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Brexit and the Charitable Sector

by Jo Hemsley

12-09-2016

Whilst Parliament has been busy since the EU Referendum, almost all organisations and industries have been left with their own concerns as to how Brexit will affect them. The charity sector is not immune to this uncertainty.

Although it is early days, charities and their trustees should start considering planning, or at least considering the effects of Brexit and leaving the EU, so as to not be caught out later on.

Possible Negative Effects

So what are the possible setbacks charities could face as a result of Brexit?

Charities rely on the generosity of the public. Recent statistics show that the average household’s disposable income has reduced by 0.6% in recent years.  This is due largely to wage growth stagnation following the introduction of the National Living Wage and automatic enrolment to company pension schemes.  If the public has less disposable income, it follows that charitable donations will fall.

However, to compound this issue, as the public considers the effects of Brexit charities may see public donations drop further still as discretionary spending reduces.

The UK’s pending exit from the EU means that those charities who had previously received substantial EU funding will no longer benefit from this source of income. Whilst the UK Government may of course choose to introduce replacement funding arrangements, this of course cannot be guaranteed and at least preliminary financial contingency planning may be appropriate.

Following any financial downturn arising from Brexit, charities may feel its effects from loss of returns on any investments on the stock market. There is the possibility of any future Budget cutting tax-relief and other significant funding commitments thereby reducing further streams of income for charities.

A financial downturn may also have the knock-on effect of increased public demand for some charitable services, placing additional strain on individual charities resources.

So are there any Positive Effects of Brexit?!

Once an exit from the EU is negotiated, the UK will be able to decide which services are eligible for reduced rates or exemptions, in particular VAT, which may result in positive tax implications for charities.

Previous EU legislation may no longer apply which could benefit charities by way of time and resources saved.

Considerations

 In these very early days, it is difficult to say exactly how Brexit will affect charities. However, trustees must start considering and planning for the future in order for their charity to continue to meet its objectives as set out in the rules of the charity’s governing document.

If a trustee has any concerns following the Brexit decision, they should seek independent legal advice and speak to the Charity Commission, which offers support.

 


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