Brexit no-deal papers: Key points for foundations

Negotiations with the EU are due to reach a crucial point in October. The UK government is publishing a series of papers that set out what will happen if a deal is not reached.

Contained within the papers – which stretch across the nuclear industry, farm payments, and state aid – is some useful information for foundations, particularly with regards to future funding, financial services, tax, and workplace rights. Foundations active in the fields of science, medicine and education may also be interested in provisions in those areas – the full list of papers can be found here.

Here, we summarise the relevant points for foundations, and will continue to provide updates as and when they emerge. For more information, get in touch with and see the second summary here.

EU-funded programmes

Several of this first batch of papers address concerns about projects funded by the EU through streams such as the structural and investment funds. Although few foundations are likely to be in receipt of this kind of funding, which often goes towards tackling issues like social exclusion, grantees and the funding eco-system could nonetheless be impacted. For foundations, this could potentially lead to more demand on resources or a perceptible withering of some civil society organisations under the pressures of reduced funding.

The government has guaranteed that “UK organisations, such as charities, businesses and universities, will continue to receive funding over a project’s lifetime if they successfully bid into EU-funded programmes before the end of 2020.”

This guarantee builds on earlier commitments, and expands the range of projects that the UK government may underwrite. The government also says it is working with the European Commission to ensure UK organisations will still be able to participate in competitive bidding processes.

The government has also offered a guarantee for the duration of successful Horizon 2020 project bids that were submitted before the UK leaves the EU. There are some notable exceptions and some cases that the government is still working on, for example where UK organisations are in a consortium but play the lead role in distributing funds.

The situation for humanitarian projects funded by the European Commission is more complicated. As part of the EU’s own contingency planning, a new clause has been added to grant agreements that means either UK NGOs would not continue receiving funding (though they would still be expected to implement the projects using other funds), or that projects may be terminated.

To counter this, the government has committed to funding the implementation of projects beyond March 2019 where the UK NGO is either operating alone or as the lead in a consortium. The aim is to avoid early termination of projects, but only applies where that particular clause has been invoked.

Money and tax

VAT is a concern for many in the charity sector with trading operations; some see Brexit as a chance to rethink some of the complexities that have built up over the years. Meanwhile the Charity Tax Commission’s ongoing review of the effectiveness of the charity tax system of coincides with broader thinking about tax arrangements for the UK after it leaves the EU.

The plans focus on transactions between the UK and the EU; the domestic system will continue in its current form. The government’s stated aim is to maintain similar procedures to avoid disruption or uncertainty, but foundations that transact with the EU may want to read up on some of the changes that might occur in the event of a ‘no-deal’ here.

Foundations with investments may also be interested in preparations that the banking and financial services industry might be making. Foundations with their financial operations entirely within the UK are unlikely to be affected by changes, according to the papers. Those using European services may be affected, but there are many influencing factors. In any case, foundations should be contacted by the appropriate body, like their bank or investment manager, if there are any actions to take.

The government says it is exploring options to align payment legislation; foundations that make grants overseas may want to watch out for how these plans develop.

Workplace rights

In terms of workplace rights, the government envisages no financial implications, though there may be changes for European Works Councils and the insolvency of some employers. Of greater interest and importance to many is the future of the workforce and the rights of EU nationals, which are not covered by the first set of papers.

What next?

It is expected that the government will publish more papers in this series. There hasn’t been any indication of timings, though it seems likely they’ll be sandwiched between the summer holiday season and the commencement of October’s negotiations. It is also suspected that areas of interest to foundations such as social policy may be covered in later papers.

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