This month’s instalment brings updated fundraising guidance from OSCR, changes to FRS102 and subsidiary gift aid payments, and the launch of a consultation around guidance for managing relationships with non-charitable connected parties.
Charities and wholly owned trading subsidiaries
The Financial Reporting Council has published a set of “clarifications” to FRS102. These clarifications will have an impact on how charities and their trading subsidiaries account for profits paid by the subsidiary to the charity under gift aid.
Seen as interpretations of the existing rules, these updates have been phrased as statements on how the accounting treatment should already be carried out – thereby having an immediate effect.
Previously, common practice has been to accrue for a gift aid payment in the subsidiary’s own financial statements on the basis that – at the year end – there was an intention to pay within nine months of the end of the financial year.
That has all changed and now, until a gift payment is actually made to the parent, or until there is a “legal obligation” to make the payment, the gift cannot be recognised in the subsidiary’s accounts.
If no legal obligation exists, and the subsidiary does not make the gift of profit before the end of the accounting year in which the profit was made, then the gift payment can only be shown in the accounts for the year in which the gift is actually made. This applies even if at the time the accounting year ended the subsidiary “expected” to make the gift, and does in fact make it within nine months of the accounting year end.
As a bit of a grey area, it is still unclear precisely what constitutes a “legal obligation”, but it is believed that evidence of past practice and board meetings to approve a future payment will not be enough.
Watch this space!
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Guidance for charities that are connected with non-charitable organisations
Off the back of clarifications around subsidiary gift aid payments (above), the Charity Commission for England and Wales launched a consultation on draft guidance setting out the principles for managing relationships with organisations that are not charities on 13 February 2018.
In the press release the following examples are cited in support of the need for further guidance, having been reported on in the last two years by The Commission:
- a charity funding research by a non-charitable organisation with political aims
- significant commercial benefit to a connected organisation resulting from the charity’s operational activity
- the importance of distinguishing whether a service is provided by a charity to help its beneficiaries, or by its trading subsidiary to raise money for the charity
For further information and all consultation documents see here.
The consultation about the draft guidance will close at 5pm on the 15 May 2018 and responses are to be submitted via an online survey.
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Charities should use the regulated financial sector
The UK’s three independent regulators of charities - the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator and the Charity Commission for Northern - issued an alert to charities on 28 February 2018. It applies to a charity when it receives, holds, moves or uses money, particularly those moving funds internationally.
This alert raises awareness amongst charities – including their trustees, employees and volunteers – of the need to use bank accounts in the regulated financial sector and the benefits of doing so.
In a joint statement Helen Stephenson, David Robb, Frances McCandless, the CEOs of the Charity Regulators said: “The financial services provided by banks and financial institutions provide safe, responsible, efficient and transparent way for charities to conduct their financial affairs. Every charity should have a bank account in its name to help keep its funds secure.
“This is the most prudent and responsible way to protect funds and evidence the movement of those funds in most cases. It is in the best interests of charities to hold and move funds through the regulated financial sector where it is available – if other methods to hold or move funds are used they involve higher risks and in some cases can result in slowing down charitable assistance to beneficiaries.”
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OSCR: Fundraising draft guidance consultation
Was extended to, and closed on, 8 December 2017. The response was split into parts:
OSCR published an evaluation report of the consultation as follows, including a handy infographics summary for those of you short on time:
- Fundraising guidance for charity trustees – full evaluation report
- Fundraising guidance report summary
See the full fundraising guidance for trustees, as published on 21 February 2018, here.
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News from the fundraising regulator
Public register update - levy
Following the introduction of the Fundraising Regulator’s fundraising levy last year, the regulator has updated their public register in an attempt to bring greater clarity to its users.
The improved register now records organisations who have and have not paid the fundraising levy. It also lists smaller fundraising organisations and third parties that have registered with the Fundraising Regulator as a 'registered charity' or 'registered commercial supplier'.
The Fundraising Regulator has published a series of bitesize GDPR guidance aimed at fundraisers in smaller charities. See here for links to each of the six pieces of guidance – Welsh versions also available.
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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:
Charity Commission and OSCR – Charities SORP
A consultation was launched on 21 February 2018 which will run for 6 weeks (until 4 April 2018) focusing on 21 proposed amendments to the SORP which are considered necessary as a result of the changes made in December 2017 to FRS 102 (see above re accounting for gift aid payments).
The Charity Tax Group reported that 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 invitiation 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.
Fundraising Regulator – consultation on the code of fundraising practice
The first two parts (A and B) invite feedback on specific issues raised by the sector in relation to complaints handling and the TPS assured certification. The deadline for response on these was 28th February 2018.
Part C proposes 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. The deadline for response on fundraising platforms is 14th March 2018.
The following consultations are closed with feedback analysis pending – watch this space for an update in future briefings:
Charity Tax Group (CTG) - Business rates in multi-occupied properties
The CTG reports that following an announcement in the 2017 Autumn Budget that the government would legislate to reinstate the relevant elements of the Valuation Office Agency’s (VOA’s) practice prior to the decision of the Supreme Court in Woolway, DCLG has launched a consultation on business rates in multi-occupied properties.
The ruling in the above case meant that two contiguous properties in the same occupation are only assessed as one if they can be considered as a self-contained piece of property. This applies if both parts are physically accessible without having to go onto other property or through commons parts (for example, a common corridor or stairwell). There has been an adverse effect on some ratepayers, 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 of them occupy two or three rooms or floors in multi-occupied buildings and not all of them receive 100 per cent business rate relief.
The consultation was launched with the following scope (closing on 23 February 2018):
- how the government should capture their policy revision intention in legislation, and
- how this policy intention should then be implemented
Charity Commission for England and Wales:
This consultation is about the Commission’s approach to deciding whether an organisation that uses or promotes CAM therapies is a charity. The Commission has released a statement, following receipt of over 600 responses:
“The Commission had planned to publish an analysis of the consultation in early August. However, the high volume of submissions means it has not been possible to prepare the analysis in that timeframe. We will continue our work on the review and plan to publish our analysis later in 2017.”
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 – withdrawal of statutory concessions – closed on 7 March 2017
- HMRC - 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
HM Treasury (HMT) – legislation to support cheque imaging. HMT consulted on two measures to support the introduction of the Image Clearing System (ICS) for cheques:
- Use of cheques as evidence of payment
- Compensation 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.
DCLG and DWP – 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. For policy statement and consultation documents click here. Both consultations sought views on the design of the government’s new supported housing funding models which relate to England only.
About 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.