UK: Charity Update - Spring 2013

Last Updated: 20 May 2013
Article by Mike Scott

Welcome to this edition of our update on developments affecting the charity and not-for-profit Sectors. Conscious of the many demands on your time we have revised the format so that you can scan it for issues of direct concern to you and follow the links to those articles which deal with the subject in more detail.

We complement this service with our series of trustee training sessions, which are designed to give you – in the course of a pretty full day – a thorough overview of the roles and responsibilities of charity trustees, and a welcome review of new developments. Recent delegates have told us that they find them "very well run by top rate people in a superb environment"; "the day was very useful and the length of the sessions well judged".

Kind regards

Mike Scott

Latest News

Happy New [Tax] Year!
Whilst this year's Budget did not bring significant changes to the Charities sector, a number of key changes are taking place in the new tax year, which started on 6 April 2013.

Income tax reduction – Gift Aid impact
Whilst the reduction of the additional rate of income tax from 50% to 45% for taxpayers earning more than £150,000 per year was good news for high earners, the amount of relief they receive on donations made to charity will be reduced accordingly.

If someone paying tax at the additional rate makes a donation by gift aid of £1,000, the total value of the donation to the charity will be £1,250. Previously the donor was able to claim back 30% (50%-20%) of £1250 = £375. After the change to 45% the donor will now only be able to claim back 25% (45% - 20%) or £312.50.

A donor can ask for Gift Aid donations to be treated as being paid in the previous tax year if enough tax has been paid in that year to cover both any Gift Aid gifts made that year and the ones to be backdated. To be valid, the request to carry back should be submitted before the submission of the self assessment return for that previous year.

Charities may consider notifying their donors of the change to assist with their personal planning, whilst highlighting the opportunity to backdate Gift Aid claims.

Other Gift Aid Changes
As well as the effect of the changes to the additional rate of income tax there are a number of technical and procedural changes to the Gift Aid regime which could affect your charity.  We highlight these in our recent briefing note for a link to which click here.

Since publication of our note HMRC have provided some updated online guidance which can be found at the following links:

For Gift Aid Small Donations Scheme:

For Charities Online:

For the new model gift aid declarations that will need to be used:

A new corporate entity is born
After a very long gestation period, it is now possible for a charity to operate with the protection of limited liability without also having to be incorporated as a company under the Companies Acts. Instead, the constitution of a Charitable Incorporated Organisation ('CIO') needs only to be registered with the Charity Commission – and so only to file its annual report and accounts with the Charity Commission, thus saving some administrative costs.

Please see our note on the subject ' CIOs – To use or not to use?' for an overview of registration and other relevant issues.

Charities' Empty Property Rate Relief
A recent judgement by the High Court has ruled that Local Authorities are allowed to consider the extent of a charity's charitable use of a private landlord's empty property before deciding whether to grant the mandatory empty property rate relief.

The commercial property downturn has encouraged landlords to reduce their outgoings by renting empty properties to charities at a peppercorn rent and for a donation. In return landlords are exempt from paying empty property rates and the charity can claim an 80 per cent mandatory charitable relief on the rates payable to the local authority.

The Charity Commission had announced that it was examining around 700 cases where charities were taking the relief available but not fully occupying or operating from the property. This has led to a number of Local Authorities challenging applications for claims for relief in the Law Courts. The recent judgement could have implications for the growing practice of charities renting empty properties but not occupying them in return for donations from landlords.

Annual Residential Property Tax
Charities have been granted an exemption from the new annual charge which applies in certain cases of holding residential properties worth more then £2 million.

Legislation review
The government has published its initial response to Lord Hodgson's recommendations:

A full response is expected to follow the Public Administration Select Committee's report of its own inquiry into the Charities Act 2006 and the regulation of charities, which is due in the next few months.  We will report more fully once the Select Committee Report and government response have been published, but with the Law Commission about to begin its own charity project we expect the next few years to bring more changes to charity legislation.

Points of interest

Pensions Auto-enrolment
You will be aware of this important development in the pensions arena; the specific implications for your charity may be less clear to you. To assist with getting to grips with that, we have prepared a (fairly!) short guide. Click here for a link to that note.

Employment Law Update
For a general overview of recent employment law developments please follow this link to our update first published in the April edition of Finance Focus link.

Vetting and Barring Scheme update
Some welcome deregulation and simplification has been introduced to a scheme which - however well-intentioned – threatened to be a disproportionately burdensome arrangement to protect vulnerable groups. The revised arrangements are likely to affect only about half of the 9m people that it is thought would have been affected by the previous proposals. In particular, for a fee, it will be possible to obtain a CRB check and then use that for different employers and keep it up to date online.

There are some new definitions and a new body – the Disclosure and Barring Service – with which you will need to become familiar. For further details see our update on the Scheme.

Charity Commission News

Public Benefit Guidance

The Commission's consultation on its revised public benefit guidance has now closed.  We eagerly await the new guidance, which is expected shortly, when we will comment in more detail on its impact on the sector.

Guidance for Trustees
New guidance has been issued on decision making by trustees. This may be partly in response to the Upper Tribunal's Decision in the Independent Schools Council case when the Commission was criticised for being too prescriptive about how charity trustees of schools should ensure their organisation was complying with the 'public benefit requirement', stating instead that, provided the provision for 'poor people' was 'more than tokenistic or de minimis', it was for the trustees to decide in all the circumstances of their school what was appropriate. It also probably has something to do with the resource constraints under which the Commission is operating and a desire to fend off approaches for advice. The Guidance is said to be draft, and if you have time, comments on it would be welcomed by the Commission. Please click here.

In November last year, the Commission also published guidance in a 'Trustees Handbook' to assist departing trustees to hand over to new trustees.

Positive guidance for charity trustees, especially any of organisations affected by the current economic climate,  is available in the latest ' Big Board Talk' publication ' 15 questions trustees need to ask'. These might usefully provide part of the Agenda of a trustees' meeting.

Finally, the Commission's new Annual Return for 2013 is now available via the Commission's website.

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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