hmrc charities overview - manchester community central...hmrc charities overview specialist pt...

HMRC Charities Overview

Specialist PT Charities, Savings & InternationalThursday 28th April 2016

This is HMRC's current guidance - however this may be subject to change - due to legislative and guidance changes. Please refer to HMRC Charities published guidance on Gov.ukin the first instance.

https://www.gov.uk/charities-and-tax

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Topics

• HMRC’s Charity Outreach Team

• Gift Aid Overview

• Gift Aid Small donations Scheme (GASDS)

• Making a Repayment claim

• How to apply for recognition as a charity for tax purposes

• Community Amateur Sports Club (CASC)

• Payroll Giving

• Value Added Tax and Charities (VAT)

HMRC’s Charity Outreach Team

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HMRC’s Charity Outreach Team

• Team of 8 experienced staff - set up in June 2014

• To help charities with their GASDS & GA claims

• Registering & enrolling for our online services

• Supporting our Charities Helpline

• Presentations

Gift Aid Overview

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What is Gift Aid?What is Gift Aid?

• Donation from a UK Taxpayer £100

• Charity can claim £25

• Donor earned £125 before basic rate of Income

Tax @20% was deducted

https://www.gov.uk/donating-to-charity/overview


Gift Aid Requirements

The 5 main requirements of Gift Aid are;

• Gift of a sum of money must be made to a Charity / CASC accepted by HMRC

• Donations must be from an individual who is a UK taxpayer

• Donor must make a valid Gift Aid declaration

• Charity / CASC must be able to show receipt of donation

• Payment must not have any conditions for repayment (to the donor)


That tax can be

• Income Tax paid at 20%, 40% or 45% rate

• Tax deducted from Bank or Building Society interest at 20% rate

• Tax deducted from dividend income at 10% up to 5 April 2016

• Capital Gains Tax paid at 18% or 28%


About the Donor

The Donor must be an Individual (not a Limited Company or PLC) who is;

• Resident in the UK, or

• Non-Resident in the UK - but must have paid sufficient UK tax

• Council Tax & VAT cannot be used to cover Gift Aid

• Residents of Isle of Man / Channel Islands / Republic of Ireland

are Non Resident for UK tax purposes


Gift Aid Declaration

A Gift Aid Declaration must contain;

• Name of charity or CASC

• Name of donor

• Ideally, we would like to see; Mr John Smith

• We will accept; John Smith, J Smith, Mr J Smith

• We will not accept; Mr Smith, Smith, John

• Donor’s home address

• Description of payment(s)

• Declaration that payments(s) are Gift Aided

• Must include a note that explains that the donor must have paid sufficient UK income or capital gains tax (not including VAT or Council Tax) to cover the tax claimed by the charity

https://www.gov.uk/guidance/gift-aid-declarations-claiming-tax-back-on-donations


Addresses on Gift Aid Declarations

• 11, WA8 4LY or Dunroamin, WA8 4LY

• 11, Park Street, Widnes, WA8 4LY

• 11, Park Street, WA8 4LY

• 11, WA8. ×

• Park Street, Widnes, WA8 4LY ×

• 11 Park Street. ×

• c/o Wetherspoons, Park St, Widnes ×

YES

NO ×


Sponsorship Gift Aid declaration form

A Sponsorship Gift Aid declaration form must contain;

• Name of participant

• Name of event

• Sponsor’s Home Address

• Amount of donations collected

Must also contain the following statement;

• Name of charity the event is in aid of

• Sponsor’s Full Name

• Gift Aid tick box

• Date that pledged donations were collected

If I have ticked the box headed ‘Gift Aid? √’, I confirm that I am a UK Income or

Capital Gains taxpayer. I have read this statement and want the charity or

Community Amateur Sports Club (CASC) named above to reclaim tax on the

donation detailed below, given on the date shown.

I understand that if I pay less Income Tax / or Capital Gains tax in the current

tax year than the amount of Gift Aid claimed on all of my donations it is my

responsibility to pay any difference.

https://www.gov.uk/government/publications/charities-sponsorship-and-gift-aid-declaration-form


Sponsorship Gift Aid

Charity: The HMRC Auditors Benevolent FundName of Participant: John SmithEvent: The 2016 Bootle Marathon

Full Name Home Address Amount Total Please treat

as Gift Aid

Clark Kent 21, Worthing Drive,

Brighton BN4 1ZP

£1 per mile £26

Harry Potter 6, Nottingham Close,

Derby D4 2YP

50p per mile £13

Bob the Builder 14,

CH2 1PY

50p per mile £13


Joint Donations

• Donation drawn on a joint bank account & charity has beengiven a Gift Aid declaration by one account-holder only.

• Charity can assume that donation is from the donor who has made a Gift Aid declaration - even if cheque is signed by the other account holder.

• If in doubt seek clarification from the donor e.g. a cheque drawn on the sole account of the other account-holder.


Most Common Errors

• No declaration held by charity

• Incomplete/incorrect Gift Aid declarations

• No evidence of receipt of donation

• Payment not received from an Individual – e.g. company donations

• Payment not a Gift

Save the World Charity


Retention of Declarations

For Audit purposes;

• Records should be kept for a period of 6 years (after the last donation)

• Must be available for inspection

• Can be retained as a scanned document


Charity Auction

£40

£100

£60Shirt valued at £40, sold for £100 so Gift

Aid can be claimed on £60.


Charity Auction

£250

£250

Signed shirt sold for £250. No Gift

Aid can be claimed as is does not

have a recommended retail price.


Charity Dinners

• The purchase of a ticket for Fund-raising Dinner /

Charity Ball is not a Gift.

• Ticket costs £100 (includes £50 donation to Charity)

- not a Gift.

• Ticket is £50 & a ‘suggested’ donation of £50 is

requested – the donation could be a Gift?


What is a benefit?

• Any item or service provided by the charity or a third

party to the donor or a person connected with the donor

as a consequence of making the donation

• When someone makes a donation, you might want to give the donor something

in return (an item or service) to say thank you. This is known as a ‘benefit’

• We have to apply the benefit rules as there limitations on what a donor can

receive.


Gift Aid donor benefit limits

• You can claim Gift Aid on the donation if the value of the benefit doesn’t exceed

certain limits, for example:

• From 6 April 2011; The maximum limit for a series of benefits given to a donor

was increased to £2,500 per tax year (previously £500 per tax year)


Not Gifts

You can’t claim on donations;

• The purchase of books, jumble sale items,

bedding plants, food, alcohol etc.

• Admission to events e.g. concerts, recitals etc.

• Golfing fees, Day Trips, Transport etc.

• Fees to adopt / re-home an animal

• Raffles, lottery tickets & 200 Clubs

• Hire of own premises


Time Limits for claiming Gift Aid

• A charity which is a Company for tax purposes

must make any claim within 4 years from the end

of the accounting period to which the claim relates.

• A charity which is a Trust for tax purposes must make any claim within 4 years of the end of the tax year to which the claim relates.

Any Gift Aid Questions?

Gift Aid Small Donations Scheme(GASDS)


Small Charitable Donations Act 2012 (Gift Aid Small Donations Scheme)

• From 6 April 2013; Charities & CASCs that receive small cash donations of £20 or

less will be able to apply for a Gift Aid style repayment without the need to obtain

Gift Aid declarations for those donations

• GASDS is a public spending initiative (not a repayment of tax) that gives Charities

& CASCs a top-up payment on donations they receive

• Currently the total amount of the small donations is capped at £5,000 maximum

per tax year giving a top-up repayment of £1,250

• This amount will increase to £8,000 maximum per tax year for GASDS collected

from 6 April 2016 and the top-up repayment will increase to £2,000



What is a small donation?

• A cash donation of £20 or less from an individual

• Donations must be collected and banked in the UK

• Membership Fees not covered by a Gift Aid Declaration are not small donations

under this scheme

• Cash donations from Companies or Trusts cannot be GASDS

• No benefits can be given to an individual that makes a small donation



Eligibility for claiming GASDS

• The charity must have been in existence with HMRC for at least 2 full tax years

before the year of claim

• Made successful GA claims in 2 of the previous 4 tax years. Without a gap in

claims of 2 or more years

• Charity has not incurred an HMRC penalty in respect of GA or GASDS claims in

the previous 2 tax years

Why? - A good Gift Aid record assures HMRC that charity has appropriate internal

processes in place to operate GASDS correctly

Any questions on GASDS?

Making a Repayment Claim


Charity Repayment Claim Options

HMRC

Charities

HMRC

Data Processing

Centre

Option 2

Government

Gateway

Option 3

3rd. Party

Software

(OOO’s of donors)

Gift Aid, Other Income &

Charity Small Donation

scheme schedules

Option 1

Paper Charity Claim

form - ChR1 (2013)

Extracted

Claim

information

By post

Charity

Repayment

Service

(Up to 1,000 donors)

On line

From own

Laptop or PC

Claim

data


Paper ChR1 Claim Form + ChR1CS (Continuation sheet)

• Only available direct from HMRC

• Form will be handwritten, scanned and data extracted

• ChR1 - space for 15 Gift Aid donors + 6 Other taxed income items + 2 Community Buildings + 5 Connected charities

• ChR1CS - space for 5 more extra Gift Aid donors

• Photocopies not acceptable

• Typed schedules & Covering letters not acceptable

http://www.hmrc.gov.uk/charities/chv1.pdf


Charity Repayment Claim Service

Introduced in April 2013

• Only charities registered with HMRC can use the Service

• Must first register with Government Gateway on line

• ID & Activation PIN posted to authorised official - Must activate within’ 28 days

• Then need to Register and activate online service

• Separate service for Agents that submit claims on behalf of charities


Gift Aid Online Schedule

Any questions on the Making A Claim?

Apply for recognition as a charity for tax purposes


What Does this mean?

The Jurisdiction + Registration condition means that ‘Charities’ in;

• The UK

• The European Union (EU)

• The EEA (Iceland, Liechtenstein & Norway)

Can now all apply to HMRC to be accepted as a charity for tax purposes


Charitable Purposes

Charitable purposes include things that contribute to:

• relieving poverty• education• religion• health • saving lives• citizenship or

community development

• the arts

• amateur sport

• human rights

• religious or racial harmony

• the protection of the environment

• animal welfare

• the efficiency of the armed forces,

police, fire or ambulance services

• disability


Do Charities pay Tax?

Investment Income• Exempt from UK tax on most types of investment income incl. income from

overseas investments, they cannot claim back the 10% tax credit paid on UK dividends

Bank & Building Society interest• Charities should have their interest paid gross without deduction of the 20%

Basic Rate Tax

Income from land & property• Exempt from Tax on rental income from land or property


Do Charities pay Tax?

Capital Gains Tax (CGT)• Gains made by charities are exempt if used for charitable purpose only

Stamp Duty Land Tax (SDLT)• Charities usually exempt when buying or leasing property to be used for

charitable purpose

Business rates relief• Charities are usually entitled to 80% business rate relief – some local

authorities give 100% business rate relief


What you need to register as a Charity with HMRC

Officials details;• You need to have a minimum of 3 different trustees

• 1x Authorised Official

• 2x Other Officials

(names, addresses, phone numbers,

dates of birth, national insurance numbers)

Charitable evidence;• Governing document

• Rules/Constitution, Trust deed, Memorandum and articles of association, Will, Act

of Parliament, Other



What you need to register as a Charity with HMRC

Regulator details;

• Copy of notification of registration from any regulators

Charitable objectives;

• What your organisation does

Financial accounts;

• Last 3 months

• Provide accounting period end date

Bank account details;• Account name, number and sort code



What records are required by HMRC?

• Blank Gift Aid declaration form(s)

• Appeal leaflets and membership forms

• The selected Gift Aid declarations & Sponsorship forms

(paper or scanned images)

Account records - ‘Audit trails’;

• Banking records, Paying-in book, Bank statements, donation envelopes etc.


Audit trail

Audit trail from each donor;• Through the charity’s books & records and then into the charity’s bank

account.

BANK


Does your charity need to register with a Charity Regulator?

• If your Charities income exceeds £5000 you must

register with the Charity Commission (England & Wales),

• All charities in Scotland & NI MUST register with their regulator Office of the Scottish Charity Regulator (OSCR) or the CCNI before registering with HMRC.

If not, may still be able to apply to HMRC to be accepted

as a charity “for tax purposes”

• CASC’s (Community Amateur Sports Clubs) must

register with HMRC.

• Some Charities are exempt from registering with the

charity commission e.g. Churches, Schools etc….

https://www.gov.uk/government/organisations/charity-commission

http://www.oscr.org.uk/

https://www.charitycommissionni.org.uk/


Register with HMRC Online – WWW.GOV.UK

BANK

• Search for – Get recognition from HMRC for your Charity

https://www.gov.uk/charity-recognition-hmrc


Charity Variation form (ChV1)

Introduced in July 2010 and must be completed and sentTo HMRC 30 days before a claim if;

• Name & address has changed

• Authorised official and/or the Responsible person(s) has changed

• Bank account has changed

• The Charity’s Trustees or Directors have changed

• Charity has appointed a new nominee

https://www.gov.uk/government/publications/charities-change-of-details-form-chv1

Any questions on registrations?

Community Amateur Sports ClubCASC


CASC Overview

What are the benefits for registering as a CASC?

• 80% mandatory rate relief

• Claim Gift Aid on qualifying donations from individuals

• Claim Gift Aid Small donations on small cash donations from individuals

• Exemption from Corporation Tax on UK trading profits if the turnover from that trade is less than £50,000 per year

• Exemption from Corporation Tax on UK property income if the total income from property is less than £30,000 per year

• Full exemption from Corporation Tax on interest received and on chargeable gains


CASC Overview

• To register as a CASC you must provide facilities for eligible sports and encourage people to take part.

• Under the new rules from 1 April 2015, at least 50% of members must take part

You must also;

• be set up with a formal constitution, known as a governing document

• be open to the whole community and have affordable membership fees

• be organised on an amateur basis

• be set up and provide facilities in the UK, the EU, Iceland, Liechtenstein or Norway (but in one country only)

• be managed by ‘fit and proper persons’

https://www.gov.uk/eu-eea

https://www.gov.uk/who-can-run-charity-finances


Eligible Sports

All of the sports provided must be recognised on the Sport England website

Some of the sports not recognised are;

• Kick Boxing

• Bridge

• Cheerleading

• Boat restoration

http://www.sportengland.org/our-work/national-work/national-governing-bodies/sports-that-we-recognise/


Governing Document

• This is the document that sets out the purpose and structure of your club. It may also be called a ‘memorandum and articles of association’ for a limited company or a constitution for an unincorporated club

It must be;

• Set out how you meet the eligibility criteria for registering as a CASC

• State that the assets left after the club closes are only used by another registered CASC, charity or related community sport

• Model clauses are available on our website www.gov.uk

https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/annex-5-model-clauses


Membership Fees

• Membership fees cannot be more than £1612 per year – otherwise they are not eligible

• Fees over £520 per year – the club must make provision for members on lower incomes to participate. The provision must be publicised.

• The cost of participation is the membership fee plus any additional costs such as green fees, court fees, purchase of equipment or hire of equipment.

• Members should participate at least 12 times a year and also partly in peak time


Non member income

• A CASC cannot receive income from non members of more than £100,000 such as visitor green fees, visitors parking fees and visitor income in the bar or for catering

Trading Profits

• Your CASC is trading if it sells good to non members. You’ll have to pay tax on the profits if your turnover is more than £50,000. It doesn’t count as trading if your club sells goods or services to voting members, e.g. it runs a bar exclusively for members. In this case you don’t need to pay tax on profits and the income will not count towards the £50,000 limit.


Organised on an amateur basis

CASCs must;

• not make a profit, unless this is reinvested in the club and spent only on promoting participation and providing facilities for eligible sports

• Not pay more than £10,000 in total to all players in a year

• Provide only the benefits normally associated with a CASC

• Only pay expenses for matches and tours where players take part in and promote the club’s sport


Running a CASC

Who’s fit to run your CASC;

• Managers must provide information for the fit and proper person test

• The manager can provide a draft declaration which the CASC keeps for 4 years after they leave

• HMRC require up to 2 ‘authorised officials’ within the CASC to manage its tax and Gift Aid and 2 to 4 ‘responsible persons’ to be legally accountable for running your CASC

Notifying changes

• CASCs must use form ChV1 to amend their record with HMRC – this is available on our website www.gov.uk

https://www.gov.uk/government/publications/charity-tax-relief-model-declaration

https://www.gov.uk/government/publications/charities-change-of-details-form-chv1


What you need to register as a CASC with HMRC

Officials details;• You need to have a minimum of 3 different officials

• 1x Authorised Official

• 2x Other Officials

(names, addresses, phone numbers,

dates of birth, national insurance numbers)

Governing document

• Rules/Constitution or Memorandum and articles of association



What you need to register as a CASC with HMRC

Financial accounts;

• Last 12 months

Bank Statements

• Last 3 months

Bank account details;• Account name, number and sort code or;

• Building society account – including roll number

Club rule book



How to register as a CASC with HMRC

Use the CASC (A1) form from our website www.gov.uk

• Search for CASC (A1)

https://www.gov.uk/government/publications/charities-community-amateur-sports-club-registration-form-casc-a1

http://www.gov.uk/



• Select – Community Amateur Sports Club Registration Form CASC (A1)



• Select – Community Amateur Sports Club Registration Form: Complete on screen



• Complete the application on screen

For supporting documents and postal application forms:

• Print it out

• Post to:

• Charities, Savings and international 2

HM Revenue and Customs

BX9 1BU

Any Questions on CASCs?

Payroll Giving


What is Payroll Giving?

• Has been around since 1987

• Employee agrees to have donations deducted from Gross salary by Employer

• Employer sends all payments to a Payroll Giving Agency

• Payroll Giving agency then distributes payments to the nominated charities


What is Payroll Giving?

• Employee that pays Basic Rate Tax of 20% gives £10 from Gross Salary

• £2 Income Tax is not charged on the donation

• Net cost of the donation to the employee is £8

• Treasury has just started a consultation process to find ways of improving the use of Payroll Giving that ends on 19 April

Any questions on Payroll giving?

Value Added Tax (VAT)


VAT and Charities

• There is no blanket exception from VAT for Charities.

• They are generally subject to the same VAT rules as other organisations & pay VAT in the UK on sales and purchases just like anyone else.

• Charities must register for VAT if their taxable sales of goods & services exceed the prevailing VAT threshold - currently £83,000 p.a.

• Certain goods and services are zero-rated or reduced-rated when purchased by charities – otherwise known as ‘VAT reliefs’.


VAT and Charities

Sales / Income

Non-business activity – no consideration for a supply. Commonly referred to as “outside the scope”.

Examples include:

• Drop in centres

• Free admission

• Rescue services; and

• Helplines


Charitable activity

Charitable activities can be ‘business activities’ for VAT purposes

Business activity – A consideration is received in return for a supply

Business supplies can potentially fall within the scope of VAT

BUT

If charity is not registered for VAT then no need to charge VAT


VAT liability of business supplies

Business supplies could be:

• Taxable at standard rate – 20%

• Taxable at reduced rate – 5%

• Taxable at zero rate – 0% or

• Exempt from VAT.

• Common examples of exempt activities:

• Welfare

• Education and training

• Sports

• Fundraising events.


Common charity activities and their VAT treatment

Charity shops and selling goods;

• Sales of donated goods = zero-rated.

• Sales of bought in goods = standard-rated (unless zero-rated books).

• If a charity charges donors to sell their donated goods = standard-rated.

• If a charity makes no charge to sell donated goods = non-business.

• A VAT-registered charity can claim back VAT on direct costs incurred.


VAT registered charities – claiming VAT on costs

The partial exemption rules:

• You can claim ALL input tax directly attributable to taxable supplies

• You can claim NO input tax directly attributable to exempt supplies

• A mixture of both – partial exemption calculation required to determine the percentage of residual input tax claimable.

• VAT Notice 706


Will the change lead to the charity needing to register for VAT?

• Yes, if the value of their total taxable supplies reaches the threshold. At present £83,000 per annum

• Charities can register voluntarily at anytime providing they are making supplies which would be taxable


What are the benefits of registration?

• The Charity can reclaim any VAT it incurs in making taxable supplies


A change in activity – common charity activities and their VAT treatment

Admission to premises;

• If this is free, but a donation is requested, no VAT is payable

• If there is a set admission fee, VAT is payable

• If a minimum donation is requested and admission is not allowed unless this is paid, VAT would be payable



Advertising services;

• Sale of advertising space in own publications or website = VAT payable

• Sale of advertising space to another charity = zero-rated

• Key thing to remember – advert must be using someone else’s time or space



Fund-raising events that qualify for exemption;

• The event must be promoted as raising funds for the charity

• Must be held in UK; and

• Must not be a series of more than 15 of same type in same location.

• Exemption is available to charities and their wholly owned trading subsidiary.


VAT reliefs available for Charities

Does a charity have to be registered for VAT to benefit from reliefs?

No, BUT;

Recognition as a charity for tax purposes is essential to claim reliefs.

www.GOV.uk >search ‘Charities and tax’ > ‘Get recognition for tax purposes’

http://www.gov.uk/


VAT reliefs available for Charities

• Construction of buildings to be used for ‘Relevant Charitable Purpose’ (RCP)

or ‘Relevant Residential Purpose’ (RRP) – not subject to charitable status.

• Advertising services and goods connected with collecting donations

• Charity funded medical, veterinary, scientific & rescue equipment and ambulances

• Certain aids to be made available to disabled people


VAT reliefs available for CharitiesChanges to accommodation

Construction services

• Constructing a new building

• Changing an existing building

• Disapplication of a Landlord’s option to tax


VAT reliefs available to Charities

- more common ones

• Advertising and goods connected with claiming donations

• Aids for the disabled

• Medical & scientific equipment

Eligibility declaration is provided to supplier to request zero-rating.


VAT reliefs available –more obscure

• Medicinal products and substances

• Drugs and chemicals for medical & veterinary research

• Lifeboats, slipways & launching equipment, including fuel

• Rescue equipment

• Resuscitation training models

VAT Notice 701/1– Charities – available from WWW.GOV.UK

https://www.gov.uk/government/publications/vat-notice-7011-charities


VAT reliefs available for the disabled& older people

• Vehicles substantially and permanently adapted for wheelchair users

• Equipment and appliances “designed solely” for use by a disabled person

• Grab rails, ramps, stair/bath seats

• Disabled people give an eligibility declaration to the supplier

VAT Notice 701/7 – Disabled Reliefs - available from WWW.GOV.UK

https://www.gov.uk/government/publications/vat-notice-7011-charities

Any questions on VAT?


Need more information?

Thank you

Website: WWW.GOV.UKHelpline: 0300 123 1073

http://www.gov.uk/

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