Budget 2018: Not for Profit
An extension of the small trader exemption and gift aid small donation scheme will be welcome news for charities. These are explained in detail below but charities should be aware of other matters in this update including the off-payroll working rules being extended to the private sector and confirmation that the VAT registration threshold is not now due to change for until at least 1 April 2022 so the concern that it will be dramatically reduced is over for the time being.
Increase in charity small trading threshold
At present, charities can benefit from an exemption from income tax or corporation tax on trading profits whenever trading is part of the charity’s primary purpose. A further exemption applies to “small trades”, where non-primary purpose turnover is less than £5,000 for the smallest charities (those with total incoming resources of under £20,000) or less than £50,000 for larger charities (those with incoming resources of over £200,000). The government will raise each of these thresholds by 60% from April 2019 meaning larger charities will be able to conduct a trade with a turnover of up to £80,000 without becoming subject to tax on the profits.
The proposed increases in thresholds will be welcomed by the NFP sector. This will allow charities to grow their trading operations without suffering the complexities faced by larger organisations, and reduces the number of charities that need to consider restructuring their trading affairs and operate via a subsidiary – therefore simplifying administration for many charities. A further uprating of the allowance to £100,000 or more in future would also be welcomed by the sector.
Gift Aid small donations scheme
Donations made under the Gift Aid small donations scheme – which must be via cash or contactless payment – can qualify for a top-up payment without the need for donors to complete a Gift Aid declaration form. At present the limit for a qualifying cash donation is £20. From April 2019 this limit will increase to £30.
The proposed increase in the limit for the Gift Aid small donations scheme will be a boost to charities who rely on small donations. The change now means that any contactless payment – limited to £30 – would also now fall within these donation limits.