While the Chancellor’s recent autumn statement does not include any mentions to co-operatives, a number of its measures will have a direct impact on the sector.
George Osborne’s statement confirmed the government’s policy shift on community energy tax relief, with community energy investors losing access to two forms of tax relief. They lost Enterprise Investment Scheme (EIS) tax relief on 30 November and will be excluded from Social Investment Tax Relief (SITR) on 6 April next year.
In its response, Co-operatives UK, the umbrella body for co-operatives, said it was working with partners to gather Parliamentary support for its proposal to allow community energy back into SITR, while providing extra protection against tax avoidance.
Even those community energy schemes which receive little, or no, electricity subsidies via Feed-in Tariffs will be excluded, Mr Osborne confirmed.
But the Chancellor did announce the increase of the renewable Heat Incentive to £1.15bn by 2020-2021 – which Co-operatives UK says could benefit community heat schemes.
There is better news on crowdfunding. Following a consultation, which included Co-operatives UK, the government will allow debt securities offered on crowdfunding platforms by co-operative and community benefit societies to be held in a new Innovative Finance ISA.
“The growth of crowdfunding presents a major opportunity for many co-ops to diversify sources of capital and raise finance from a broader public,” says Co-operatives UK in its response to the statement. “These opportunities are significantly enhanced by opening up ISA eligibility in this way.
“In our response to the government consultation we described to HM Treasury the complexities involved in co-op equity being held in ISAs, and so are pleased that measures have not been rushed through in this regard.”
Another move in the statement is likely to affect medium-sized and larger co-operatives. From April 2017 the government would impose a levy of 0.5% of the pay bill of every employer with a pay bill over £3m, to fund a national apprenticeship scheme.
But corporation tax – which affects most unincorporated associations such as co-operatives – will be cut from 20% to 18% by 2020. Since 2010, the headline rate for corporation tax has been cut from 28% to 20%, meaning a flat rate now applies to all organisations liable for the tax.
And the Chancellor said small businesses would benefit from an extension to 2017 of the Small Business Rates Relief, a move likely to affect smaller co-ops.
HMRC will place a stronger emphasis on digitisation, providing all businesses with an all-encompassing online tax account by 2020. Co-operatives UK says this could make it easier and cheaper for co-ops to manage their tax affairs.
But Co-operatives UK has expressed concerns over the decision to reduce HMRC’s budget by 18% – which, it argues, could result in a smaller higher skilled workforce.
And co-ops sometimes face difficulties when dealing with HMRC because their distinctive features do not fit neatly into tax frameworks and there is a lack of proper understanding among officials, warned Co-operatives UK.