March 16th, 2016 / Insight posted in Articles, MKS Comments

Budget 2016: Not for Profit

The Budget contained few significant tax-related proposals impacting on the not for profit sector.

Schools into Academies

By 2020 all primary and secondary schools in England will either have become or will be in the process of converting into an Academy or a Free School.

KS comment: These measures are unlikely to have any significant tax implications but this can only be confirmed once the details of what is proposed become available.

Tax break for museums and galleries

The Government is launching a consultation this year on a new tax relief for temporary and touring exhibition costs that will apply from April 2017.  The relief aims at encouraging museums and galleries to make their collections accessible by a wider audience.

KS comment: This relief would extend to the museum and gallery sector some of the tax breaks given by the Government in recent years to the creative and cultural sectors.

Government funding for selected charities

The Government has committed £45 million of banking fines over the next four years to support a range of military charities and other good causes.

The Government is also committing £12 million of funding to support a range of good causes benefitting women.

KS comment: This is good news for the charities selected and continues the trend of the Government publicly supporting charities from previous budgets.

Dividend tax regime

The tax credit on dividends for individuals is being abolished from 6 April 2016 and replaced with a new regime for the taxation of dividends.  A feature of the new regime is an exemption from tax for the first £5,000 of dividends.

KS comment: Although announced in last year’s Budget, it is worth re-emphasising the likely impact on charities’ Gift Aid income.  Donors with low incomes will be unable to use the tax credit to cover the basic rate tax on their Gift Aid payments and will either have to pay the tax over to HMRC or consider whether they still wish to continue making Gift Aid payments.

Museum VAT refund scheme widened

From 16 March 2016 the eligibility criteria for the museum VAT refund scheme is to be broadened. Without the refund scheme, the VAT that museums incur on their expenditure is irrecoverable. To be eligible to apply for admission to the scheme museums or galleries must now:

  • Be open to the general public for at least 30 hours per week, without exception
  • Offer free entry, without prior appointment
  • Hold collections in a purpose-built building
  • Display details of free entry and opening hours on the museum website

KS comment: Obviously increasing the number of museums or galleries that are eligible will make more exhibits available to the public to view without charge is a good measure.

Business Rates

Business Rates bills in England will be reduced starting in 2017.  No changes were announced to the existing 80% rate of Business Rates relief for charities or to local authorities’ discretion to top up the relief by up to a further 20%.

KS comment: The fact that no changes have been announced to the reliefs available is welcome.

Insurance Premium Tax

The rate of Insurance Premium Tax is increasing by 0.5% from 9.5% to 10%.

KS comment: This increase is less than was feared, but assuming insurers pass on the increase to customers it will nevertheless be an unwelcome additional cost in premiums paid by not for profit organisations.