Changes to simplify corporate donations and boost payroll giving were announced not just in the Budget but also in the Chancellor’s speech to the NCVO AGM in February and presaged in his pre-budget report last November. With effect from April, the changes are:
• Gift Aid minimum abolished (previously £250), payments by companies now made gross (no tax need be deducted), no paperwork once basic declaration of eligibility made;
• Gift Aid relief extended to non-resident companies;
• abolition of £1,200 upper limit on payroll giving, plus a 10% supplement for three years (see Best Practice feature in this issue); advisory group including BT , NatWest and WH Smith to advise on a campaign to double pay-roll contributions to £60 million pa;
• tax relief on business contributions to local enterprise agencies, training and enterprise councils, local enterprise companies and Business Link organisations, due to expire on April 1, extended indefinitely;
• tax relief allowed on donations of shares and securities, broadly defined;
• new publications and telephone help-line to ensure greater consistency of advice from local Inland Revenue and Customs & Excise offices.
Education
• new money for Excellence in Cities programme including £60 million for business-led ‘city academies’, starting with ten pilot schemes; likened by some to the Conservatives’ City Technology College initiative, which few big companies supported; Peter Vardy of the car retailer Reg Vardy has pledged £12 million towards the scheme, having previously donated a reported £2 million to Emmanuel CTC in Gateshead;
• extension of £30 per week grant scheme to encourage 16-18 year olds to stay on in education;
• more money for the University for Industry and the Small Business Service to promote training on the Internet.
Employment
• changes to the employer-administered working families tax credit, aiming to incentivise work and avoid the poverty trap;
• a promised review of maternity leave rules, perhaps including automatic right to a part-time job on return to work – greeted by criticism from employers’ organisations;
• minor changes to payroll and tax administration, but no comprehensive simplification as recommended in the Haskins ‘better regulation’ taskforce report, published on March 10;
• moves to require lone parents with school-aged children to work: mandatory job centre interviews but also extra benefits for training and an earnings disregard for low paid workers;
• further tax relief for childcare provided by employers;
• tax benefits through new Inland Revenue-approved all-employee share plans plus reduced capital gains tax on employee shares.
Enterprise
• package of measures on capital gains tax (four year taper relief on business assets), earlier capital allowances for IT investment by SMEs, tax relief at 150% for research and development, enhanced relief for share options to encourage entrepreneurs;
• review of investment fund management industry, headed by Paul Myners, executive chairman of Gartmore ; similar to the Cruickshank enquiry into the banking industry, the scope is likely to include why so little of the £800 billion in pension funds is invested in new enterprise and the ‘grass roots’ economy.
Environment
• plans for a tax on aggregates, made revenue neutral by reduced employers’ National Insurance;
• cut in VAT on energy-saving materials to 5%; but no harmonisation of VAT between new build, often on green field sites, and refurbishment on existing ‘brown field’ sites;
• further weakening of the climate change levy, including a five year 50% discount for the horticultural sector;
• linking company car taxation to exhaust emission levels.
Regeneration
• partnership between the European Investment Bank and the private sector to finance a £1 billion regional venture capital investment fund;
• more money for the regional innovation fund to support business clusters and incubators;
• ‘action teams’ to match people in high unemployment areas with vacancies in other parts of the country, being piloted in the new Employment Zones; also linked to the new Phoenix Fund to harness the spirit of enterprise in inner city communities (plans include workspace incubators for SMEs and a network of 1,000 volunteer business mentors);
• venture capitalist, Ronald Cohen, to head new Social Investment Taskforce, looking at alternative ways to fund and encourage community enterprise.
Comment
The annual budget process has always been a great set-piece occasion for the Chancellor to present the whole government programme. Here let’s focus on just two aspects, charitable giving and the so-called regulatory burden.
On giving, the announcements go halfway to address the call we made in Community Affairs Briefing last year (Issue 45) to remove the tax barriers to greater community involvement. Cash giving to charities is now sublimely simple, even though the whole system is still built on the contrivance of routing payments either as business expenses or as pure donations – at complete variance to the win-win philosophy of CCI. The new relief for gifts of shares is welcome, but the lack of action of new funding forms such as interest free loans is disappointing.
More importantly, the government has failed to remove the VAT disincentives to in-kind giving where a convoluted paper-chase is still required to give away obsolete PCs and redundant products. On VAT, the charities have been moaning loudly but to no effect as the cost of widespread exemptions is huge and European legislation restrictive. This has drowned out attention to in-kind gifts, a potentially very valuable resource. Alas, too many charities still see companies as a source of money, not of time, expertise and in-kind resource.
Talking of moaning, the second aspect to note is the increased regulatory burdens on business. Orchestrated by the triumvirate of the CBI, the IOD and the BCC, the chorus of complaint centres on the complexity of tax systems, the cost of payroll administration and the burden of family-friendly rights to maternity and paternity leave. Here, little sympathy is warranted, as they are trying to have it both ways.
The old way was for the government to do it all, with high taxes and bureaucratic inertia. The new way is to reduce taxation and involve other players in addressing social issues. If business wants low tax and its social remit recognised, there is bound to be some pain along with the gain. Getting and keeping more people in work is the right way forward, with huge benefits in terms of social cohesion. Business should be prepared to play its part by bearing a very modest administrative burden.
Corporate Citizenship Briefing, issue no: 51 – April, 2000
COMMENTS