Tax and reliefs

The government provides a number of tax reliefs to support charities, the largest of which are business rates relief and gift aid.

Gift Aid

Gift Aid is the most widely used and recognised tax-effective giving mechanism. It accounts for about 90% of all tax-effective giving, and lets charities increase the value of donations by reclaiming tax and Transitional Relief.

Government support for Gift Aid is essential and reforms to the current system would bring even greater benefits to fundraising organisations and inspire even more people to give to charity.

Donor benefits

The gift aid donor benefits regime defines what value of benefit a donor can receive before a donation becomes ineligible for a gift aid claim by a charity. The current rules are complex and are being reviewed by HMRC. Read our response to the call for evidence (PDF, 400KB).

The government is currently consulting further on how to improve the rules.

Changes to the Gift Aid Declaration

The Gift Aid Declaration rules were updated with effect from April 2016. Existing declarations are not affected, but new declaration forms need to be updated to meet the new requirements. Read our blog on the changes and how to update your declarations.

Gift Aid Small Donations Scheme

The small donations scheme allows charities to claim a gift aid-style top-up on small donations, in situations where it wouldn't be feasible to collect Gift Aid declarations, for example where a collection tin or bucket is used. You can find out how to use the scheme on gov.uk.

The Small Charitable Donations Bill is currently passing through Parliament, which is expected to introduce a number of improvements and simplifications to the scheme. We’ve been briefing parliamentarians to try to make the scheme more accessible for smaller charities.

Business Rates

Business rates are a tax on occupancy, which any charity that owns or rents a property is liable to pay. Charities receive a mandatory relief of 80% of their business rates bill. Local authorities are able to grant discretionary relief on the remaining 20% that charities have to pay, although on average receive only a further 2.5% relief.

In 2015, the government consulted on reforming all aspects of the business rates system. NCVO made representations alongside other sector bodies, calling for charitable reliefs to be protected and improved.

In March 2016, the government confirmed it would not be changing charitable reliefs. Read the government’s response to our pre-budget letter on business rates, confirming that the 80% level of mandatory relief is being protected.

Apprenticeship Levy

The Apprenticeship Levy is due to be introduced from April 2017 for all employers with a payroll above £3m, including charities. If you do not have to pay the levy, you may be able to apply to train any apprentices you have at a 90% discount. Full details on how the levy works are available on gov.uk.

The levy is calculated as 0.5% of an employer’s payroll above £3m. Levy payments are placed into individual employer accounts, and can then be spent on the training of apprentices. If funds are not spent within a year, they are reclaimed by the system on a rolling monthly basis and used to fund the apprenticeships of other organisations.

We estimate that around 1,200 charities will be affected, paying around £60-70m in total a year. There are currently no apprenticeship standards specific to the voluntary sector, although there are some in development. However, one of the existing standards may be appropriate depending on the nature of the prospective apprentice’s role, or the sector they are working in – for example, there are a number of standards relating to social work, healthcare and scientific research.

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