Charity Newsletter – July 2019

Scottish charity law reform consultation responses published

The Scottish Government has published a summary of the responses received to it’s recent charity law consultation. Overall there was wide support for all the changes to Scottish charity law proposed by OSCR. The topics being consulted on were as follows;

  1. Publishing annual reports and accounts in full for all charities on the Scottish Charity Register.
  2. An internal database and external register of charity trustees.
  3. Criteria for automatic disqualification of charity trustees and individuals employed in senior management positions in charities.
  4. A power to issue positive directions to charities.
  5. Removal of charities from the Scottish Charity Register that are persistently failing to submit annual reports and accounts and may no longer exist.
  6. All charities in the Scottish Charity Register to have and retain a connection in Scotland.
  7. Inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities.
  8. De-registered charities’ assets and public benefit.
  9. The speed and efficiency of OSCR’s powers to gather information when making inquiries.
  10. The reorganisation of charities established under royal charter, warrant or enactment.

It has yet to be confirmed when a bill to implement these changes will be brought forward but OSCR have confirmed it will not be in the current session of parliament. The full analysis can be found here.

Charity Statement of Recommended Practice (SORP) governance review

The findings of the SORP governance review were published on the 6th of June. The purpose of the review was to analyse the Charities SORP development process as the SORP is now about to be applied in four jurisdictions of the UK and Ireland; with four different regulators.

A key recommendation is that the SORP making committee should be smaller and they should engage more with the key users of charity financial statements, such as the media, trustees and donors and what their requirements of financial statements are. The report also recommends that financial reporting for smaller charities should be simplified. The full report is available here.

Tax update

Charity Corporation Tax returns – HMRC have confirmed that the 3,000 charities in the UK with the largest gift aid claims will be asked to complete a tax return this year.  If your charity receives a request to complete a tax return and to iXBRL tag your financial statements this is something our tax team are experienced in performing for our charity clients and they will be able to help you with.

Proposed restriction to the employment allowance – HMRC have launched a consultation on restricting the £3,000 employment allowance to employers with employer NIC totalling less than £100,000 in the previous tax year. The purpose of the changes are to ensure the allowance targets small businesses.

Introduction of Employers NIC on certain termination payments – A bill has been introduced to parliament to align the NIC treatment of termination payments with the income tax treatment. From 6 April 2020 employer NIC at 13.8% will be payable on any part of a termination payment which is liable to income tax, i.e. the element above £30,000. Termination payments will remain exempt from employee NIC. HMRC guidance is available here.

Using Conflict as a Catalyst for Change

In conjunction with MHA, our national association of UK accountancy firms, we have produced a monthly guide for embracing, managing and mitigating conflict within your charity. Each article covers a different type of conflict that may affect your charity, with the overall theme of using conflict as a catalyst for change. The full guide is available here.

NCVO Charity Tax Commission report

The NCVO Charity Tax Commission has published the following suggestions for the improvement of charity tax reliefs;

  • Reforming Gift Aid to direct the additional value of relief above the UK basic rate to charities unless donors opt-out.
  • Developing a Universal Gift Aid Declaration Database (UGADD) to provide a single, enduring declaration which individuals can make covering all their subsequent gifts to charities.
  • Simplifying VAT for charities, for example, reviewing the rules around shared services could encourage cross-sector partnerships.
  • The provision of clear guidance by HMRC to public bodies so they can provide the VAT status of any charitable funding.  Grants and contracts are treated differently for VAT purposes but can be difficult to distinguish in practice.
  • Consulting on the extension of business rates relief to wholly-owned trading subsidiaries.

The full report is available here.