SPNFP

Autumn Budget 2021: Limited measures to help Social Purpose and Non Profit organisations

Tina Allison, Partner, Head of Education - Non Profits
27/10/2021
SPNFP

The Chancellor's Budget sets out the plan for a “new economy, post-COVID-19”. There were welcomed increases in public spending and some help for the lowest paid in society; but with the global inflation challenges and the cost of living set to rise further it is likely that there will be greater demands on services provided by the Third Sector. Despite the significant contribution the sector has already made in these challenging times, there have been very few measures included in the autumn Budget to help.

Museums and Galleries Exhibition Tax Relief extension

Tax Relief extended Museums and galleries run by charities or their trading subsidiaries will welcome the extension to the Museum and Galleries Exhibition Tax Relief from April 2022 by two years to 31 March 2024.

Cultural tax reliefs to be doubled

Theatres, orchestras, museums and galleries have all suffered due to COVID-19. The amount of cultural tax credits that they have been able to claim on developing productions have also fallen substantially.

The Chancellor has announced a welcome doubling of the tax credits that cultural organisations can claim to April 2023 and then tapering down after that date. This will support these organisations as they rebuild post pandemic lockdowns. The table below summarises what we know about the new rates and how long they will last.

  Current rates  From 27 October 2021  From 1 April 2023  From 1 April 2024 
 Theatre Tax Relief (TTR)
  •  Touring 25%
  • Non-touring 20%
  • Per production
  • Touring 50%
  • Non-touring 45%
  • Per production
  • 35%
  • 30%
  • Per production
  • 25%
  • 20%
  • Per production
 Orchestra Tax Relief (OTR)  25% per concert or series 50% per concert or series 35% per concert or series 25% per concert or series
Museums and Galleries  Exhibition Tax Relief (MGETR)
  •  Touring 25% up to a maximum of £100,000 per exhibition
  • Non-touring 20% up to a maximum of £80,000 per exhibition
  • Touring 50%
  • Non-touring 45% (no details about maximum limits)
  • 35%
  • 30%
  • (no details about maximum limits)
 The relief will cease on 31 March 2024 unless extended

No details have been published about raising the cap on the museums and galleries relief, which is already a significant restriction on how much museums and galleries can claim. If the cap is not raised in line with the rates, the increase in rates may not significantly benefit this sector.

From 1 April 2022, changes will be made to better target MGETR, TTR and OTR and ensure that they continue to be safeguarded from abuse, although it is unclear what abuses the government has in mind.

Business rates relief

Further business rates reliefs were announced for the retail, hospitality and leisure sector. The government will introduce a new temporary business rates relief for eligible retail, hospitality and leisure properties in 2022/23. Eligible properties will receive 50% relief, up to £110,000 per business cap.

This will benefit charity shops to the extent that they cannot already claim exemption. Shops held in the charity already benefit from 80% mandatory exemption, and may also be receiving a further 20% discretionary relief. However, shops held by trading subsidiaries are not eligible for charitable rates relief, so this will be of benefit to them.

Foreign aid spending

The Chancellor announced that foreign aid spending is projected to return to 0.7% of GDP by 2024/25.

Residential Property Developer Tax (RPDT)

The rate of the new RPDT to subsidise the removal of unsafe cladding has been announced at 4% on profits. This applies to profits from development of residential property per company or group of over £25 million. The profits are calculated before deduction of finance costs. The draft legislation was open for consultation before the Budget, and the latest draft included an exemption for registered non profit housing associations and their subsidiaries. Charities would also be exempt on profits from property development that would be exempt from corporation tax as charitable trading, but their trading subsidiaries would not be exempt.

Charities engaged in property development need to consider whether they may be exposed to the charge and consider whether they can make any changes to reduce this, perhaps by reviewing the timing of expenditure on projects. It might for instance be possible to delay completing a project until a year when the profits would fall below the limit.

VAT

The VAT aspects of today’s announcements were more interesting for what was not covered, rather than what was included.

None of the VAT measures were particularly headline grabbing but relevant to this sector was confirmation that a new VAT penalty system will be introduced for VAT return periods starting on or after 1 April 2022.

This confirmed what has previously been announced and will be applicable to any UK VAT registered organisation. We will be providing more details of the changes in the near future.

What was interesting is that UK government didn’t take the option provided by Brexit to deviate from EU VAT law in making headline UK VAT rate changes, for example by reducing VAT on household energy bills, providing a zero-rate for cladding works or further incentivising green measures such as solar panels, which would have been welcomed.

Health and Social Care Levy

As previously announced, a new Health and Social Care Levy will come in to force to pay for reforms to the care sector and NHS funding in England.

The levy will apply to earnings from April 2022, although will operate slightly differently in the tax year 2022/23 compared to future tax years.

From April 2022, the levy will see an increase of 1.25% on the rates of:

  • Class 1 Primary (employee) and Secondary (employer) National Insurance Contributions on earnings
  • Class 1A and Class 1B Contributions paid by employers on benefits provided to employees
  • Class 4 National Insurance Contributions paid by the self-employed on profits.

In 2022/23, this will operate as a simple increase of the National Insurance Contributions (NIC) rates, so only those liable to pay NIC will be subject to the levy.

From 2023/24 onwards (once HMRC has developed new systems) the levy will operate as a separate payment to National Insurance Contributions, and it will also apply to those above the State Pension age, which is currently not the case for Class 1 Primary and Class 4 NIC.

Existing reliefs for Class 1 Secondary NIC will also apply to the new levy for employers of apprentices under the age of 25, all employees under the age of 21, veterans, and new employees in freeports (from April 2022). The levy deduction will appear separately on employee payslips.

National Living Wage

The government has confirmed that the National Living Wage will rise in April 2022 from £8.91 to £9.50.

The Low Pay Commission recommended to the government the 6.6% rise for those aged 23 and over. This represents a rise of over £1,000 a year for a full-time worker.

In addition, the National Minimum Wage for younger workers rises as follows:

  • Aged 21 to 22 £8.36 to £9.18
  • Aged 18 to 20 £6.56 to £6.83
  • Aged under 18 £4.62 to £4.81
  • Apprentice rate £4.30 to £4.81

The above increases will benefit over two million lower paid workers.

If you would like to discuss any of these issues further please get in touch with Naziar Hashemi or your usual Crowe contact.

Autumn Budget 2021

What do the announcements mean for you and your organisation?

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Two key changes that employers should be thinking about after the Budget announcement.
Outlining the key areas of focus for operating in a ‘VUCA’ world.
How charities can navigate current challenges in the sector.

Contact us

Naziar Hashemi
Naziar Hashemi
National Head of Social Purpose and Non Profits
London