As the Charity Commission has announced that it could withdraw its CC10 document The Hallmarks of an Effective Charity in favour of the sector's governance code, it is interesting to note that the Financial Reporting Council has announced plans for a fundamental review of The UK Corporate Governance Code.
The review is likely to build on themes already expressed by the FRC, all of which resonate in the charity sector. They are: helping boards take better account of stakeholder views; linking executive remuneration with performance; and extending the FRC's enforcement powers to ensure that disciplinary action can be taken against all directors where there have been financial reporting breaches, because at the moment only professional accountants, actuaries or auditors can be punished by the FRC.
The European Commission has recently proposed that the same VAT rates should apply to both e-publications and printed publications. EU law currently provides that e-publications are standard-rated for VAT purposes, whereas member states may apply a reduced VAT rate to printed publications, which are zero-rated in the UK. The result is a markedly less favourable VAT treatment of e-publications. To resolve this anomaly, the European Commission appears keen to get the law changed on this point as soon as possible.
In practice, this would allow the UK to extend its current VAT zero-rate on printed matter to their electronic equivalents. This is potentially good news for charities and their subsidiaries that publish e-publications, because they will be able to reduce costs to their customers with no reduction in VAT recovery. It is also good news, of course, for consumers who purchase e-publications, to whom VAT represents a real cost.
In 2015, the government commissioned an independent review of the community infrastructure levy. This is a development tax from which charities enjoy substantial exemptions. The review has just been published and proposes withdrawing CIL, replacing it with a mix of local infrastructure tariff and Section 106 agreements, and a possible new strategic infrastructure tariff. There is no suggestion that charities would continue to enjoy any exemption. Charities considering developments should bear this potential additional cost in mind in their long-term planning.
Making Tax Digital
HM Revenue & Customs has published responses to its consultation document Making Tax Digital: Bringing Business Tax Into the Digital Age. It has confirmed that it will introduce legislation to exempt charities from the Making Tax Digital programme requirements. Other tax-related mechanisms, such as PAYE, will continue to be in digital form. This exemption will probably not extend to charity trading subsidiaries, which will need to maintain digital records and update HMRC at least quarterly.
From 6 April this year, intermediaries that collect donations for charities can get authority from a donor to operate Gift Aid on all their donations for the rest of the tax year. HMRC has therefore published new guidance: charities with substantial donations from third-party intermediaries might wish to make sure these arrangements are working properly over the next few months. If an intermediary gets authority on or after 1 March, a Gift Aid declaration can be made for the remaining tax year and all of the next tax year.
A final tax point for longer-term planning: Vanity Fair reports that Bill Gates has suggested that if a robot replaces a human's job it should be taxed at a similar level to the equivalent human worker. He did not go on to discuss whether or not robots could donate under Gift Aid, but it would seem to be the logical extension - although presumably these metal human replacements would need to be UK residents.
Don Bawtree is lead partner for charities at accountants BDO LLP