Further measures to boost charitable giving mean that the Getting Britain Giving package of tax incentives announced in the Pre-Budget Report on 9 November 1999 will be worth 400 million pounds a year in tax relief. The extra measures, announced today by the Chancellor of the Exchequer, Gordon Brown, will:
– extend the new tax relief for gifts of shares to charities to cover a wider range of shares and securities than previously announced
– allow non-resident individuals and companies to make Gift Aid donations
– extend VAT exemption to more fund-raising events than previously announced
– broaden the VAT zero rate for the sale or hire of donated goods
These improvements to the Getting Britain Giving package have arisen as a result of consultation with charities following publication of draft legislation. All of the measures in the Getting Britain Giving package, including those announced today, will come into effect in April 2000.
Extension of income tax relief for gifts of shares
1. A new tax relief for gifts to charity of listed shares and securities was announced in November 1999. Further measures announced today will extend the tax relief to:
– units in authorised unit trusts
– shares in open-ended investment companies
– holdings in foreign collective investment schemes
– unlisted shares and securities dealt in on a recognised stock exchange, such as shares traded on the Alternative Investment Market.
Relief will be given to the donor by way of a deduction for the full value of the gift in computing income or profits for income tax or corporation tax purposes. This will be in addition to any existing capital gains tax relief.
2. As part of the measures announced last November, the Gift Aid scheme was extended to Crown servants and members of the armed forces serving overseas. In addition to this, donations by non-resident individuals made out of income or gains brought into charge to United Kingdom tax will come within the Gift Aid scheme. Donations by non-resident companies will also come within the scheme.
VAT exemption for fund-raising events
3. It was announced last November that the existing VAT exemption for fund- raising events will be widened to include more types of events, including participative events and events on the Internet. The measures announced today reflect the views of charities that more events should benefit from exemption: the number will be increased to up to 15 of each type or kind of event in any one location in a 12 month period. For small-scale events the exemption will apply to any number of events, provided the gross weekly income does not exceed 1,000 pounds.
4. The Inland Revenue will in future use the VAT rules to decide whether an event comes within their extra-statutory concession for fund-raising events for charity. Charities will benefit from only having to face one set of rules, which will ease administration.
5. These changes will not affect charity law, which may require charities to undertake fund-raising events through a wholly owned trading company.
Donated goods sold or hired VAT free to the general public or people who are disabled or on means tested benefits.
6. As announced in November, charities, as well as other organisations giving their profits to charity, will be able to sell donated goods VAT-free to people who are disabled or on means tested benefits. Currently goods have to be offered to the general public as a whole for zero-rating to apply. This has excluded supplies by charities that deal only with target groups. Relief will now also apply to the hire of donated goods in the same circumstances as for sales.
NOTES FOR EDITORS
Measures already announced
1. In the Pre-Budget Report on 9 November 1999 the Chancellor announced a package of tax incentives aimed at modernising and simplifying the tax system to boost giving to charity. The Getting Britain Giving package included:
– abolishing the 250 pounds minimum limit for Gift Aid donations;
– allowing donors to join the Gift Aid scheme by telephone or Internet;
– abolishing the 1200 pounds annual maximum limit for payroll giving;
– a 10% supplement on payroll giving donations for three years from April 2000;
– a new tax tax relief for gifts of listed shares and securities
– removing existing barriers facing those who wish to give to charities using certain settlor interested trusts;
– extending and aligning the income tax and VAT exemptions for charity fund-raising events;
– broadening the VAT zero rate for charity advertising;
– greater VAT relief for the sale by charities of donated goods to disabled people and those on means-tested benefits;
– extension of VAT relief for the provision of bathrooms for disabled people in day- centres, sheltered accommodation and houses owned by charities; and
– an increase to 1000 pounds in the limit below which charities and other businesses do not have to account for VAT on goods on hand when they become de-registered.
Holdings in foreign collective investment schemes
2. These are interests in offshore collective investment schemes that generally operate in the same way as UK collective investment schemes, with investors’ interests in the scheme being redeemed by the scheme manager on demand.
VAT exemption for fund-raising events
3. The reason for having some limit on the fund-raising events that can qualify for relief is to prevent distortion of competition with commercial providers. However, the new rules will be sufficiently generous to meet the needs charities expressed during the review of charity taxation. An anti-competition rule will be introduced to ensure that VAT-registered businesses are not put at a commercial disadvantage. Customs & Excise will not be routinely using this rule to deny exemption. It will only be used where there is evidence of potentially distortive exploitation of the relief.
4. There will be a special rule for small-scale fund-raising events (e. g. coffee mornings). They will not count towards the 15 event limit, providing total gross takings do not exceed 1000 pounds in any one week.
5. The Getting Britain Giving measures will offer many deregulatory advantages to charities, business and individuals. Charities in particular should benefit from lower compliance costs compared with the old rules and these should far outweigh any additional administrative costs. A Regulatory Impact Assessment has been prepared and is available on the Internet at www.inlandrevenue.gov.uk or from
Room 130 New Wing
London WC2R 1LB
Fax: 0171 438 7134 E Mail address: Penny.Hood@ir.gsi.gov.uk
6. Details of the VAT changes are in Budget Notices 26/00, 27/00, 47/00, 64/00 and 69/00. These are available from Customs & Excise Business Advice Centres and from the Customs & Excise Internet site.
7. Charities can obtain updated guidance reflecting the direct tax changes outlined in this notice from the Inland Revenue’s website at