CLARK BROWNSCOMBE

INTRODUCTION

We held a very successful seminar with Griffith Smith Farrington Webb, Skerritts Financial Consultants, and Midas Charity Appeals in June on Issues Faced by Charities in an Economic Downturn.

We were delighted to have fundraising specialists Midas Charity Appeals with us for the first time. You will find their details at http://www.midasappeals.org.uk/ where you can sign up for their newsletter.

We are pleased to announce that three members of Clark Brownscombe have been awarded the Diploma in Charity Accounting by the Institute of Chartered Accountants in England and Wales. Congratulations to Chris Tyler, Robert Scrivins and myself. As a firm, we are constantly seeking to strengthen our commitment to the charity sector, with its own particular issues and unique role in our society.

CHARITY COMMISSION NEWS

An updated version of CC28 – Sales, leases, transfers and mortgages: what trustees need to know about disposing of charity land – was issued in May 2009.

In most cases, the law enables trustees to proceed without approaching the Charity Commission for approval to transactions before they can proceed. CC28 provides guidance as to which situations do and don’t need Charity Commission involvement, as well as other issues trustees need to consider.

www.charitycommission.gov.uk/publications/cc28.asp

The implementation of changes to accounting and examination requirements following the Charities Act 2006 has led to a range of reporting regimes. Hence:

1. CC15 – financial years starting between 27 February 2007 and 31 March 2008.

2. CC15a – financial years starting on or after 1 April 2008 and ending before 1 April 2009.

3. CC15b – financial years ending on or after 1 April 2009.

For more details, go to www.charity-commission.gov.uk/investigations/sorp/sorpfront.asp

The main points to note going forward as to the regime under CC15b are:

1. Accruals accounting threshold option is raised to £250,000 (non-company charities only).

2. Independent examination starts at £25,000, as does the requirement for the trustees report and submission of accounts to the Charity Commission.

3. Independent examination will be the scrutiny regime for all charities (i.e. charitable companies too) in the range above submission level and below audit level.

4. Audit will apply when either

a) Income is above £500,000; or

b) Income is above £250,000, and gross assets exceed £3.26m.

In the meantime, you have to check carefully what applies to where you fall in the three regimes.

PUBLIC BENEFIT

This is the fourth newsletter to which I have devoted a whole page on public benefit, which proves to be a major issue for the charity sector, and certain types of charity in particular.

For the latest Charity Commission guidance go to:

www.charity-commission.gov.uk/publicbenefit/default.asp

Twelve charities have been subject to public benefit assessments and the results were:

· Charities for the advancement of religion – all four passed.

· Independent schools – three passed, two failed.

· Care home charities – one passed, one failed the public benefit test, one failed as it was operating outside its objects.

The charities that failed the public benefit test were all judged to be spending too small a proportion of their income and reserves on ensuring that people who could not afford their fees had an opportunity to benefit.

Dame Suzi Leather, chair of the Charity Commission, has stated that the charities which failed the public benefit test are capable of doing so and remain registered, but they must now agree with the Charity Commission in the next twelve months the changes that are needed.

The Charity Commission have produced a report on their findings from the twelve charities assessed. Succinctly titled “Public Benefit Assessments: Emerging findings for charity trustees from the Charity Commission’s public benefit assessment work 2008-09”, the 30 plus page report seeks to draw out relevant points from the charities assessed, under the 1a-1c, and 2a-2d public benefit headings.

This report gives an insight into the Charity Commission’s approach with these charities, and will be of interest if you are operating in one of the three charity areas examined or are selected for an assessment.

www.charity-commission.gov.uk/publicbenefit/assessemerge.asp

Trustees need to report on public benefit in accounts starting on or after 1 April 2008 (not ending on or after 1 April 2008 as originally stated in Charity Commission News Summer 2009 – now amended on their website). Such reporting needs to cover:

1. Certification that the trustees have had regard both to the Charity Commission guidance on public benefit and to the issue of public benefit in deciding what activities to undertake.

2. A description of the activities undertaken to carry out the charity’s aims for the public benefit.

For those involved with Arts charities, the Charity Commission have produced an example report and accounts which incorporate the public benefit reporting requirement.

www.charity-commission.gov.uk/library/publicbenefit/pdfs/pbexarts.pdf

Finally, the draft guidance on belief systems and public benefit has been abandoned. Sorry Jedi Knights of Brighton and Hove (2.6% of Brighton and Hove population in the 2001 census), you’re going to have to find (feel?) your own way!

TAX UPDATE

Time limits for the repayment claims.

Time limits are being reduced for the submission of tax repayment claims.

For charitable trusts, the position is:

1. Up to 31 March 2010 – five years after 31 January following the end of the year to which the claim relates.

2. After 31 March 2010 – four years after the end of the tax year to which the claim relates.

For all the other charities and CASCs, the position is:

1. Up to 31 March 2010 – six years after the end of the accounting period to which the claim relates.

2. After 31 March 2010 – four years after the end of the charity period to which the claim relates.

In sum, four years will be the limit, so basically two years less than at present.

Gift Aid transitional relief

To qualify for payment of Gift Aid transitional relief on donations made between 6 April 2008 and 5 April 2011, claims must be made within two years of the end of the charity’s accounting period/tax year. You don’t need to make a special claim – HM Revenue and Customs will pay it out automatically with your Gift Aid tax repayment.

VAT

Charities buying property could be hit with a VAT charge from 1 July 2010 as HM Revenue and Customs is changing the way it calculates charitable use.

Previously VAT did not have to be paid on the acquisition or construction of a new building if it was being used at least 90% for charitable purposes, based on either floor space or staff time spent on charitable activities.

From 1 July 2010, the minimum usage is being increased to 95%. HM Revenue and Customs have indicated that they are willing to help charities which can prove they are over the 90% mark to reach the required 95%.

For more details see:

www.hmrc.gov.uk/briefs/vat/brief3909.htm

OTHER NEWS

Resources

A wide range of resources have been made available recently, particularly to help in these more difficult economic times.

1. NCVO: Income Exploration Tool – to help identify and assess the right income streams for you. You will find it on: www.ncvo-vol.org.uk/sfp/

2. Futurebuilders England Modernisation Fund – interest free loans, bursaries and grants. http://www.futurebuilders-england.org.uk/

3. DWP Future Jobs Fund - £1 billion to support the creation of jobs. www.dwp.gov.uk/futurejobsfund

4. Fundraising Health Check – a free diagnostic tool. http://www.fundraisinghealthcheck.org/

5. RICS free consultation – one hour free consultancy on property matters. http://www.charitypropertyhelp.com/

6. Clark Brownscombe Financial Issues Checklist – covers Mission, Accounting, Income and Cost issues. E-mail admin@cbhove.co.uk for a copy.

7. CIPFA online charity accounting toolkit – designed for the smaller organisation. www.knowhownonprofit.org/news/new-online-charity-accounting-toolkit/

Community Interest Companies

New draft CIC regulations have been published, and are due to come into force on 1 October 2009. They are largely tidying up a number of administrative matters, but do not deal with the dividend cap issue which is still under consultation.

Charitable Incorporated Organisations

The Charity Commission updated their notes in CIO’s in March this year.

www.charitycommission.gov.uk/registration/charcio.asp

Every care is taken in preparing this newsletter, but readers are advised to seek professional advice before acting on any information contained in it.