UK: Charities - Round-up of Recent Developments

Last Updated: 8 October 2003

Originally published in April 2003

Article by Guy Greenhous and Oenone Wright

Strategy Unit Report

The consultation period ended on 31st December 2002 and the Government’s response is due "in the Spring".

There are likely to be three different Bills, a DTI Bill to create Community Interest Companies, a Treasury Bill on Industrial and Provident Societies and a Home Office Charities Bill. Government activities will be co-ordinated by the Active Communities Unit of the Home Office.

Treasury Cross- Cutting Review

It is accepted that core costs should be covered and that the cost of a contract for services should reflect the full cost of delivery including overheads.


The Head of the European Commission’s Indirect Tax Unit recently stated at a conference in Brussels that there is no European Union obstacle to the introduction by national governments of VAT recovery systems for charities. The UK Government has always said that it is because of EU constraints that they cannot lift the VAT burden on charities and perhaps it is now time to lobby on this again.

The Inland Revenue and Customs & Excise are to establish an integrated help line service to provide charities with advice on direct tax and/or VAT issues.

Criminal Records Bureau

The Home Office is currently consulting on reform of the disclosure process and responses are required by 25th April 2003.

The relevant website for consultation is

Charity Commission

The Charity Commission has updated its model form Declaration of Trust to take account in particular of the Trustee Act 2000.

The Charity Commission publication CC14 "Investment of charitable funds" has been updated and deals with social investment. It suggests that it is possible to reconcile the need for maximum financial return with socially responsible investment on the grounds that ethical companies are more likely to flourish.

The publication includes a definition of what the Charity Commission means by "investment" and summarises powers given by the Trustee Act 2000.

New guidance has been published on Annual Returns (OG97) and there is a SORP update bulletin which deals, among other things, with reporting on defined benefit pension schemes.


  • Statutory awards

On 1st February the annual increases in statutory payments came into force. With effect from 1st February 2003 the maximum week’s pay for calculating the basic award for unfair dismissal increased from £250 to £260. The same figure is used for the calculation of a week’s pay for the purpose of redundancy payments.

The maximum compensatory award increased from £52,600 to £53,500.

  • 6 April 2003

Provisions of the Employment Act 2002 come into force affecting maternity, paternity and adoption leave, together with flexible working (see below for more detail on Flexible Working).

  • National Minimum Wage increase

In October 2003 this will increase from £4.20 to £4.50 an hour (youth rate increasing from £3.60 to £3.80). In October 2004 increases are set to be to £4.85 and £4.10 respectively.

  • Race discrimination

Implementation of the European Union Race Directive is giving rise to concern for Jewish and Sikh charities as it will cease to be legal to provide services that discriminate on racial grounds. Under the UK Race Relations Act 1976 there has always been an exemption for charities but this is likely to be removed. Unlike other religious communities, Jewish and Sikh communities are regarded as having a racial as well as a purely religious identity so that, if the exemption is removed, it will not be possible for such charities to continue to provide services exclusively to their own communities.

Flexible working

Will it work?

On 6 April 2003, the Flexible Working (Procedural Requirements) Regulations 2002 (‘the Regulations’) come into force. It is now a statutory requirement for employers to consider any request for flexible working made by an employee who has responsibility to look after a child. The Regulations underpin existing sex discrimination legislation and an employee may claim indirect sex discrimination if the employer has failed to consider a request for part-time or flexible working.

‘Flexible working’ means a variation to an employee’s contract in respect of the hours, time and place they work. The Regulations require employers to consider such requests pursuant to a prescribed procedure as follows:

  • the employee’s application must be in writing and dated
  • the employer must either agree to hold a meeting to discuss the application or agree to the contract variation in writing within 28 days of the application being made
  • the employer must notify the employee of its decision within 14 days of the date of the meeting
  • the employee has the right to appeal but this must be exercised within 14 days of the notice of the decision being given
  • the employee has a right to be accompanied at the meeting to discuss the application or appeal. The companion must be a fellow worker employed by the same employer.

An employer may refuse an application if it can establish a good business reason for doing so. The refusal must be in writing and fully explain the reasons. Examples of business reasons include:

  • burden of additional costs
  • effect on ability to meet customer demands
  • inability to reorganise work amongst existing staff
  • inability to recruit new staff
  • detrimental impact on performance
  • insufficiency of work during the period the employee is prepared to work

If the employer fails to comply with the agreed procedure, an employee may make a complaint to an Employment Tribunal which may:

  • make an order requiring the employer to reconsider the application for flexible working, and/or
  • make an award of compensation up to a maximum of 8 weeks pay. A week’s pay is capped at £260 and hence the maximum an employee could receive is £2,080.

A defence of justification for business reasons would require the employer to show a real need to impose the provisions, criteria and practice, and that this need has been balanced against the disparate impact on the employee.

Our advice

It is important to remember that an employer is not obliged to vary the employee’s contract, but simply to comply with the procedural requirements and give the matter due consideration.

Although potential compensation awards under the Regulations may not be significant, employers should be wary of ignoring them because employees may still have a claim under sex discrimination legislation – where there is no cap to the compensation!

Employers should introduce a policy which sets out the procedure, and business reasons when considering requests for flexible working. All managers should be made aware of the policy and trained in implementing it.

© RadcliffesLeBrasseur

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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