CCH Live News - Budget 2012

Budget 2012

Philanthropy and charities

Overview

In measures relating to charities and philanthropy which were first announced in the 2011 Budget and which were then subject to consultation, two new reliefs for taxpayers are to be included in the Finance Bill 2012. The two new reliefs are to be as follows:

  • a reduction from 40 per cent to 36 per cent in the inheritance tax rate chargeable on estates, where 10 per cent or more of the value of the estate is donated to charity; and
  • reductions in liabilities to income tax, capital gains tax and corporation tax where individual or corporate owners of pre-eminent objects donate them to the nation. Pre-eminent objects will include works of art and other items that are of national, scientific or artistic interest, and the amount to set against tax liabilities will be 30 per cent of the value of the object for income tax or capital gains tax, and 20 per cent of the value for corporation tax.
  • Three measures intended to help charities are also to be included in the Finance Bill 2012, as follows:

  • the legislation of a concession that allows charities to claim tax repayments relating to non-Gift Aid donations during the year rather than waiting to do so on their tax returns;
  • provisions to achieve the aim of legislating correctly the concession that allowed charities to claim tax repayments relating to Gift Aid donations during the year rather than waiting to do so on their tax returns (correcting faults in the Finance Act 2010 legislation); and
  • retrospective legislation to correct anomalies in the treatment of Community Amateur Sports Clubs in relation to their ability to be registered as CASCs and to claim tax repayments under Gift Aid.
  • Alison Aspin, BA (Hons) CTA ATT, tax writer at CCH.

    Detailed Budget Measures

    Gifts of pre-eminent objects

    The aim of this scheme is to stimulate lifetime giving by encouraging taxpayers to donate pre-eminent objects, or collections of objects, to the nation. The objects may be loaned or given to appropriate institutions including certain charities and accredited museums for safe keeping and to provide public access. In return, donors will receive a reduction in their UK tax liability based on a percentage of the value of the object they are donating.

    CCH Comment:

    The stated aim of this measure, which was first proposed in the 2011 Budget and then consulted on, is to encourage philanthropy and increase the attractiveness of the UK as a cultural tourism destination. Individuals or companies will need to offer an object (or collection of objects), with a proposed value. A ‘panel of experts’ will consider whether the object is ‘pre-eminent’ and, if they consider that it is, they will agree a value with the donor. The relief is a percentage of that value, set against the donor’s tax liabilities, and can be spread forward for up to five years. The percentage of the value is 30 per cent for individuals liable to income tax or capital gains tax, or 20 per cent for companies liable to corporation tax. If the gift is declared void or set aside, the reduction in tax liability will be reversed and the tax plus late payment interest and any late payment penalties will have to be paid. The relief is to be operative from a date to be set by Treasury order, after the Finance Bill 2012 receives Royal Assent.

    For more details see the Tax Information and Impact Note on the measure.

    Inheritance tax: reduced rate for estates leaving 10 per cent or more to charity

    Legislation will be introduced in Finance Bill 2012 to provide for a reduction in the rate of IHT from 40 per cent to 36 per cent where 10 per cent or more of a deceased person's net estate (after deducting IHT exemptions, reliefs and the nil-rate band) is left to charity. The measure will apply to deaths on or after 6 April 2012.

    CCH Comment:

    This new relief follows proposals made in the 2011 Budget which were then consulted on. In March 2012, it was estimated that the relief will cost the Exchequer around £60m per year in reduced IHT liabilities. Those who are willing to make sizeable donations to charity in their wills (or who already do so) should consider looking again at their IHT planning, as a four per cent reduction in tax on the rest of the estate could be substantial. Donations made in accordance with of deeds of variation will also be counted in determining whether the relief applies to the estate.

    For more details see the Tax Information and Impact Note on the measure.

    In-year repayments of tax to charities

    This measure puts on a statutory footing the practice by certain charities of making claims for repayment of tax outside a tax return (excluding Gift Aid). HM Revenue & Customs (HMRC) makes certain repayments of tax to charitable companies and certain charitable trusts that make a claim to repayment of tax outside a tax return (in-year claims) which should, in strict law, be claimed in a tax return.

    In-year claims to repayments of income tax under Gift Aid were put on a statutory basis by Schedule 8 to Finance Act 2010 and this measure puts on a statutory basis other repayments of tax to charities. As the measure is legislating an existing extra-statutory concession, charities will not need to be aware of the change.

    CCH Comment:

    This is a welcome move. In-year repayments benefit charities’ cash-flow and can be especially valuable to the smaller charities. Although in-year repayments are currently allowed by HMRC, it can only be helpful to put the right to obtain them onto a statutory footing.

    For more details see the Tax Information and Impact Note on the measure.

    Gift aid for charitable companies and community amateur sports clubs

    This measure puts on a statutory footing the practice by certain charities and CASCs of making claims for repayment of Gift Aid outside a tax return.

    CCH Comment:

    This will be a correction to the existing legislation in FA 2010 which was intended to legislate the HMRC practice of allowing in-year claims for repayment. As such it is welcome. It will apply for claims made on or after 6 April 2012.

    For more details see the Tax Information and Impact Note.

    Community amateur sports clubs: registration and Gift Aid

    This measure amends the CASC and Gift Aid legislation to ensure it operates as originally intended. HMRC has continued to register CASCs, and allow Gift Aid repayments, on a concessionary basis. The CASC legislation will be amended to put both points onto a statutory basis.

    CCH Comment:

    Another welcome legislation of existing practice, to give more certainty and guaranteed treatment for CASCs. It will apply with retrospective effect, from April 2010.

    For more details see the Tax Information and Impact Note.