Charity compliance update July 2018
This month’s instalment is all about updated guidance from the Regulators – a tweak here, a simplification there. Read on for the latest around Gift Aid donor benefit rules and more.
Charities SORP: Making body to include Irish regulators
The Financial Reporting Council (FRC) has approved the addition of the Charity Commission for Northern Ireland and the Charities Regulatory Authority for the Republic of Ireland as joint members of the SORP-making body with the Charity Commission for England and Wales (CCEW) and the Scottish Charity Regulator (OSCR).
The inclusion of the Charities Regulatory Authority is subject to the SORP being formally adopted by way of regulations for use in the Republic of Ireland.
The new SORP is expected to commence development from January 2019.
John Farrelly, chief executive of the Charities Regulatory Authority for the Republic of Ireland, said this will “result in an effective common reporting and accounting framework suitable for all four jurisdictions that also respects the unique reporting requirements for both Ireland and the UK”.
Echosing this, the chief executive of The Charity Commission for Northern Ireland Frances McCandless said: “This renewed partnership will allow us to work closely together to create a high-quality reporting and accounting framework for charities that can command the confidence of donors and funders across the UK and Ireland.”
Simplification of the Gift Aid donor benefits rules
HMRC updated their draft legislation around simplification of donor benefit rules for Gift Aid on 6 July 2018.
The revisions replace the current donor benefit rule thresholds, which comprise a combination of monetary and percentage thresholds and determine when a charity might lose its entitlement to claim Gift Aid tax relief on a donation.
From April 2019 the benefit threshold for the first £100 of the donation will remain at 25% of that amount. Charities can offer an additional benefit of 5% to donors on the amount of the donation that exceeds £100. The total value of the benefit that a donor can receive remains at £2,500.
OSCR updates key risks focus
OSCR has reviewed their risk framework, streamlining the number of risk areas from ten to six,
since our last update.
In the Our regulatory priorities: an update to our risk framework (19 June), OSCR have identified their key risk areas of focus to be:
- Deliberate mismanagement of charities
- Criminal activity
- Charity trustees' lack of knowledge
- Attempts to gain charitable status for private benefit
- Lack of clarity of the charity brand - bodies at the margins of charitable status and/or with complex or novel structures
- Charities that don't provide public benefit.
Charity Commission for England and Wales (CCEW) guidance updates
The CCEW has been busy updating various guidance releases in the last couple of months – two of the key ones being:
Charity automatic disqualification rules: changes to the law
On 25 June 2018 the CCEW updated their guidance around automatic disqualification changes by adding more information to help charities prepare.
To help you check that a new trustee or senior manager is not disqualified under current automatic disqualification rules, the CCEW has produced two sample declarations for download and use, as follows:
- senior charity manager positions: automatic disqualification declaration
- charity trustee positions: automatic disqualification declaration
To read the updated guidance click here.
Because of the updated guidance, the CCEW also updated the following publications on 3 May 2018:
- The essential trustee: what you need to know, what you need to do (CC3)
- Charity trustee: what’s involved (CC3a)
- Finding new trustees (CC30)
Prepare for the charity annual return 2018
On 29 June 2018 the guidance was updated to include the salary and benefits questions which will be asked in the 2018 annual return.
These new salary and benefits questions will be asked as part of the 2018 annual return:
- Does the charity have any trading subsidiaries?
If you answer yes to the above question you will be asked the following:
- How many trustees are also directors of the trading subsidiaries?
- During the period covered by this annual return, did any of the trustees resign and take up employment with the charity?
- During the financial period for this annual return, did any of your charity’s staff receive total employment benefits of £60,000 or more?
If you answer yes to the above question you will be asked the following:
- Enter the number of staff for each of the following salary bands
- £60,000 - £150,000 (increments of £10,000)
- £150,001 - £500,000 (increments of £50,000)
- over £500,000
- What was the value of the total employee benefits provided by the charity to its highest paid employee?
Consultations open or pending a response
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:
OSCR: Consultation on disclosure regime - proposals to simplify and modernise the Protecting Vulnerable Groups (PVG) scheme.
The full consultation document, including details on how to respond, can be found here. Respond before closure on 18 July 2018.
The following consultations are closed with feedback analysis pending – watch this space for an update in future briefings:
Charity Tax Commission (CTC): The CTC called for a review of charitable tax reliefs, with the last comprehensive review being conducted some 20 years ago
The CTC said that it was “keen to receive thoughts about the effectiveness of current reliefs….and whether the existing system could be improved in order for charities to better serve their beneficiaries.”
Responses were to be submitted by 5pm on 6 July 2018. The Commission is currently collating responses.
Charity Commission for England and Wales (CCEW): 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.
Charities that are connected with non-charitable organisations: maintaining your charity’s separation and independence. This consultation closed on 15 May 2018.
CCEW 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 because of the changes made in December 2017 to FRS 102.
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
The SORP committee met on 21 June 2018 and agenda items included presentation and discussion of working group findings for Smaller Charities and Tiered Reporting. The wait continues!
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 was due in Spring 2018 but has not yet been published.
HMRC: Withdrawal of statutory concessions – closed on 7 March 2017 and Draft legislation: The Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2017 – published 27 March 2017, closed on 21 April 2017
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.
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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...