The Chancellor, with his attention no doubt on the coronavirus pandemic, did not make the charities sector a priority in his Budget.
However, some of the changes announced will affect charities as employers, especially those that have a lot of lower paid employees. Minor changes to VAT and the new announcements on business rates may also be of benefit to charities.
National Living Wage
The National Living Wage (NLW) will increase by 6.2% in April to £8.72 an hour and the government also announced an intention for NLW to reach of two-thirds of median earnings by 2024, provided economic conditions allow. Following recommendations made by the Low Pay Commission, the NLW will apply to workers aged 23 and over in April 2021, with a target for it to apply to workers aged 21 and over by 2024. HM Revenue & Customs also announced last month that they will resume their ‘name and shame’ policy for employers who fail to pay their employees the National Minimum Wage from 6 April 2020.
Changes to Employment Allowance
The Chancellor has announced an increase in the rate of the Employment Allowance – an employer’s National Insurance contribution (NIC) annual exemption – from £3,000 to £4,000 from April 2020. In addition, the eligibility rules will also be changing. From 6 April 2020 Employment Allowance can only be claimed for periods where the employer’s annual National Insurance liability was £100,000 or less in the prior tax year. Deemed payments subject to NIC under the new off payroll rules will not count towards this limit. The allowance will also count towards de minimis state aid thresholds, so restricting the level of other state aid that can be claimed.
Statutory Sick Pay
Specific measures aimed at dealing with consequences of the coronavirus include the previously announced change to the rules, where statutory sick pay (SSP) will be paid from day one of illness. In addition, eligibility will be extended to all those advised to self-isolate even if they had not yet presented with symptoms. There will also be no requirement to go to the doctors for a sick note, as these will be made available by the NHS 111 service. Employers with fewer than 250 employees will have the cost of SSP for any employee off work due to coronavirus for up to 14 days refunded by the government in full.
The rate of statutory sick pay, currently £94.25 per week, is due to increase to £95.85 on 6 April 2020. There will also be additional benefit entitlement to self-employed and gig-economy workers who would not be entitled to SSP.
There were no charity-specific VAT announcements, although many charities may benefit from the zero-rating of e-publications. The zero rate will be applied to qualifying e-publications from 1 December 2020 and the new measure will seek to apply zero-rating so that the electronic version of the publication enjoys the same existing zero-rated treatment as its physical counterpart. The government will consult on the details of the new legislation ahead of its implementation
The registration thresholds are unchanged. A VAT registration will continue to be required where taxable turnover exceeds £85,000. The de-registration threshold remains unchanged at £83,000. The government has previously indicated that the registration and de-registration thresholds will remain at this level until at least 31 March 2022.
Several changes have been announced regarding business rates in England in response to the coronavirus, and the existing difficult trading environment faced by many small businesses. They include some measures that may benefit charities with trading operations that are not eligible for charitable rates relief, as follows:
Currently, the government provides a business rates discount for occupied retail properties with a rateable value of less than £51,000. This reduces the bill by 33% and was set to increase to 50% from 2020-21. This will be increased to 100% for the 2020-21 tax year and will, in addition, be temporarily extended to the hospitality and leisure sectors (including cinemas, theatres, museums, nightclubs, music venues and gyms).
A one-off grant of £3,000 will be available to small businesses that do not currently pay business rates because they qualify for Small Business Rate Relief (SBRR) (which provides full relief for businesses using a single property with a rateable value of £12,000 or less). This will be available for businesses currently eligible for Rural Rate Relief.
Those that have already paid their business rates for 2020-21 will be refunded but they may be required to apply to their local authority.
A further review of business rates is promised and, as ever, charities will wish to see that the existing charitable business rates reliefs available to them are not reduced and, ideally, improved.
Impact on donors
There was much speculation in advance of the budget that some favourable tax reliefs would change; notably Entrepreneurs’ Relief and tax relief on pension contributions. It is difficult to measure the relationship between tax reliefs and giving to charity. However, the reduction in the Entrepreneurs’ Relief lifetime limit from £10 million to £1 million (which will have a tax cost of £900,000 to those who could have benefited from the full £10 million limit) may affect giving to charity by people realising gains from the sale of their business.