Welcome to this edition of our update on developments affecting
the charity and not-for-profit Sectors. Conscious of the many
demands on your time we have revised the format so that you can
scan it for issues of direct concern to you and follow the links to
those articles which deal with the subject in more detail.
We complement this service with our series of trustee training
sessions, which are designed to give you – in the course of a
pretty full day – a thorough overview of the roles and
responsibilities of charity trustees, and a welcome review of new
developments. Recent delegates have told us that they find them
"very well run by top rate people in a superb
environment"; "the day was very useful and the length of
the sessions well judged".
Kind regards
Mike Scott
Latest News
Happy New [Tax] Year!
Whilst this year's Budget did not bring significant
changes to the Charities sector, a number of key changes are taking
place in the new tax year, which started on 6 April 2013.
Income tax reduction – Gift Aid impact
Whilst the reduction of the additional rate of income tax
from 50% to 45% for taxpayers earning more than £150,000 per
year was good news for high earners, the amount of relief they
receive on donations made to charity will be reduced
accordingly.
If someone paying tax at the additional rate makes a donation by
gift aid of £1,000, the total value of the donation to the
charity will be £1,250. Previously the donor was able to
claim back 30% (50%-20%) of £1250 = £375. After the
change to 45% the donor will now only be able to claim back 25%
(45% - 20%) or £312.50.
A donor can ask for Gift Aid donations to be treated as being paid
in the previous tax year if enough tax has been paid in that year
to cover both any Gift Aid gifts made that year and the ones to be
backdated. To be valid, the request to carry back should be
submitted before the submission of the self assessment return for
that previous year.
Charities may consider notifying their donors of the change to
assist with their personal planning, whilst highlighting the
opportunity to backdate Gift Aid claims.
Other Gift Aid Changes
As well as the effect of the changes to the additional
rate of income tax there are a number of technical and procedural
changes to the Gift Aid regime which could affect your
charity. We highlight these in our recent briefing note for a
link to which
click here.
Since publication of our note HMRC have provided some updated
online guidance which can be found at the following links:
For Gift Aid Small Donations Scheme: http://www.hmrc.gov.uk/charities/gasds/basics.htm
For Charities Online: http://www.hmrc.gov.uk/charities/online/benefits.htm
For the new model gift aid declarations that will need
to be used:
http://www.hmrc.gov.uk/charities/gift_aid/declarations.htm#2
A new corporate entity is born
After a very long gestation period, it is now possible for
a charity to operate with the protection of limited liability
without also having to be incorporated as a company under the
Companies Acts. Instead, the constitution of a Charitable
Incorporated Organisation ('CIO') needs only to be
registered with the Charity Commission – and so only to file
its annual report and accounts with the Charity Commission, thus
saving some administrative costs.
Please see our note on the subject '
CIOs – To use or not to use?' for an overview of
registration and other relevant issues.
Charities' Empty Property Rate Relief
A recent judgement by the High Court has ruled that Local
Authorities are allowed to consider the extent of a charity's
charitable use of a private landlord's empty property before
deciding whether to grant the mandatory empty property rate
relief.
The commercial property downturn has encouraged landlords to
reduce their outgoings by renting empty properties to charities at
a peppercorn rent and for a donation. In return landlords are
exempt from paying empty property rates and the charity can claim
an 80 per cent mandatory charitable relief on the rates payable to
the local authority.
The Charity Commission had announced that it was examining around
700 cases where charities were taking the relief available but not
fully occupying or operating from the property. This has led to a
number of Local Authorities challenging applications for claims for
relief in the Law Courts. The recent judgement could have
implications for the growing practice of charities renting empty
properties but not occupying them in return for donations from
landlords.
Annual Residential Property Tax
Charities have been granted an exemption from the new
annual charge which applies in certain cases of holding residential
properties worth more then £2 million.
Legislation review
The government has published its initial response to
Lord Hodgson's recommendations:
A full response is expected to follow the Public Administration
Select Committee's report of its own inquiry into the Charities
Act 2006 and the regulation of charities, which is due in the next
few months. We will report more fully once the Select
Committee Report and government response have been published, but
with the Law Commission about to begin its own charity project we
expect the next few years to bring more changes to charity
legislation.
Points of interest
Pensions Auto-enrolment
You will be aware of this important development in the
pensions arena; the specific implications for your charity may be
less clear to you. To assist with getting to grips with that, we
have prepared a (fairly!) short guide.
Click here for a link to that note.
Employment Law Update
For a general overview of recent employment law
developments please follow this link to our update first published
in the April edition of
Finance Focus link.
Vetting and Barring Scheme update
Some welcome deregulation and simplification has been
introduced to a scheme which - however well-intentioned –
threatened to be a disproportionately burdensome arrangement to
protect vulnerable groups. The revised arrangements are likely to
affect only about half of the 9m people that it is thought would
have been affected by the previous proposals. In particular, for a
fee, it will be possible to obtain a CRB check and then use that
for different employers and keep it up to date online.
There are some new definitions and a new body – the
Disclosure and Barring Service – with which you will need to
become familiar. For further details see our
update on the Scheme.
Charity Commission News
Public Benefit Guidance
The Commission's consultation on its revised public benefit
guidance has now closed. We eagerly await the new guidance,
which is expected shortly, when we will comment in more detail on
its impact on the sector.
Guidance for Trustees
New guidance has been issued on decision making by
trustees. This may be partly in response to the Upper
Tribunal's Decision in the Independent Schools Council case
when the Commission was criticised for being too prescriptive about
how charity trustees of schools should ensure their organisation
was complying with the 'public benefit requirement',
stating instead that, provided the provision for 'poor
people' was 'more than tokenistic or de minimis', it
was for the trustees to decide in all the circumstances of their
school what was appropriate. It also probably has something to do
with the resource constraints under which the Commission is
operating and a desire to fend off approaches for advice. The
Guidance is said to be draft, and if you have time, comments on it
would be welcomed by the Commission.
Please click here.
In November last year, the Commission also published guidance in a
'Trustees Handbook' to assist departing trustees to hand
over to new trustees.
Positive guidance for charity trustees, especially any of
organisations affected by the current economic climate, is
available in the latest '
Big Board Talk' publication '
15 questions trustees need to ask'. These might usefully
provide part of the Agenda of a trustees' meeting.
Finally, the Commission's new Annual Return for 2013 is now
available via the Commission's website.
www.charitycommission.gov.uk.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.