The Budget had very little direct impact on the education sector. However, there are measures proposed to reduce the administrative burden on schools from April 2019.
From April 2019, charities will be able to earn profits from non-charitable trading without paying income or Corporation Tax, so long as the turnover is no more than £80,000. The current upper limit is £50,000.
Currently there is no Corporation Tax (for companies) or income tax (for Trusts) on trading profits where the turnover does not exceed certain limits. For very small charities the upper limit is £5,000 per year. From April 2019 this will increase to £8,000. For larger charities the limit is 25% of their total income up to a maximum of £50,000. The upper limit will increase to £80,000 from April 2019.
The limit of £50,000 was set in 2000 and has not increased since then. The charity sector has long stated that it was too low and ideally should be doubled, or at least increased for inflation.
Wider consideration still needed
While this is a welcomed measure to reduce any bureaucracy, it is important that wider considerations are taken into account when deciding whether a trading activity should be passed through a separate entity, including whether it would be better to ring-fence any risk away from the charity. There may also be considerations with regard to VAT.
The Budget confirmed that non-corporate entities will soon be able to enter VAT groups where they can demonstrate control of other group members. This will assist charities as many are still controlled by non-corporate entities such as Trusts and, therefore, the controlling member has been unable to be part of the VAT group.
Simplify group structure and reduce compliance costs
VAT groups can assist in simplifying group structures and reducing VAT compliance costs. It should also be noted that VAT groups are able to defer Making Tax Digital for VAT for a further six months to 1 October 2019.