Community groups and social enterprises benefit from the budget, but income tax drop will eat into Gift Aid

The Chancellor's eleventh budget has promised to bolster community organisations with an £80m fund, and to conduct a Government review to help charities maximise their take up of Gift Aid.

But the fall in the basic rate of income tax from 22 to 20 pence in the pound will reduce the amount that Charities can reclaim through Gift Aid.

The loss to charities could be as high as £71m, according to the Charities Aid Foundation. The greatest losses are likely to be to charities that already have effective Gift Aid reclaim policies.

Other budget winners are social enterprises, which will reap the rewards of a relaxation of regulations on community investment tax relief and measures to foster a greater spirit of entrepreneurship in the UK.

More charities will also be able to apply for loan finance from Futurebuilders, which has had its eligibility criteria widened to include all third sector organisations. A boost for the NSPCC came in the form of the Chancellor's pledge to provide "additional resources" for its ChildLine service.

Community assets

The new £80m fund to help small local community organisations appears to be in addition to the existing £30m Community Assets Fund, the administration of which is currently under discussion.

Gift Aid

The Chancellor announced a consultation with charities on increasing the takeup of Gift Aid and payroll giving.
Among those likely to benefit from Gordon Brown's announcements are smaller charities that are unable to devote the necessary time and resources to reclaim the full Gift Aid potential of their donations.

The Budget included an increase in the value of tax benefits that may be claimed by higher-rate tax payers who Gift-Aid their donation. The new figure will be 5 per cent for donations of more than £1,000. The upper limit of benefits received will also be raised to £500.

Community investment tax relief

There was disappointment for charities hoping to see community investment tax relief extended to investment in for-profit businesses and across all communities. However, the flexibility of the scheme will be improved by changing the onward investment requirements from 75 per cent at all times to an average of 75 per cent over the course of the year.

The Office of the Third Sector will also consider whether the scheme can be used to boost investment in social enterprise if consultations conclude that it is under-capitalised. One idea is to increase the limit for community development finance initiatives investing in social enterprises.

Unclaimed assets

The Chancellor's report announced that a second consultation document on the distribution of the unclaimed assets fund will be published later in the spring. It confirmed that the results of the third sector review will be published in the autumn.
Heritage funding

In the wake of the big hit the Heritage Lottery Fund took in last week's announcement on Olympic funding, the Chancellor said: "in the run up to the spending review, the Culture Secretary and I will examine the help we can give the churches and heritage buildings that are at the heart of so many communities."

Other provisions

Social enterprises will benefit from the 2p cut in corporation tax to 28p, the lowest rate of all the major economies.
The Chancellor also announced that while the time limits for empty property tax relief would be lowered to three months for offices and six months for industrial premises, it would be abolished altogether for charities.

He said that the Government intends to publish updated details illustrating incentives for the giving and seconding of employees by business. It will also publish guidance on tax-efficient giving for individuals. The Chancellor said: "Our culture of giving and volunteering defines Britain as a fair and compassionate society."

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