Budget March 2011: Charities
Wednesday 23rd March 2011
Charities, Gift Aid and SA Donate
The existing cap whereby the benefit received by individuals and companies as a result of making donations to charities and community amateur sports clubs in excess of £10,000 is to remain at 5% of the value of the gift, but the monetary cap on the value of such benefits is to increase from 1 April 2011 (companies) and 6 April 2011 (individuals) from £500 to £2,500.
The option to have self assessment repayments donated to charity under the SA Donate scheme is to be withdrawn in respect of:
- tax returns for the tax year 2011/12 onwards
- tax returns for years up to and including 2010/11 where the repayment is made on or after 6 April 2012.
The Government is to consult on a scheme to encourage donation of pre-eminent works of art or historical objects to the nation in return for a tax reduction.
From April 2013, a new scheme will allow charities to claim Gift Aid on up to £5,000 of small donations without the need for Gift Aid declarations.
‘Tainted’ charitable donations
The law will be changed to deny tax relief on charitable donations where one of the main purposes of the donation is to receive an advantage for the donor or a connected person directly or indirectly from the charity. These donations will be known as ‘tainted donations’ and there is no monetary limit on the amount of the donation which may be caught by these rules.
The rules will affect charity donations made on or after 1 April 2011 and replace the existing ‘substantial donor’ rules.
Inheritance Tax (IHT) reduced rate for legacies to charities
A reduced rate of IHT will apply where at least 10 per cent of a deceased person's estate (net of IHT exemptions, reliefs and the nil rate band) is left to charity. Where this is the case, the current 40 per cent IHT rate will be reduced to 36 per cent. This will apply where death occurs on or after 6 April 2012. The Government will be consulting on the detailed implementation of this measure and will issue a consultation document in the next few months.
VAT and academies
As reported in our Insight last year, a new VAT refund scheme will be introduced in the Finance Bill 2011 with effect from 1 April 2011. The measure aims to bring the VAT treatment of non-business activities for academies in line with that for local authority maintained schools.