Charity compliance update April 2018

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Jen Gerrard reports on the latest consultation responses, including business rates in multi-occupied properties and funding for supported housing.

Business Rates in multi-occupied properties

The government’s response to a consultation around the proposed reinstatement of a practice by the Valuation Office Agency (VOA) – namely applying one rating assessment to contiguous (touching) business properties occupied by the same ratepayer – has been published this month.

There has been an adverse effect on some ratepayers since the practice was amended, including:

  • increases to the overall rateable value due to the loss of “quantum discount”
  • loss of small business rate relief for ratepayers who have seen their property split into parts
  • changes to rateable value due to rounding

The ruling was potentially important for small charities and charitable companies because many occupy two to three rooms or floors in multi-occupied buildings and not all receive 100% business rate relief.

It is potentially good news for some small charities, with The Charity Tax Group reporting that the government will be “making it possible for ratepayers to be able to make a prioritised ‘check’ of their rateable value on the 2017 rating list to apply the new legislation to their assessment”.

Subject to Parliamentary approval of the draft bill, those businesses that have been directly impacted will be able to ask the VOA to recalculate valuations based on previous practice.

They will then be able to have their bills recalculated if they so choose – and backdated. This will include those businesses that lost small business rate relief.

Read the full response here, pending the passing of secondary legislation to enable implementation.

Funding for supported housing

Two consultations were launched on 31 October 2017 and closed on 23 January 2018 - one on housing costs for sheltered and extra care accommodation, and one on housing costs for short-term supported accommodation.

Both consultations sought views on the design of the government’s new supported housing funding models which relate to England only.

The government has issued an interim response, stating that further details will be issued in the summer. Read the full interim response here.

Accounts monitoring: Concerns highlighted by auditors in their audit reports 2017

On 15 March 2018 the CCEW published a report around their accounts monitoring processes and outcomes in relation to reviews which took place during 2017.

This most recent set of transparency data makes for interesting reading.

In 2017, 80 charities submitted at least one set of accounts that contained a modified audit opinion, compared with 97 in 2016. 29 of the charities that submitted accounts in 2016 that contained a modified opinion did so again with their following year’s accounts.

Jen Gerrard

Of the 80 noted above, the reasons for the modified opinions can be summarised as:

  • Going concern accounts prepared for a charity which was clearly not a going concern
  • Insufficient evidence to support figures in their accounts (48 charities, compared with 50 in 2016)
  • Accounts did not comply with the SORP (31 charities, compared with 45 in 2016)

The last bullet point above illustrates that it has never been more important for charities to be able to access sector-specialist auditors and accountants.

The full report can be viewed here and further explains the actions of the CCEW, lessons charities may learn from these examples and about their monitoring process.

OSCR blog watch

OSCR has been busy this last month with the following guidance for Scottish charities being released:

OSCR have also released a statement around the use of NHS Endowment Funds, which can be read here.

CCEW publishes gender pay gap report

As I’m sure you’re aware, from all of the press reporting on this topic in recent weeks, last year the government introduced statutory legislation for organisations (with 250 or more employees) to report annually on their gender pay gap.

As a larger employer, the Charity Commission for England and Wales (CCEW) also published its own gender pay gap report on 27 March 2018.

See the stats here via their dashboard view.

For further information, you can read their ‘full’ report, together with supporting narrative around distortions, here.

Fundraising preference service launches in Northern Ireland

On 26 March 2018 the Fundraising Preference Service (FPS) launched in Northern Ireland.

As in England and Wales, FPS in Northern Ireland will be managed by the Fundraising Regulator, who will contact charities on behalf of the user and request that the selected methods of communication are stopped until the individual decides otherwise.

The launch of the FPS reflects the group’s commitment towards ethical practices for fundraising, noted Walter Rader, Fundraising Regulator, Northern Ireland Board member.

“The service will play a crucial role in allowing members of the public in Northern Ireland to control the communications they receive from charities,” said Rader. “This is a vital step in continuing the work the Fundraising Regulator has undertaken to rebuild trust between the public and the sector over the last two years.”

Consultations round-up

Here’s our monthly round-up of (and links to) key consultation opportunities and those closed, pending feedback.

The following consultations are currently open and inviting a response:

The following consultations are closed with feedback analysis pending – watch this space for an update in future briefings:

Fundraising Regulator: Three-part consultation on the code of fundraising practice

The first two parts (A and B) invited feedback on specific issues raised by the sector in relation to complaints handling and the TPS assured certification.

Part C proposed to introduce a new section to the code for online fundraising platforms and aims to ensure that these platforms provide adequate and clear good practice guidance to individuals setting up a fundraising page on their sites. 

It also aims to ensure relevant platforms follow the legal requirements set out within the recently introduced Payment Services Regulation 2017.

Charity Commission and OSCR – Charities SORP

A consultation was launched on 20 February 2018 (which ran until 4 April 2018) focusing on 21 proposed amendments to the SORP which were considered necessary as a result of the changes made in December 2017 to FRS 102 (see above re accounting for gift aid payments).

These changes are to be made via a second update bulletin and include:

  • the introduction of an accounting policy choice for entities that rent investment property to another group entity
  • the clarification of the accounting treatment for payments by subsidiaries to their charitable parents that qualify for gift aid
  • the clarification of the requirement for comparatives for disclosures required by the SORP
  • the introduction of a requirement for a net debt reconciliation to be prepared as a note to the statement of cash flows

Click here to visit the consultation web page for the original invitation to comment and the full draft FRS102 update bulletin.

The Charity Commission has stated that, whilst the changes to FRS102 are not up for review, feedback on how these will be applied in the SORP will be useful.

Initial consultation responses can be viewed here, pending analysis of full feedback.

Charity Commission for England and Wales 

The use and promotion of complementary and alternative medicine (CAM): making decisions about charitable status – closed on 19 May 2017.

This consultation is about the Commission’s approach to deciding whether an organisation which uses or promotes CAM therapies is a charity.

The Commission planned to publish an analysis of the consultation in early August but due to receiving over 600 responses, it is unable to prepare the analysis in that timeframe.

Charity Tax Group (CTG)

 Review of HMRC’s Guidance on Gift Aid Donor Benefits – closed 5 January 2018. To read more around the working group terms of reference and objectives click here.

HMRC and policy

Withdrawal of statutory concessions – closed on 7 March 2017

Draft legislation: the Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2017 – published 27 March 2017, closed on 21 April 20

Treasury: Legislation to support cheque imaging. The Treasury consulted on two measures to support the introduction of the Image Clearing System (ICS) for cheques:

  • Use of cheques as evidence of paymentCompensation in the event of an ICS loss
  • Closed 1 December 2017. Draft legislation and supporting consultation documents can be viewed here.

Charity Commission for Northern Ireland

Annual monitoring return 2018 – closed on 21 November 2017. Changes to apply to charities’ financial years starting on or after 1 January 2018.

A full consultation report, providing an overview of the public consultation process and outlining how the Commission considered the responses they received will be available in Spring 2018.

Office of Tax Simplification (OTS) 

Review of depreciation and capital allowances and whether the use of accounts depreciation to provide relief for capital expenditure instead of capital allowances would simplify the preparation of tax returns for incorporated and unincorporated business.

Deadline for responses was 30 November 2017. For more information about the OTS’s call for evidence see here.

About Jen Gerrard

Jen Gerrard

Jen is a Fellow of the Association of Chartered Certified Accountants (FCCA) and the founder and managing director of Gerrard Financial Consulting, a specialist accounting firm for the charitable sector. She has over 17 years’ experience working in accounting and finance and has also worked as an accountancy tutor for a leading training provider.

Jen has been a trustee of the Southville Community Development Association (2014 to 2017), Self Injury Self Help (SISH) (2013-2016), the Oswestry Food & Drink Festival and Impact AAS (2007 to 2010). In addition to being a current Trustee of Women’s Aid Federation of England, Jen has been a registered volunteer with Volunteer Bristol for four years and is a Member of the ICAEW Charity & Voluntary Sector Specialist Group.

Jen sits on the South West & Wales Regional Engagement Forum of the Charity Finance Group and makes regular contributions to articles in national publications – most recently AccountingWEB and Charity Finance Focus (produced by the CFG). She is also a regular speaker on charity finance and governance matters.

Her firm is a corporate member of the Charity Finance Group and was shortlisted in two categories for the AccountingWEB Practice Excellence Awards 2016. This is in recognition of the company’s innovative work with charities and NFPs to streamline their finance functions through adoption of new technology.

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