News and Publications

Spring Budget 2024 and the impact on charities

Posted: 09/04/2024

The announcements made on 6 March in the Spring Budget 2024 have left the charity sector, according to Civil, with ‘very few measures to help’. Of course, much of it is speculative as we are in an election year, but what is disappointing to see is the lack of recognition of the way in which the charity sector is propping up the public sector.

Whilst the reduction of the VAT registration threshold will be welcomed by some charities, the point remains that many are often unable to recoup much of their VAT liability as a result of the amount of their business activities which are exempt, or considered non-business for VAT purposes. A paper by the Charity Tax Group (CTG) in 2020 found that 57% of the VAT paid by charities on goods and services purchased is irrecoverable. The CTG has suggested a number of ways to tackle this problem, such as the introduction of new ‘zero-rates’ for certain charitable activities, but these were not incorporated in the budget.   

The extension of the Household Support Fund was also welcome news, but the six-month period of the extension is widely seen as too short. The fund is used to help people with the costs of utilities, food, and essential living costs, and has for some time been extended in six-monthly increments. This latest short extension leaves users of the fund with uncertainty, and the possibility for charities of having to pick up the slack if the fund is not renewed further.

The Local Government Association has reported that three quarters of councils are expecting hardship to increase further in the next 12 months, and have called on the Chancellor of the Exchequer (be it the incumbent or his successor) to put a long term plan in place to assist people in need.

A similar concern has also been expressed regarding the level of funding for local councils, who are increasingly reporting that they are having to cut back on services, including adult social care or temporary accommodation, which will require charities to get involved and spread their resources ever more thinly.

On a more positive note, the chancellor did announce that the government will amend the current Gift Aid legislation to allow charities which offer subscription donation models to claim Gift Aid. Tax relief was also granted to theatres, orchestras, museums and galleries, and a £45 million fund was announced for medical charities, including £3 million for Cancer Research UK.  

The impact on legacy teams

With relatively few measures to help the charity sector at large, however, the budget will put a pressure on legacy teams across the country to plug the gap as charities’ expenditure increases to take pressure off public services.

In previous years, making a gift as part of a will was seen as a ‘nice to have’, perhaps for those with no dependants, or with a larger estate. It is now more than ever where there appears to be a real need to support communities and public services, in a time when the ageing population will increase the frequency and value of large transfers of wealth on death.

So, how can legacy teams tap into this rich source of wealth transfer and what can they do to ensure that they receive that money as quickly as possible so that it can be put to good use?

  • Go further with setting out impact – charities are amazing at setting out to their donors what their charitable objectives are, but donors need to understand the wider impact. Some examples include what pressure, by giving to that charity, will be alleviated on other public services (noting the commentary in the Spring Budget), what is the impact on the environment, how does the charity look after its staff’s wellbeing, what is the charity’s policy on equity and diversity, and how will the donors data be processed by the charity. In a world of ever-increasing information sharing, donors want to hear more rather than less, and that transparency is key.
  • Make it clear that it is not a case of family vs charity. With difficult economic times ahead, many testators are rightly concerned about ensuring that their children and grandchildren are looked after once they pass away. Charities should make it clear when discussing legacy-giving that wills can be structured in such a way that charities benefit only once the testator’s family are provided for.
  • Start the conversation early. If the donor has not already thought about it, the first conversation a charity has with them about legacies may not prompt the donor to change their will. Persistence (but not pestering) is key. Legacy Voice points to American professor James Proschaska's theory of behaviour change. Moving from a position of not even considering leaving a charitable legacy in your will, to considering leaving such a legacy, to finally changing your will, may be a process of months or years for many donors. All the more reason to start having the conversation with donors as soon as possible!

Arrow GIFReturn to news headlines

Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP