund to 30 June 2021 which provides licensed Zoos and Aquariums in England with continued support for animal care and maintenance costs.
  • A £300m Sports Recovery Package for clubs and governing bodies to support major spectator sports in England.

 

General Support announced for all businesses which will benefit the charities sector:

  • An extension to the Coronavirus Job Retention (furlough) scheme to September 2021. This is a scheme currently used by thousands of charities.  Under the extension, employers will be expected to pay 10% towards the hours their staff do not work in July, increasing to 20% in August and September as the economy fully re-opens.
  • Restart Grants were announced, awarding funding in England of up to £6,000 per premises for non-essential retail business and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.  This will provide essential support for those charities looking to re-open shops in the coming months.

The government is also to provide all local authorities in England with an additional £425m of discretionary business grant funding (adding to the £1.6bn already allocated).

  • An extension to the Apprenticeship hiring incentive scheme in England, increasing the payment to £3,000 for businesses hiring new apprentices of any age between 1 April and 30 September 2021 (from £1,500 per 16–24-year-olds and £2,000 for those 25+).
  • An extension to the 100% Business Rates relief continuing to 30 June 2021 with rates then discounted by two thirds until March 2022 (subject to a £2m limit for those closed on 5 January 2021 or £105,000 per business for other eligible properties). For charities who ordinarily receive at least 80% Business Rates relief, the extension of the 100% relief will provide much needed support.

However, the long overdue review and reform of the business rates system has already been pushed into the Autumn with an update scheduled for 23 March, leaving charities uncertain of their continued entitlement to 80% Business Rates relief in the long term.

  • A new recovery loan scheme where trading businesses who have demonstrably been impacted by the pandemic will be able to take out loans of up to £10m from 6 April 2021.
  • An increase to the contactless payment card limit with Single contactless payments up to £100, and cumulative contactless payments up to £300, will be permitted without the need for customers to input their chip and pin.  This will increase the amounts charities can receive through contactless donations.
  • An extension to the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30 September 2021, with a 12.5% rate in place from 1 October 2021 to 31 March 2022.
  • A new VAT deferral payment scheme for any business that took advantage of the original VAT deferral on VAT returns from 20 March through to the end of June 2020.  These businesses can now opt to pay the deferred VAT in up to eleven equal payments from March 2021, rather than one large payment due by 31 March 2021.
  • A Super Deduction of 130% for capital expenditure between 1 April 2021 to 31 March 2023 for qualifying main pool plant and machinery purchases.  This will be limited to 50% for any qualifying special rate pool and long-life assets in that period.   This will make any planned investment in plant and machinery extremely tax efficient over this period.
  • Finally, there was a potential boost for tax cashflows with the Chancellor announcing that business tax trading losses incurred in accounting periods falling into the 2020/21 and 2021/22 tax years will be available to carry back against profits in the last 3 years (compared to the usual 1 year).

 

Additional measures announced to encourage investment which will assist the charities sector include:

  • An extension of Social Investment tax relief by a further two years to April 2023 which will assist social enterprises in the UK seeking growth and investment.  This relief provides Income Tax and Capital Gains Tax relief for investors in qualifying social enterprises.
  • A new Community Ownership Fund of £150m to ensure communities can continue to benefit from local amenities and facilities such as pubs, sports clubs, theatres and post offices. Community groups will be able to bid for up to £250,000 of matched funding to purchase local assets to run as community-owned businesses. Up to £1m of matched funding will be available to establish community owned sports clubs or to purchase sports grounds which are at risk of loss from the community.
  • A new help to grow: digital scheme providing a £5,000 voucher and online support to assist small and medium sized businesses in purchasing approved productivity enhancing software.

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Unfortunately, the budget did not include the much called for increase in Gift Aid.

However on a more positive final note, following post budget requests for clarification on state aid, the government, through the Department for Business, Enterprise and Industrial Strategy, has now confirmed a change to the previous decision to cap grants at a lower level using old EU state aid rules.   This change means that trading charities can now claim up to £1.9m in grants to meet uncovered fixed costs (up from circa £860,000) through local authorities.  In some specific circumstances, trading charities will be able to apply for an additional £9m of funding (up from circa £2.58m).  The revised rules bring UK grants in line with existing EU Guidance.

 

If you have any questions or queries, please contact us at support@garbutt-elliott.co.uk