The Year Ahead: 2016 What To Expect - Finance

Further austerity, Gift Aid changes and movement on VAT

Despite the better-than-expected spending review, austerity is still in place and will stay for the foreseeable future.

The Charity Finance Group has warned that the voluntary sector remains in recession, with an estimated funding deficit of £4.6bn expected by 2018. With income falling, can levels of service be maintained? Pension liabilities will also remain an issue for the sector.

The planned review of Gift Aid is due in April, which should provide greater clarity for charities. New rules will be introduced to allow fundraising intermediaries a bigger role in administering Gift Aid, although there remain issues about implementation, such as fee structures and Gift Aid on SMS donations. Charities will also have to ensure that Gift Aid declarations are compliant with the new requirements from April.

The spending review contained two major VAT announcements - sixth-form colleges converting to academies to avoid irrecoverable VAT and the government's confirmation that it would seek a zero rate for women's sanitary products. Charity tax experts think these could be a precedent for further refund schemes ahead of the European Commission's VAT reform plans, which are likely in 2016.

The government's business rates review will report before the Budget on 16 March, and will hopefully clear up uncertainty about what the abolition of uniform business rates will mean for the existing 80 per cent mandatory rate relief for charities.

The longer-term implications for Gift Aid of the devolution of income tax rates to Scotland, which will come into force in April 2016, should also become clearer. The new Statements of Recommended Practice are in force for reporting years from 2014/15, and more detail is expected on the apprenticeship levy and how it will be implemented.

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