Brexit and the charity sector

At the end of 2020, the transition period for the UK’s departure from the EU ended. This averted a no deal Brexit and the resulting UK-EU Trade and Cooperation Agreement laid out the foundations of the future relationship between the EU and the UK.

 

Three months on, we look at the situation for charities, explore the remaining areas of uncertainty, and discuss some of the fresh challenges facing the sector.

 

 

Retail investment concerns

 

One of the most recent challenges to emerge has been around government and council investment in charity retail. This funding is vital to help shops mitigate against income losses due to COVID-19-related shop closures. It has also been useful to help charity shops to digitise the retail experience, especially through contactless payment processes.

 

But charities have been missing out on funding due to confusion over how high street retail funding is allocated post-Brexit. While the EU had increased the limits on the rates of funding on offer, the UK government has been sticking to pre-Brexit caps.

 

Following a successful lobbying push in 2021 by the Charity Retail Association and the Charity Tax Group, the UK caps have finally been brought in line with Europe. The £860,000 cap uplifted to £1.93m in lockdown grants plus the additional limit of £2.57m has been increased to £9m.

 

“We are pleased the government has listened to us,” said Charity Tax Group Acting Chair Richard Bray. “For charities with large property portfolios in the retail, hospitality, and leisure sectors this will be worth up to £1m and possibly more.”

 

But while this area of post-Brexit funding has eventually been ironed out, confusion remains on how lost funding that had come direct from the EU will be replaced.

 

The government has announced that a UK Share Prosperity Fund will be created. This is yet to launch, however, and no firm details on how local areas can benefit have been published.

 

 

Spring budget fails to address tax break vacuums

 

The UK’s departure from the EU created a vacuum in finance legislation. With greater legal freedoms, the UK government has an opportunity to overhaul and increase tax breaks to stimulate the charity sector.

 

The Charity Tax Group and Charity Finance Group have called on the government to ensure that taxation is developed that supports rather than hinders charities.

 

This includes extending VAT and other rate reliefs. In addition, they asked the government to uplift Gift Aid to ensure charities can increase the amount they receive from donations.

 

But there was widespread disappointment in the sector to Chancellor Rishi Sunak’s Spring Budget, which was announced earlier in March 2021.

 

The Chancellor failed to offer any increase to Gift Aid. In addition, he failed to create an emergency support fund for charities. This had been called for by the #NeverMoreNeeded campaign by a coalition of charities and charity sector groups. ACEVO chief executive Vicky Browning said, simply: “The government is taking the charity sector for granted.”