Charity Connect – December 2015

Proposed fundraising regulatory changes to go ahead

Two reports on fundraising practices and regulation have been issued by the National Council for Voluntary Organisations (NCVO) and the Scottish Council for Voluntary Organisations (SCVO). The former was commissioned by the UK Government and the latter is the result of an informal review commissioned by the Scottish Government. These reports set out proposals for clearer, more streamlined and more effective regulation of charity fundraising and represent a first step in the development of a new framework for fundraising that reflects the needs and concerns of the public and charities. The NCVO report concluded that the current system should be scrapped and replaced while the SCVO report suggested the current system should be improved.

The government has now accepted all of the proposals made in the Etherington Fundraising Review, including the creation of a new Fundraising Preference Service. This may mean that:

  • Large charities (those spending more than £100,000 a year on fundraising) could be forced to sign up to a new fundraising watchdog.
  • If large charities fail to appropriately safeguard their supporters in any way the government will have new powers to intervene and regulate charity fundraising.
  • The new watchdog will require charities to have the explicit consent of all donors, past and present, before any data can be shared.

In response to this announcement, the Charity Commission has launched a new consultation on revising its fundraising guidance. The draft guidance highlights six key responsibilities for trustees:

  • effective planning
  • supervising fundraisers
  • protecting the charity’s reputation and other assets
  • complying with fundraising law
  • following recognised standards
  • being open and accountable.

Views on the revised guidance are sought and the consultation closes on 11 February 2016.

OSCR has also commented that it will work with the other relevant bodies in the development of a new fundraising framework and in the meantime will promote the findings of the Etherington review to charities as well as the findings from the SCVO review of fundraising practice in Scotland.

Example accounts for charities

With the 31 December 2015 almost upon us, many charities will be gearing up to producing their first set of accounts under the new SORPs. OSCR has produced four new example accounts to illustrate how charities should do this. These examples are:

  • Scottish limited company group accounts prepared under FRS 102 SORP;
  • Scottish limited company group accounts prepared under FRSSE SORP;
  • Scottish unincorporated accounts prepared under FRS 102 SORP; and
  • Scottish unincorporated accounts prepared under FRSSE SORP.

These templates cover various scenarios and circumstances so may be of help in producing a set of SORP-compliant accounts. For more detailed advice, specific to your own charity, please contact your usual Henderson Loggie advisor.

Charity Finance Group releases free guidance on auto-enrolment for small charities

This step-by-step guidance urges small charities to plan early and budget for additional costs created by auto-enrolment. The guidance, Auto-enrolment for small charities: what you need to know, aims to support the more than 20,000 charities estimated to be auto-enrolling their staff between 1 January 2016 and 1 April 2017. It aims to help charities to prepare, implement and build processes for auto-enrolment.

Amended guidance on gift-aid

On 21 October 2015, HMRC published amended guidance, including the new model Gift Aid declaration. Donors must confirm not only that they are a UK taxpayer, but also that they understand that if they pay less tax in the current fiscal year than the amount of the gift aid claimed on all their donations, it is their responsibility to pay the difference. To see the new HMRC template declarations click here. The new declaration will apply to all new donations and we recommend that all charities and CASCs use the wording of the HMRC-approved model declaration as incorrect declarations may result in gift aid claims being invalid.

Employment tax changes in April 2016

From April 2016, there are certain changes to employment taxes including:

  • the abolition of the £8,500 threshold for taxing certain benefits in kind
  • the voluntary payrolling of benefits in kind
  • the replacement of dispensations with an exemption for paid or reimbursed expenses

At the moment, if you pay or reimburse deductible expenses (or provide benefits in kind that are covered by a matching deductible expense) to any of your employees, you have to report these on the form P11d and those employees must then contract HMRC to claim back any tax relief they are entitled to – unless you have previously agreed a “dispensation” with HMRC. A dispensation is an agreement that specified expenses and benefits can be provided to employees without deducting tax and national insurance and without reporting them to HMRC.

From 6 April 2016, a new exemption means you will no longer have to agree a dispensation with HMRC or report expenses to benefits in kind on form P11d where the employee is entitled to tax relief for those expenses or benefits in kind. Those expenses or benefits in kind will now be exempt from income tax. This means, however, that employers will need to determine the correct tax treatment of the expenses they pay to their employees and whether a matching deduction is due.

Whilst the withdrawal of the need for a dispensation may save time, it could create a significant risk to employers as, if it later transpires that these expenses or benefits in kind are taxable, the liability will fall on the employer. Some employers may wish to obtain a dispensation in advance of April 2016 in order to aid decisions as to which items may be specifically excluded from reporting.

Cessation of contracting out from 6 April 2016

On 6 April 2016 the current basic state pension and state second pension (S2P) will be abolished and replaced by a single-tier state pension. This will mean the end of contracting-out, which will have cost implications for both employers and employees because of the loss of NIC rebates. As a result, employers’ Class 1 NICs will increase by 3.4% and employees’ Class 1 NICs will increase by 1.4%. This is most likely to affect those working in public sector organisations (NHS, local councils, fire, police and armed forces), but may also affect schools.

OSCR Meeting the Charity Test Guidance

OSCR has rewritten its guidance on meeting the charity test to make it easier to understand what it takes to become a charity and to stay within the rules on public benefit. While the basic principles remain unchanged, Meeting the Charity Test has been extensively rewritten and reformatted for ease of use.  The new-look guidance is web-based and organised into separate sections for easy reference according to individual needs. The guidance has been informed by the Regulator’s experience in assessing and granting status to over 5,000 charities since the last update, along with widespread consultation of charities and third sector advisors.

New consultation on the charity taxonomy

The FRC and the Charity Commission are jointly consulting on a taxonomy to enhance the quality and accessibility of financial reporting for Charities in the UK and Ireland. 70% of companies currently file digital accounts with Companies House and the Charity Commission is keen to enable charities to do the same. Those charities filing tax returns with HMRC will also benefit from having the option of digital filing when submitting supporting accounting information. The consultation will close on 8 December 2015.

Consultation on updated Guidance for Charity Trustees

OSCR has issued a draft of its updated Guidance for Charity Trustees in light of its experiences since September 2010 when the guidance was last updated. The draft guidance focuses more clearly on what is expected of trustees and highlights some of the common issues facing those that run charities. OSCR is seeking views on the revised draft and urges charities and their advisors to respond to the consultation, which closes on 18 December 2015.