Although it is early days, charities and their trustees should start considering plans, or at least consider the effects of Brexit and leaving the EU. Whilst Parliament has been busy since the EU Referendum, almost all organisations and industries have been left with their own concerns of how Brexit will affect them, and not least the charity sector.
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 charity donations will fall. However, to compound the issue, as the public considers the effects of Brexit, charities may see public donations drop further as discretionary spending reduces.
The UK’s subsequent exit from the EU means that those charities who had previously received substantial EU funding will no longer benefit from this source of income, although the UK Government may of course choose to introduce replacement funding arrangments.
Following any financial downturn arising from Brexit, charities may feel its effects from loss of returns on any investments on the stock market.
And, of course, there is the possibility of any future Budget cutting tax-relief and other significant funding commitments thereby reducing further streams of income for charities.
Following any financial downturn, there is then the possibility of further knock-on effects, such as an increase in public demand for some charitable services, putting a further strain on individual charities resources.
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.
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.