How will Brexit affect the third sector?

Brexit Puzzle Pieces STEP’s Charities UK and Philanthropy Advisors Special Interest Groups hosted a seminar on Charities and Brexit on 6 September presented by STEP members Ed Powles TEP and Tom Dumont TEP and chaired by Suzanne Reisman TEP, writes Emily Deane.

According to those in the charity sector there was an immediate drop in charitable donations after Brexit, but this proved only temporary before it stabilised. However politicians and economists are struggling to gauge what will be different following Brexit. Ed Powles pointed out: ‘If we invoke Article 50 it will be biggest de-merger in history.’

So what are the main points of concern for those who work in the third sector?

Tax reliefs – UK law is vulnerable to significant legislative change following Brexit. EU law currently makes it possible for British citizens to donate to EU charities and claim tax relief. Likewise EU members can donate to the UK and obtain tax relief. European charities can also use UK tax relief in the form of Gift Aid. It seems very unlikely that this regime will continue and that the EU will extend charitable exemptions to the UK after we leave.

EU funding – UK charities receive up to GBP300 million in donations directly from the EU every year, representing a significant contribution towards vulnerable beneficiaries and vital research. It seems highly unlikely that this will continue. There will inevitably be a decrease in grants available through the European Social Fund (ESF) and the European Regional Development Fund (ERDF).

Economic instability – the uncertainty that people are facing in their jobs and personal investments means that they are far less likely to make donations from their disposable income. In addition, charities that depend upon profit from their investments may have major concerns about how the economy will affect them. Having said that, we have survived recessions before and charities have managed to endure.

Legislative change – it is unclear how Brexit will affect charity law. The UK may be compelled to repeal laws that we were obliged to adopt from the EU. Will we modify the European Union Act, and if so, what will we keep and what will we discard? There could be a serious impact on the UK if we re-visit employment, regulatory and data protection laws. Will there be further, onerous due diligence and money laundering requirements imposed upon charities? It seems almost inevitable.

In these pre-Brexit days it is proving very difficult for tax practitioners to advise their clients regarding charitable gifts, cross border gifts and property across Europe. The future seems precarious for the third sector at this stage and the impact over the next few years is relatively uncertain.

John Low CEO of Charities Aid Foundation comments on the future of charities following Brexit, ‘Britain’s culture of charitable giving and the important work of our international charities are hugely significant to how we are viewed by other nations. As Britain starts a new chapter in our approach to international relations, charities must be given the chance to play a leading role.’

STEP is hosting two relevant Special Interest Group events in the next few weeks, with discounted rates of attendance for SIG Members at both:

 

Emily Deane TEP, STEP Technical Counsel

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s