How will charities be affected by Brexit?

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There was a great deal of disruption during 2020 and charities and the rest of the not-for-profit sector were by no means immune. In addition to the dwindling donations as furlough and redundancies cut the nation's disposable income, the end of the Brexit transition period loomed on 31st December. So, how will this affect charities? Read our latest article below to find out more...

Before the end of the transition period, EU funding streams provided charities with around £258m per year. Charities already awarded EU funding will still be entitled to this now that the transition period has come to an end, but charities are likely to be concerned about whether such a significant element of funding can and will be replaced by the government's shared prosperity fund.

Some EU funding schemes are still accepting applications from UK-based organisations, so all may not be lost. Of course, there may be funding opportunities from outside the EU to consider, in addition to existing arrangements. Leaving the EU might open as many doors for charities as it has closed.

Charities may need to consider their staff and volunteers, since a report published in 2018 showed that the number of EU workers in the charity sector had risen to 31,000 from 14,000 at the turn of the century. Free movement between the EU and the UK came to an end with the implementation of the UK's new immigration policy on 1st December 2020.

It is thought that around 82% of the EU employees in the charitable sector would not be eligible to work in the UK under the rules of the new scheme. EU workers have been able to apply to remain in the UK for some time and many will have done so, therefore, the charity sector shouldn't be faced with the immediate loss of 82% of its staff. However, going forward, the sector may see a reduction in the number of applicants from the EU for roles and will need to consider how they can plug any recruitment gaps this might create.

Charities hold a great deal of personal data on their volunteers, employees, beneficiaries, and donors. General Data Protection Regulations (GDPR) still applies post-Brexit, it has been confirmed, even though this was EU legislation. Therefore, charities should continue to follow these rules following the end of the transition period. Accounting guidelines and principles relating to charities are also unchanged; charity finances should be accounted for in the same way and returns and submissions should continue to be carried out as before.

One element which may change for charities post-Brexit is VAT. Legislation in effect from 1st January 2021 could mean that a significant percentage of business-to-consumer services provided by UK businesses will not require the addition of VAT, should the customer be located outside of the UK. The Place of Supply legislation states that a customer has to be outside of the EU (which from 1st January 2021 applies to the UK), to receive VAT-free services. Many charities, especially religious charities, can be considered as the customer in a B2C transaction since they do not receive business income and rely on donations and grants instead.

Consider the situation of a charity based in Northern Ireland, which is part of the UK, receiving services from a business just across the border in the Republic of Ireland, part of the EU. There could be some significant VAT savings as a result of this legislation. Some believe that it may not be long before the legislation is amended, since HMRC will not want to miss out on potential income. However, for now, charities are advised to just enjoy any savings which may come their way.

Questions? We can help!

We have vast experence with charities and not-for-profit organisations and have inavlauble knowlege to help our clients. Contact our Director, Neil Coupland, who specialises in charities and not-for-profit organisations on 0115 964 8866 or email him at neilc@rwbca.co.uk to find out how we can help you across all areas of your business.

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.  

Tags: Financial planning Tax advice Tax planning VAT Tax HMRC Employee Employment Government Brexit EU European Union Charity Charities NFP Not for profit

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