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UK votes to leave EU – what next for charities?

Posted: 20th July 2016

Gavin McEwan at Turcan Connell comments on what, if anything, will actually change for charities in the immediate future.

 

Stock markets and sterling

It is too early to say what the lasting impact may be of falls in stock markets and sterling, but a long downward trend would affect investment portfolios and would be keenly felt by endowment funds and grant makers who rely on investment returns.

Charity tax

Charities within the EU are eligible for relief from UK and devolved Scottish taxes, provided that the necessary conditions are met. Similarly, tax relief is afforded to Scottish charities in other EU states. Unless there can be agreement with the EU or individual EU member states, Scottish charities will no longer automatically qualify for tax relief in EU states. Equally, EU charities will only qualify for tax relief in the UK or Scotland if Parliament decides to keep the current rules in place.

EU grant funding

Some charities are worried that EU funding including the European Social Fund will now be closed to them. This is a real risk. In theory it remains possible for the EU to make grants to non-member states, but this needs a deliberate decision by the EU and there is no certainty of that.

Irrecoverable VAT

One tax which charities can never totally avoid is VAT. The UK’s VAT system is aligned with equivalent taxes imposed in other EU states. The UK has limited powers to relieve charities of the burden of irrecoverable VAT on expenditure, but Brexit will give an opportunity to Westminster to grant charities relief from VAT. This is entirely dependent upon government policy.

Other policy areas

A number of charities are concerned about the loss of EU protections and policies. A key example is environmental protection and conservation, where the UK benefits from EU-wide policies covering wildlife and fish stocks, water and air quality, energy and pollution. The existence of EU-wide standards often underpins work carried out by environmental and conservation charities. Any change in environmental policy post-Brexit would require the UK deliberately to depart from existing EU standards.

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