Briefing P032 - Emergency Budget 2010

Introduction

The 2010 Emergency Budget will be remembered as a wide-ranging attempt to immediately reduce public expenditure and tackle the deficit in public spending. It was preceded by other ministerial announcements which cut various capital spending programmes approved by the last Government and reducied spending on initiatives (such as the Future Jobs Fund). Key areas of public spending reduction include:-

  • Departmental budgets face an average real cut of around 25% over four years (apart from health and aid spending which is protected).
  • VAT will increase to 20% in January 2011
  • Councils which propose low council tax increases will be offered extra
  • funds to allow them to freeze council tax for one year from April 2011.
  • The welfare budget has been cut by £11 billion.

This briefing paper looks at the budget from the perspective of how it is likely to affect Voluntary and Community Sector organisations.

The cuts announced by the Chancellor are likely to place considerable pressure on funding for charities and, in time, on the demand for services to be provided by the Voluntary and Community Sector to “fill gaps” resulting from the severest post-war spending reduction. The speech itself did not make very many references to the Voluntary Sector but the wider papers published by the Treasury after the budget speech contain a number of items which have a direct influence on their work and ability to fundraise.

Increase in Personal Tax Allowance

The personal tax allowance is to be increased by £1,000 from April 2011. It is expected that this will take an additional 880,000 out of the Tax threshold altogether. This, in turn has implications for the Gift Aid process as opne of the criteria for the scheme is that the claim must be generated as a result of a donation from a UK Taxpayer. Treasurers or fundraisers should remind potential donors that they should only register a claim for Gift Aid if they pay income tax or capital gains tax that is equal to or greater than the tax recoverable from the Charities they are supporting.

Increase in Capital Gains Tax

The Capital Gains tax increase to 28% creates an opportunity to remind donors of the tax advantages of giving land, and property to charity. Only a minority of donors are aware of the tax relief available from giving of this type.

VAT

The Charity Tax Group estimate that the increase in VAT to 20% will add £143 million to the sectors costs. Groups considering budgets for the next period organisations will need consider carefully the impact of this tax increase and to reflect the likely increased costs in running services arising from the recent changes.

Gift Aid Reform

The papers issued after the budget announced that the consultation aimed at improving the Gift Aid system is to continue by opening a Gift Aid Forum. Thje previous Government set upo this forum in February 2010 to look at gift aid, payroll giving and other tax incentives for donors. It has vbeen made clear that the pressures on Government finances will not permit changes that increase the cost of Gift Aid to the Exchequer. It is anticipated that the consultation is to report by 30th September 2010 on measures which can improve the scope or efficiency of current Gift Aid arrangements. It is anticipated that recommendations could feature in the 2011 Finance Act.. Groups who use GIFT Aid provisions or have views on how current arrangements coul,d be improved may wish to make their views known to those representing the Voluntary Sector on the Forum. Further details can be sound at http://www.hm-treasury.gov.uk/2010_june_budget.htm

Charitable Incorporated Organisations (CIOS)

Although not referred to in the budget the long promised introduction of Charitable Incorporated Organisations (CIOS) appears to have slipped again to 2011.

The Big Society

Much of the framework for the Governments relationship with communities and local groups are contained within a policy framework known as the Big Society. Hastings Voluntary Action will be issuing a further briefing paper when the detailed arrangements for the policies outlined in the manifesto of the Conservative Party are make clear.

Acknowledgements

We acknowledge the contribution of briefing material produced by NAVCA, NVCO and Sheen Strickland Chartered Accountants which been useful in the preparation of this summary.

Steve Manwaring
Director
Hastings Voluntary Action

 

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