Charities running charitable activities in community buildings

Part of Small Charitable Donations and Childcare Payments Bill – in a Public Bill Committee at 10:00 am on 18th October 2016.

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Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury 10:00 am, 18th October 2016

Clause 3 will simplify the small donations scheme, making it easier for charities to operate while ensuring that the scheme delivers its original policy intention. It is about issues relating to community buildings. The clause also makes certain of the community building rules requirements more flexible, to give more charities the opportunity to benefit from the scheme. Clause 4 ensures that, for “connected charities” running charitable activities in community buildings, the rules retain the flexibility to claim top-up payments under the gift aid small donations scheme in the way that best suits their circumstances.

To explain the background, when the gift aid small donations scheme was introduced in 2013, the core principle was that each charity should be entitled to one allowance to top up their gift aid claims in circumstances in which asking a donor to complete a gift aid declaration was really not practical. As we have just discussed, that might be during a bucket collection or church service. The intention was also, most definitely, that the rules should operate as equitably as possible and not give manifestly unfair results when similar charities doing similar things in a similar way just happen to be organised differently. For example, the rules treat “connected charities” as if they are one charity for the purposes of the gift aid small donations scheme. It might help if I explain that, put simply, broadly charities are connected when they are controlled by the same people and have similar objectives. In that way, a charity is entitled to one allowance. For example, the head office and the regional offices could together register as one single charity, or each office or local branch could register separately. I am sure that everyone agrees that that is a fair and necessary rule.

Charities that regularly carry out charitable work in local communities are able to claim community buildings allowances in addition to the one core or main allowance. We want to ensure that, where a charity has a presence and is engaged in valuable charitable activities in our communities, such as in a church or village hall, it may claim a top-up allowance in respect of the local donations. Again, I do not think that anyone would argue that that was unfair. However, we have come to realise that the rules as cast do not always give the outcome that the Government want, or deliver on the intent of the scheme.

Some charities are able to claim many more allowances than others simply by virtue of the way in which they are structured, which is different, even though they might be carrying out similar activities in a similar way to the others. That disparity is acknowledged by the overwhelming majority of charities that can benefit from double allowances, as is the need to rectify the problem to restore the original policy intent.

The changes made by clause 3 will therefore make it clear that charities may claim one allowance, currently set at £8,000, or a community buildings allowance for each community building, with a maximum allowance for each building being £8,000. For example, therefore, a charity with three community buildings will, assuming that it has collected enough donations, be able to claim a top-up on £8,000 in respect of each of those community buildings. It will not, however, be able to collect an additional allowance in respect of any donations collected by its head office. That change will remove the scope for some charities to be able to double-claim allowances.

In making the change, we are adopting the approach that many respondents to the consultation suggested both as a way to ensure equity of treatment, and as a simplification of the scheme. In addition to simplifying the operation of the rules, the clause also makes the community buildings rules much more flexible and generous. At the moment, only donations actually made in the community building while charitable activities are being carried out count towards the community buildings allowance—that is, the amount of donations on which top-up payments may be claimed.

The Government, however, recognise—as I am sure we all do—that many charities carry out charitable activities in a community building, but collect donations to fund that valuable work outside the building itself, such as in collection tins in the local area. One hon. Member at least was taken back to his bob-a-job days with the scouts by our debate, but that is a perfectly good illustration of what we are talking about.

To enable charities in that position to get greater benefit from the scheme, therefore, clause 3 will allow donations made in the local authority area in which the building is situated to count towards the community buildings amount. As might be expected, a donation may only count towards one community buildings total, but the clause makes it clear that if a donation could be counted towards more than one community building amount—for example, if the charity had more than one community building in a local authority area—then, unless the donation was actually made in the building, the charity may decide to which building it is allocated. That means that charities with multiple community buildings will always be able to make best use of the total allowances available to them.

As I have explained, charities may claim one core allowance, or a community buildings allowance for each community building. They may claim whichever is more beneficial to them—that is what we want them to do. To ensure that the process for claiming top-up payments for charities is as straightforward as possible, a charity that is not connected with any others and collects less than £8,000 in small cash donations in total will not have to make a distinction between community buildings donations and other donations—a donation made anywhere, including within the community building, will simply qualify for the core £8,000 allowance. That will make things much easier for very small local charities to claim.

In practice, the Government anticipate that the vast majority of connected charities will be better off claiming under the community buildings rules, because connected charities are to be provided with an £8,000 allowance for each building, rather than a single £8,000 allowance to be shared between the group. So we have made that the default position. By designing the rules in that way, the vast majority of connected charities will automatically receive the most beneficial allowance.

Clause 4 will make life easier for most connected charities. They will simply collect up to £8,000 in or around their community buildings and submit a claim via HMRC’s Charities Online service, and a top-up payment will be paid into their bank account. However, we want the small donations scheme to be successful and for connected charities to have the freedom of choice to claim whichever allowance is more beneficial to them as a group. Where it is more beneficial for a group of connected charities to share a single core allowance, they may elect to do so by notifying HMRC. Where none of the connected charities in a group runs charitable activities in a community building, the amount on which allowances can be claimed would be calculated as it is currently. All small donations received are pooled and shared between the connected charities within the group. HMRC will be developing clear and detailed guidance in collaboration with the charities sector to help charities to determine how the new rules will apply to them, and how they can best use them.

To summarise, clauses 3 and 4 restore parity of treatment for comparable charities, and so deliver a fairer outcome. Charities can claim under one or other element of the scheme, but not both. Charities with community buildings have the freedom to claim top-up payments under the gift aid small donations scheme in a way that best suits their individual circumstances. For many charities, the rules will be simpler to operate and, given the relaxation of community building rules, more generous.