The impact of Brexit is likely to be felt heavily by the charitable sector. Charities are businesses (albeit tax-privileged) and will encounter the same legal issues as other entities, including in relation to employment law, regulatory law and data protection. To that extent it is important for charities to engage proactively to protect their interests against Brexit developments which produce adverse, or perhaps unintended consequences.
Outlined below are a number of areas where charities are likely to be affected by Brexit. However, the full extent to which Brexit will impact the third sector is still relatively unknown, although this should become clearer as the UK Government begins to negotiate the terms on which Britain exits from the EU.
Loss of EU funding and Financial Downturn
Commentators have suggested that Brexit will result in charities losing more than £300m annually in direct funding from the EU. Grants available through the European Social Fund (ESF) and the European Regional Development Fund (ERDF) are likely to cease following the exit of Britain from the European Union.
Some charities may consider restructuring, to create a greater European presence. Charities will of course feel the effects of any financial downturn arising from Brexit, whether as a result of reduced levels of donor-giving and/or decreasing returns on investments.
Tax relief on donations to charities
At the moment, as a result of the Persche case, it is possible for UK tax payers to get tax relief on donations to charities or not for profit organisations which have been established in other European countries, provided that the European entity has been recognised by HMRC. While very few European entities have in fact been given equivalent charitable status by HMRC, there is no certainty that the current regime will continue post-Brexit.
Universities and research institutions are likely to see decreased levels of research infrastructure funding from Europe. Currently, EU students pay home fees. If, post-Brexit, EU students are required to pay overseas fees, this could give rise to Equality Act issues in the context of discrimination on the basis of nationality.