The 2018 Budget: changes to help your charity

Philip Hammond announced welcome reforms to charity taxes in the 2018 Budget. The Chancellor announced that from April 2019 the following changes will take effect:

Small Trade Limit

What has changed?

The annual small trade limit has increased to a minimum of £8,000 and a maximum of £80,000 (where the charity’s total turnover exceeds £320,000). The small trade limit is currently £5,000 minimum and £50,000 maximum.

How will this impact my charity?

It is common for charities to charge their trading subsidiaries for management and administrative services. Where these management charges are recharged at cost, no corporation or income tax arises.

However, where management charges (together with any other non-charitable trading activities) exceed the small trade limit, annual tax returns have to be prepared. The increase in the small trade limit should mean some charities will no longer have to prepare and submit annual tax returns, reducing the administrative burden (and accountancy fees).

Regardless of whether or not a charity charges management fees, the announcement will mean that more charities can undertake more non-charitable trade activities without having to worry about incurring tax liabilities.

Retail Gift Aid Scheme

What has changed?

Charities operating the Retail Gift Aid Scheme will be able to send letters to donors every three years when goods raise less than £20 per year; currently charities must write to donors every year.

How will this impact my charity?

Many charities that operate the Retail Gift Aid Scheme will welcome this change: having to write to donors every year adds to administrative costs and often donors do not understand why a charity is ‘wasting money’ writing to them rather than furthering their charitable objectives.

This announcement will alleviate the administrative burden and cost for these charities and will allow them to focus resources where they’re most needed.

Gift Aid Small Donation Scheme

What has changed?

The individual donation limit under the Gift Aid Small Donation Scheme increases from £20 to £30.

How will this impact my charity?

The Gift Aid Small Donation Scheme applies to small collections where charities cannot obtain a valid Gift Aid declaration. The individual donation limit is a ceiling above which Gift Aid cannot be reclaimed without a valid declaration: for example, a one-off donation of £50 with no Gift Aid declaration would mean the charity cannot reclaim the Gift Aid.

The maximum a charity can reclaim under this scheme is £2,000 a year from 6 April 2016 (or £1,250 for earlier years) and there is no indication that this overall limit will change. With the annual total remaining in place, the change to the individual donations making up that total may have little impact on charities.