Charity Newsletter – November 2020

Changes to digital advertising VAT rates for charities

HMRC have agreed to change their policy on VAT rates applicable to digital advertising following a successful campaign by the Charity Tax Group. Certain types of digital advertising are now considered zero-rated, therefore charities should review VAT rates applied to advertising over recent years. Significant savings for organisations are possible for previous standard rate digital advertising such as:

• Retargeting individuals revisiting a website

• Demographic targeting

• Lookalike targeting

It is important to note that not all types of digital advertising have been changed to zero-rated.

SORP engagement discussions announced

The SORP-making committee has introduced a new development process to apply greater engagement using engagement partners who have been recruited via an open recruitment process.

Convenors have been allocated to each of the different engagement strands (specific areas) based on their interests. The areas will cover the key users of charity annual reports and accounts, as well as the SORP itself.

Details of each of the convenors, and the strands they have been appointed to, are provided on the dedicated SORP website.

Submission of accounts to OSCR

OSCR has announced that where charities are not able to file their accounts within the 9 month deadline of their year end that they will extend their grace period from 6 months to 9 months after the deadline.  This means that if charities submit late accounts during this time, they will not be penalised by being marked as late on the OSCR register. This is only applicable to charities where the due date for filing is between 1 March 2020 and 31 December 2020.

Companies House has already extended the deadline for filing company accounts from 9 months to 12 months where the filing deadline falls between 26 March 2020 and 29 September 2020

Making Tax Digital – Extended

The Treasury has recently announced their ten-year plan to build a trusted, modern tax administration system. This report includes introducing a progressive extension of HMRC’s Making Tax Digital work, exploring appropriate timing and frequency for payment of different taxes, and the technology infrastructure needed to support that, as well as a reform of the tax administration framework. HMRC plan to extend the Making Tax Digital programme, which has already been introduced, to more taxpayers and agents as part of the 10-year strategy. Extensions highlighted in the report include:

• Making Tax Digital will apply to all VAT-registered business for their VAT obligations from April 2022,

• Businesses and landlords with business income over £10,000 per annum will need to keep digital records and use software to update HMRC quarterly through Making Tax Digital from April 2023,

• Later this year, the government will be consulting on the design of what that system should be for Corporation Tax.

Independent schools salary sacrifice changes

The Optional Remuneration Arrangement (OpRA) rules end salary sacrifice arrangements for school fees for independent schools on 5 April 2021. There is the opportunity for schools where employees entered into a salary sacrifice scheme before 6 April 2017 for the payment of fees for the same child to restructure their arrangement so that the salary sacrifice is condensed for the whole school year with deductions being made between September 2020 and March 2021. This will benefit from continued lower income tax and National Insurance Contributions (NICs). Salary sacrifice arrangements are where school members of staff take a reduced salary in exchange for discounted school fees for their child.

ICAS guidance on going concern

ICAS has issued guidance on going concern for charity trustees covering reporting and accounting, financial management and external scrutiny considerations. The guide assists charity trustees to:

  • Assess their charity’s ability to continue as a going concern and to prepare a trustees’ annual report and accounts which properly address the relevant requirements.
  • Understand the work of their charity’s auditor or independent examiner ongoing concern.

The guide is available here

Charity insolvency

The Corporate Insolvency and Governance Act was passed into law on 25th June 2020. The Act aims to address financial problems that both voluntary organisations and private companies are having to face as a result of the COVID-19 pandemic. The new rules introduced to help charities facing problems are:

• The right to apply for more time to avoid debt enforcement action

• Limits to the rights of contractors to terminate supply agreements with charities

• Placing restrictions on winding up petitions where a charity cannot pay its bill as a result of the pandemic

• Introducing new procedures to help viable charities restructure if they are struggling with debt

 • Suspending some provisions in order to reduce the risk that trustees are personally liable during the crisis.

MHA Trustee Hub launched

Our national hub of downloadable templates and resources for charity trustees is now live!

The MHA Trustee Hub is an online resource aimed at assisting charity trustees to find practical guidance such as templates, checklists, help sheets and policies, that will support Trustees to improve governance and financial competencies and help charities to adapt to the ‘new normal’ environment post-Coronavirus.

At MHA we pride ourselves on our commitment to the not for profit sector and our clients. Over the years we have seen increasing responsibility within the Trustee role. To help you within your role we have created our own Trustee hub where we will share materials to help and support you in your role.

The initiative is an ongoing project where materials will continue to be updated to provide the most relevant information to charity Trustees.

Go to the MHA Trustee Hub:

Charity Newsletter – September 2019

Scottish Governance Code Checkup

The Scottish Council for Voluntary Organisations (SCVO) have created a Good Governance Checkup document to be used in conjunction with the Scottish Governance Code published earlier in the year to help trustees regularly review their governance. Your board can use the checkup to identify areas for improvement and monitor and record your journey to good governance.

You can view the Good Governance Checkup document here.

HMRC off-payroll working (IR35) guidance

HMRC has published guidance on the rules which will apply for engaging individuals through personal service companies from April 2020. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.

Small organisations will be exempt from the rules which will mean a large number of charities will be excluded. The Companies Act definition will be used – to be small an organisation must meet two of the following conditions

  • annual turnover must be not more than £10.2 million
  • the balance sheet total must be not more than £5.1 million
  • the average number of employees must be no more than 50.

The guidance is available here   

Hard Brexit

With the new prime ministers’ directive and the fast approach of 31st October 2019, those within the Not for Profit Sector should be preparing for the possibility of a Hard Brexit.

The Charity Commission has published ‘Five ways civil society organisations can prepare for Brexit’, with five key areas to consider:

  1. If you employ EU staff or have EU volunteers
  2. If you receive EU funding
  3. If you receive any personal data from the EU
  4. If you import or export goods to or from the EU
  5. Potential changes to VAT and customs.

If any of the above applies to your organisation, the Charity Commission has a questionnaire which helps to tailor Brexit publications specifically to your organisation and to help you find relevant and useful information. The questionnaire is available here

Recent VAT judgement may be helpful for the not for profit sector

Frank A Smart & Son Ltd, an Aberdeenshire Business, incurred the VAT on the purchase of Single Farm Payment (SFP) Units, a scheme which entitles a farm to particular benefits and subsidies if certain conditions are met. HMRC refused the claim of this VAT, stating that the purchase of the units did not relate to any VATable sales activity and the VAT was therefore irrecoverable.

The claim made its way to the Supreme Court, where the crux of the argument came down to how income from the subsidies had been spent. In the case of Frank A Smart & Son Ltd, the subsidy income had been directly spent on taxable farming activities.

Judges ruled in agreement with Mr Smart that he should not have paid VAT on a £7.7 million transaction to buy more than 34,000 units of land, meaning he was able to reclaim VAT payments of more than £1 million.

Glyn Edwards, a VAT Director within MHA MacIntyre Hudson, and an advisor to Frank A Smart & Son Ltd stated: “There are potential benefits to the not-for-profit sector. The traditional view has been that no VAT can be claimed on costs which generate non-business income, but that may be over-restrictive. It is always worth looking beyond the immediate and understanding how income is used, before reaching a conclusion on input VAT recovery.”

This judgement is helpful against the recent decision by the Court of Justice of the EU (CJEU) on the University of Cambridge, which ruled that VAT on investment management fees could not be recovered as they were an overhead of investment activities, not charitable activities. This judgement will make it more difficult for HMRC to refuse VAT recovery on charitable fundraising activity in the future.

If you would like any advice on input VAT recovery or any other areas of VAT please get in touch with your contact at MHA and we can put you in touch with one of our VAT specialists.

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.

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.

Charity Newsletter – June 2019

Trustee Charity Finance Competency Survey

For the second year in a row, MHA, our national association of UK accountancy firms, have partnered with the Charity Finance Group to carry out a survey, assessing the charity finance competencies of Trustees which is available here.

The results of the survey highlight that, like last year and consistent with the Charity Commission’s Taken on Trust study, there remains only ‘satisfactory’ standards when it comes to Trustees’ charity finance competencies. Broken down into five sections, the survey analyses the responses of over 200 charity professionals working in organisations with income ranging from under £1m to over £100m.

Tax updates

There have been several pieces of HMRC news and tax updates in the last month which could have a potential impact on charities. The key items are as follows:

  • Employer provided living accommodation: From the 6 April 2019, HMRC will no longer accept that the ‘customary’ exemption is appropriate to accommodation provided by employers within the Higher and Further Education Sector and therefore HMRC has now published guidance to this effect, precluding the tax exempt provision of this type of accommodation.
  • VAT on mixed sponsorship and donations: Section 5.9.6 has been added to VAT Notice 701/1 (How VAT affects charities) to give guidance on mixed sponsorship and donations. The revised guidance clarifies that VAT does not need to be accounted for on donations which are separate to sponsorship agreements, provided that any benefits the sponsor receives are not conditional on the donation being made. The new section also covers the VAT treatment of a charity letting a commercial business use its name to raise donations.
  • Making Tax Digital update: A new section in the Making Tax Digital VAT Notice 700/22 has been introduced on charity fundraising events, relaxing the digital links record keeping requirements.

The guidance now states:

Where supplies are made or received during  a charity fundraising event run by volunteers you may treat all supplies made as covered by one invoice for the event, and all supplies received as covered by one invoice for the event, for the purposes of the digital record keeping requirements.

This could significantly reduce the administrative burden of recording supplies received from a fundraising event.

  • Digital service for business rates: On 25 April 2019 the House of Commons introduced The Non-Domestic Rates (Preparation for Digital Services) Bill. The bill enables HMRC to expend its resources on beginning to design and build a new digital service for business rates. The implementation of any proposed reforms will require further legislation at a later date and the government plans to engage closely with local government and businesses in developing proposals.

Using Conflict as a Catalyst for Change

In conjunction with MHA, we have written together a monthly guide for embracing, managing and mitigating conflict within your charity. Each article covers a different type of conflict that may effect your charity with the overall theme of using conflict as a catalyst for change. The full guide is available here.

Institute of Fundraising publishes an updated GDPR guide

The Institute of Fundraising has published an updated guide for fundraising organisation which includes top tips and advice in relation to GDPR. For instance, it includes advice on assessing whether you have a legitimate interest and on employing a Data Protection Officer. A PDF version of the guide can be accessed here.

Cyber security breaches are on the rise

The Cyber
Security Breaches Survey 2019
, published in April by the Department
for Digital, Culture, Media and Sport, found that over one in five charities
(22%) reported a cyber security breach in the past 12 months, up from 19% in
the year before.

With the average cost of a breach
for charities being £9,470, this is particularly threatening to smaller
charities – especially because those charities with income under £100,000 were
reported as being less aware and equipped to deal with a breach than those with
income over £500,000.  

A topic we have been aware of and
advising our clients on for several years, we can help charities review their
exposure to, and explore insurance against, this issue of growing

Charity Newsletter – April 2019

Changes to Gift Aid

6 April 2019 marks the implementation date of changes to the gift aid rules which were announced in the 2018 Autumn budget and approved by Parliament in February 2019.

The maximum donation under the Gift Aid Small Donations Scheme which allows charities to claim gift aid on small cash or contactless donations without a declaration has been increased from £20 to £30. The maximum level of gift aid which can be claimed under the scheme in a year has also been increased to £2,000 from £1,250.

The donor benefit rules which allow charities to give a small reward to their donors in exchange for a donation and for the donation to still qualify for gift aid have been simplified reducing the thresholds from 3 bands to 2. The revised limits are as follows:

Value of donation Maximum value of benefits
£0-100 25% of the donation
£101+ 25% of £100 plus 5% of the value exceeding £100 up to an annual benefit of £2,500

Making Tax Digital for VAT

HMRC are reminding all entities over the VAT registration threshold that they require to sign up for Making Tax Digital after they have completed their last online VAT return and at least one week before the Making Tax Digital VAT return is due.

We reported in our last charity newsletter that trusts, unincorporated charities and those in a VAT group are able to defer their implementation of Making Tax Digital for VAT until October 2019. For all VAT registered entities where it is not possible to link their accounting system direct to HMRC systems the use of a spreadsheet to submit VAT returns to HMRC , called bridging software, is able to be used until April 2020. HMRC have now announced that the use of bridging software for trusts, unincorporated charities and those in a VAT group will be extended until October 2020.

Should you need any assistance with your implementation of Making Tax Digital for VAT, our VAT team are able to help.

Off Payroll Working

The Government has launched a consultation on extending the off payroll rules to the private sector from April 2020 for medium and large sized organisations ( i.e as defined under the Companies Act or with either £10.2m turnover or 50 employees in an unincorporated organisation).

This would mean that any individuals paid through personal service companies would be paid as if they were employees with the deduction of tax and NIC. Contractors would continue to be excluded from employee entitlements such as holidays and sick leave. The impact of this change will mean that individuals paid through personal service companies will become 13.8% more expensive as employer’s national insurance will be due. The consultation is available here.

Using Conflict as a Catalyst for Change

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

Information Commissioners Office – Charity Risk Review Findings

In August 2018 the Information Commissioners Office published its findings of reviews it had performed at 8 large charities and 25 smaller charities during 2017/18. The report is intended to help all charities recognise where they can make improvements. The main areas found for improvement included; Information Governance, policies for data protection, training staff on data protection both at induction and annual refresher training, implementation of data protection compliance reviews and lack of procedures around incident reporting. The report is available here. Should you need any assistance with a GDPR post implementation review, this is something we can assist with.

National Cyber Security Centre Board Toolkit

The National Cyber Security Centre launched a toolkit in February 2019 which enables board members and management of organisations to identify, prioritise and manage the risks associated with cyber security. The guidance is written in plain English and enables readers no matter their IT knowledge to understand the practical changes which can be made to improve the cyber security in their organisation. The guide is available here.

Alan Davis

Alan is Chairman of Henderson Loggie, he is also Head of Tax for the Firm and leads our award winning VAT team. He covers all four offices providing specialist advice on technical VAT compliance and advisory, training and development.

Having spent 16 years with HM Revenue & Customs carrying out VAT assurance visits for a wide range of businesses – from small retailers to local authorities, Alan has gained considerable experience of HM Revenue & Customs inspections. He can help with planning opportunities for VAT efficiency, and can advise our clients on retrospective reclaim opportunities, securing significant VAT repayments.

Alan can also advise on other indirect taxes e.g. landfill tax, aggregates levy, climate change levy, and also offers in-house technical updates to the legal profession.

In addition to his tax specialism, Alan leads our Education Sector Group, ensuring that that team meets all the needs of the sector – from audit, to advisory and across all the services the firm provides.

Andy Niblock

Andy provides audit and accountancy services to clients in both the commercial, charitable and agricultural sectors. He trained and worked for a Big 4 firm, and also worked in industry for a period before returning to the profession. Andy is Head of our Agriculture & Rural Team.

Andy has very much a hands-on approach due to his time spent in industry, and understands the practical issues of running a finance function and the issues they are faced with.

Andy also specialises in outsourcing of finance functions, providing this service to companies without their own in house finance team. The service Andy provides means he’s often involved with companies on a day to day basis, providing advice and ensuring their time is freed up rather than worrying about the financial administration side of their business.

Barbara McQuillan

Barbara has worked in taxation and specialised in the owner-managed business sector for over 30 years. During that time she has dealt with a wide range of clients in a variety of sectors ranging from the initial establishment of new businesses, through the growth years and then to retirement or sale. Throughout the life cycle of any business, a great variety of tax challenges arise and Barbara has provided pro-active and practical tax advice at every stage.

Barbara is a member of the firm’s Life Sciences Sector Group and with the team provide a wide range of skills and experience to service an important and substantial sector in the Scottish economy. Barbara is involved in running Corporate and Tax Clinics for one of our major Universities, assisting early-stage companies.

Barbara was for a number of years a Director of MHA Henderson Loggie Financial Planning.

Barbara Walton

Barbara is a corporate tax specialist with over 20 years of experience of advising clients on domestic and international tax, R&D and entrepreneurial tax issues and leads the firm’s R&D and Patent Box group.

She is experienced in corporation tax compliance for private and publicly listed companies, and tax planning for large groups of companies. Her industry experience includes technology, biotechnology and pharmaceuticals, software development, manufacturing and the food industry. Barbara is a member of the firm’s Healthcare and Life Science Sector teams.

David Legge

David is one of the Senior Consultants within the team at MHA Henderson Loggie Financial Planning. He brings 30 years of industry experience to his role within the Firm.

David works extensively with high net worth individuals as well as the SME sector, and for the last 20 years he has developed particular expertise in the area of Self Administered Schemes – SIPP and SSAS. This specialist area of pension planning can also act as a very useful business tool as well as a source of capital. David recently made use of a Self Administered Scheme in helping a family business formulate an exit and retirement strategy with the creative use of a SSAS.

In addition to his pension work David also advises both corporate and individuals on strategic investment and Inheritance Tax Planning.