Charity Newsletter – November 2020

Changes to digital advertising VAT rates for charities

HMRC have agreed to change their policy on VAT rates applicable to digital advertising following a successful campaign by the Charity Tax Group. Certain types of digital advertising are now considered zero-rated, therefore charities should review VAT rates applied to advertising over recent years. Significant savings for organisations are possible for previous standard rate digital advertising such as:

• Retargeting individuals revisiting a website

• Demographic targeting

• Lookalike targeting

It is important to note that not all types of digital advertising have been changed to zero-rated.

SORP engagement discussions announced

The SORP-making committee has introduced a new development process to apply greater engagement using engagement partners who have been recruited via an open recruitment process.

Convenors have been allocated to each of the different engagement strands (specific areas) based on their interests. The areas will cover the key users of charity annual reports and accounts, as well as the SORP itself.

Details of each of the convenors, and the strands they have been appointed to, are provided on the dedicated SORP website.

Submission of accounts to OSCR

OSCR has announced that where charities are not able to file their accounts within the 9 month deadline of their year end that they will extend their grace period from 6 months to 9 months after the deadline.  This means that if charities submit late accounts during this time, they will not be penalised by being marked as late on the OSCR register. This is only applicable to charities where the due date for filing is between 1 March 2020 and 31 December 2020.

Companies House has already extended the deadline for filing company accounts from 9 months to 12 months where the filing deadline falls between 26 March 2020 and 29 September 2020

Making Tax Digital – Extended

The Treasury has recently announced their ten-year plan to build a trusted, modern tax administration system. This report includes introducing a progressive extension of HMRC’s Making Tax Digital work, exploring appropriate timing and frequency for payment of different taxes, and the technology infrastructure needed to support that, as well as a reform of the tax administration framework. HMRC plan to extend the Making Tax Digital programme, which has already been introduced, to more taxpayers and agents as part of the 10-year strategy. Extensions highlighted in the report include:

• Making Tax Digital will apply to all VAT-registered business for their VAT obligations from April 2022,

• Businesses and landlords with business income over £10,000 per annum will need to keep digital records and use software to resource HMRC quarterly through Making Tax Digital from April 2023,

• Later this year, the government will be consulting on the design of what that system should be for Corporation Tax.

Independent schools salary sacrifice changes

The Optional Remuneration Arrangement (OpRA) rules end salary sacrifice arrangements for school fees for independent schools on 5 April 2021. There is the opportunity for schools where employees entered into a salary sacrifice scheme before 6 April 2017 for the payment of fees for the same child to restructure their arrangement so that the salary sacrifice is condensed for the whole school year with deductions being made between September 2020 and March 2021. This will benefit from continued lower income tax and National Insurance Contributions (NICs). Salary sacrifice arrangements are where school members of staff take a reduced salary in exchange for discounted school fees for their child.

ICAS guidance on going concern

ICAS has issued guidance on going concern for charity trustees covering reporting and accounting, financial management and external scrutiny considerations. The guide assists charity trustees to:

  • Assess their charity’s ability to continue as a going concern and to prepare a trustees’ annual report and accounts which properly address the relevant requirements.
  • Understand the work of their charity’s auditor or independent examiner ongoing concern.

The guide is available here

Charity insolvency

The Corporate Insolvency and Governance Act was passed into law on 25th June 2020. The Act aims to address financial problems that both voluntary organisations and private companies are having to face as a result of the COVID-19 pandemic. The new rules introduced to help charities facing problems are:

• The right to apply for more time to avoid debt enforcement action

• Limits to the rights of contractors to terminate supply agreements with charities

• Placing restrictions on winding up petitions where a charity cannot pay its bill as a result of the pandemic

• Introducing new procedures to help viable charities restructure if they are struggling with debt

 • Suspending some provisions in order to reduce the risk that trustees are personally liable during the crisis.