Exchequer Secretary speech: Charity Tax Group conference

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Good morning everyone, and thanks for inviting me back.

I am delighted to be here once again at the Charity Tax Group conference, and have the opportunity to talk to you all again.

Such is the transience of modern government, that I think that I am the first Exchequer Secretary for some time to still be in position a year on and able to return and report back to you.

Treasury ministers don’t often quote Marx – well not this government’s ministers – but he said that “there are decades when nothing happens. And then there are weeks in which decades happen.”

It seems we are living in times like that today (4 April 2019), at least in Westminster. In such a climate, the continuous creativity and contribution, including science and research, of charities, often low key, without fanfare or media attention, binding communities together and making society stronger, seems more important than ever. On behalf of government, thank you for all that you do.

I’ve been a charity trustee. I’m President of one myself, the Friends of my local hospital in Newark, and through that I am proud to play a small part in helping the hospital provide wonderful care for the people that need it.

As an MP, I’m constantly inspired and uplifted by charities and their donors and volunteers.

From the smallest charities in our communities…

…to the giants of medical research – Cancer Research UK, British Heart Foundation and the Wellcome Trust, where we meet today.

Governments have long recognised the vital role that charities play in all corners of the UK.

And this government is no different. We are firmly committed to supporting charities, and their donors who continue to donate generously to support the causes they care about.

In 2017-18, tax reliefs were worth over £5 billion to charities altogether, including £1.3 billion from Gift Aid, £2 billion in business rates relief, and over £800 million on inheritance tax exemptions and reductions. Gift Aid is the most successful charity tax relief in the world.

When I spoke at last year’s conference, and also met with the Charity Tax Group, you asked me to take a number of steps to improve government’s support for charities. I’m happy to say we have achieved much of it.

Firstly, we have protected and enhanced Gift Aid, which I know is vitally important to you all. In total over £15 billion of Gift Aid relief has been paid to charities since 1990.

After a visit to the British Paralympic Association, I was persuaded to clarify the guidance around bake sales, to make clear that charities could claim Gift Aid from the proceeds. I was very happy to promote the idea around the Macmillan Coffee Morning.

Some of you may even have seen me in my kitchen on Twitter – the Mary Berry of the Treasury. I didn’t manage to persuade Philip Hammond to be my Paul Hollywood!

We also announced at Budget that we would change the Retail Gift Aid Scheme so that charities will only have to issue letters once every three years – rather than every year – where a donor’s total donations in a tax year are less than £20.

This will reduce the administration burden upon those operating charity shops and increase profit for good causes.

We also increased the limit on Gift Aid Small Donation Scheme donations from £20 to £30, so that more Gift Aid-like ‘top-ups’ can be claimed on things like tin collections, where it is impractical to collect a Gift Aid declaration.

We have continued to encourage charities to make use of Gift Aid and donors to ‘tick the box’, including writing to 50,000 charities last year to explain the scheme and urge them to ensure they benefit from it.

Our final Budget measure specifically on charities taxation was to increase the Small Trading Tax Exemption, which allows charities to carry out limited amounts of trading not related to their primary charitable objectives, without incurring a tax liability. We have increased the upper limit from £50,000 to £80,000.

These changes to Retail Gift Aid, the Small Donations Scheme and the Small Trading Tax Exemption were all suggestions from the Charity Tax Group, and I am delighted that we were able to take them forward at the Budget.

When I spoke here last year, you raised Making Tax Digital, and I understand the concerns that charities have.

On 1 April, the Making Tax Digital programme became law for over one million VAT-registered businesses earning more than £85,000.

We appreciate that you will require time to become familiar with the new requirements. That was the feedback I received when I came here a year ago.

As such, my colleague Mel Stride, the Financial Secretary, has announced that during the first year of VAT mandation, HMRC will take a light touch approach to penalties by not issuing filing or record keeping penalties where organisations are doing their best to comply with Making Tax Digital, and that may well be the case for many charities, especially small ones.

And to be clear, the 1 April is not a cliff edge for signing up. The first returns under the new system for the majority of organisations, which file VAT quarterly, won’t be due until August at the earliest.

We believe that our Making Tax Digital programme will make everything much easier for charities that are VAT registered in the long term, and ultimately save you time and energy that could be better spent elsewhere and achieving your goals and charitable objectives.

We also recognise the value of charity shops on high streets up and down the country. At Budget, we created a £670 million Future High Streets Fund to create transformative packages of investments and I encourage charities with a particular presence on the high street to take part in that.

There are already numerous business rates reliefs which benefit charity shops. At Budget we cut business rates by one third for all retailers in England with a rateable value below £51,000, which will help sustain our nation’s high streets as they evolve to meet changing consumer habits.

Finally, at this event last year and in a later meeting at the Treasury, I was asked by ACRE – Action with Communities in Rural England – about funding for Village Halls, many of which were built a hundred years ago to commemorate the end of the First World War.

The charity told me that they had been campaigning for an intervention akin to a time limited VAT rebate since they met with Gillian Shephard – I presume in the 1980s when I was still in short trousers!

I was persuaded by their case and spoke to the Chancellor who was very supportive and as such we responded at the most recent Budget, providing £3 million pilot funding for grants equivalent to the VAT chargeable on such refurbishment projects. I am pleased to be launching that with ACRE on Friday (5 April 2019).

It’s another example that shows we are listening to your needs.

We have achieved a lot, but we know there is always more to do.

One area we know we can work together on in the future is tax transparency, which is vital to maintain public trust in the extensive reliefs I have described today.

As a start, I want all charities, led by the largest, to publicly report the amount of Gift Aid they receive.

I have asked the Charity Commission to consider how this could be done, and there is also significant Parliamentary interest in this which expects action.

That interest, like my own, is both to allow the public to understand the degree of support provided and to spur charities to make better use of the reliefs provided.

We also want to look at the fees charged by donation sites. I acknowledge the important roles these platforms play in terms of crowding in donations, simplifying the process for charities and bringing them into the tech era.

However, I was concerned by the lack of transparency, the lack of choice and, in some small cases, the scale of the fees.

Again, there is clear Parliamentary interest here, for example from my colleague Neil Coyle MP, responding to disaster appeals like Grenfell and London Bridge – where significant fees were initially incurred when the public made generous donations.

I am pleased Just Giving have announced they are taking action, and I hope we see further progress.

In particular, it should be a clear choice for charities using such sites whether they wish to pay a fee for the site to administer the Gift Aid and that fee should be a reasonable one – so taxpayers money does not get diverted from the purpose to which we intended – charitable activities.

I would also like to thank the Charity Tax Group for their advice and input on this matter.

As I am speaking at the headquarters of the Wellcome Trust, I wanted to say something about the many medical research charities are driving scientific development and leading cutting-edge research.

Over the last five years, the research they have funded has contributed to the development of 300 medicinal products including drugs, medical devices and diagnostic tools.

Thousands of patients have benefited.

But without the input of medical research charities, these new technologies would never have seen the light of day.

Many of these research areas are simply too high risk or long term in development to attract conventional investment.

In government, we know how important this is.

Last year, the British Business Bank launched ‘British Patient Capital’ – a £2.5 billion fund to invest in innovative firms.

And we invested £1.6 billion into our research and development base to strengthen the UK’s global leadership in science and innovation.

But there’s a limit to what government can do.

Which is why we need to work together with the private sector, and with charities to achieve our shared goals – in particular, unlocking the potential of our pensions to invest more than they do today, in patient capital, including that focused on medicines, life sciences, bio sciences and so on.

We are taking action to encourage pension fund trustees to increase their focus in this area and working with the regulators to break down barriers which might inhibit action today.

We want the charitable sector engaged in such projects or in social investment to be part of that.

As we look to the future, I know that the NCVO Charity Tax Commission is reviewing the impact of the tax system on charities.

It is due to be published in the early summer, and I look forward to reading its findings.

We also recently launched a consultation on off-payroll working, commonly known as IR35.

In the main, this is for businesses that employ workers through an intermediary, but that may well apply to some of your charities as well.

It is right we do in the private sector and in charities what we have done in the public sector and ensure a fair tax system for all.

Finally, in the coming months, the government will publish call for evidence documents on VAT partial exemption and capital goods scheme, the Social Investment Tax Relief (SITR), and the insurance premium tax operational review.

All of which, I’m sure, you’ll be keen to read and digest.

In closing, I want to thank the Charity Tax Group once again for inviting me back today.

And thank them also for all their hard work in representing the charity sector.

The focus and direction they bring is vital to the way we work together, and all that we have secured in the past year.

And I hope that today I have shown that we as Government have a record of action in this area.

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