CLARK BROWNSCOMBE

INTRODUCTION

Public Benefit continues to be a major topic of interest, particularly in the schools sector.

The consultation period on the draft Charity Consolidation Bill has ended. This bill is not intended to bring in new legislation, and I am not yet aware of the timetable for the bill. Originally, the government had hoped to get the bill through in the 2009/10 session, though it may well be delayed given the upcoming General Election.

Indeed, the forthcoming election will probably affect whether and/or when a number of measures referred to in this newsletter are introduced.

John Thacker

Clark Brownscombe

CIOs

In September, the office of the Third Sector published responses to the Consultation on Charitable Incorporated Organisations.

The aim is for the CIO to become an option for charities in late spring of 2010.

http://www.cabinetoffice.gov.uk/third_sector/news/news_stories/090917_cioresponse.aspx

CICs

Community Interest Companies will become more attractive to investors if government plans proceed to simplify the rules governing how much profit can be paid out.

Dividends of up to 20% without reference to the Bank of England tax rates will be possible from 6 April this year.

For loans where repayment and interest is limited to performance, the new maximum rate will be 10% of the average amount of the CIC’s debt.

The overall cap for the distribution of profit is unchanged at 35%.

BBC Children in Need

Simpler application processes have been introduced for small grants of up to £10,000 a year for three years.

The next application deadline is 15 April 2010.

http://www.bbc.co.uk/pudsey/grants/general_grants.shtml

CHARITY COMMISSION NEWS

“Incorporating an existing charity as a company – Questions and Answers” sets out the circumstances in which incorporation of an existing charity might be appropriate and provides guidance on the process and implications.

http://www.charitycommission.gov.uk/Charity_requirements_guidance/default.aspx

“Small Charities” provides some guidance for charities with income under £20,000.

http://www.charitycommission.gov.uk/supportingcharities/sculist.asp

A new constitution is available for charities which expect to stay small (income under £5,000), and do not intend to own land or employ people.

http://www.charitycommission.gov.uk/registration/smallcharity.asp

“Faith in Good Governance” contains guidance on legal and good practice issues for faith-based charities. This publication covers registration and governance matters, with particular emphasis on trustee roles and responsibilities. A “must read” for all trustees of such charities.

http://www.charity-commission.gov.uk/tcc/faithgov.asp

A discussion was held on 24 November 2009 between the Charity Commission and a number of trusts and foundations. The findings are published in “Firm Foundations” which provides information on how trusts and foundations responded to the economic downturn of 2009. This is very helpful for charities applying for grants from such organisations.

http://www.charitycommission.gov.uk/publications/foundationsum.asp

A number of toolkits are available from the Charity Commission including:

Managing risks – a number are being developed at:

http://www.charitycommission.gov.uk/investigations/toolkitintro.asp

Collaborative working and mergers – various to be found at:

http://www.charitycommission.gov.uk/enhancingcharities/cwmresources.asp

“Charity Reporting and Accounting: Taking Stock and Future Reform” is a fairly lengthy (nearly 50 pages) research report on the sector’s view of the SORP and current accounting guidance. The overall picture would indicate “carry on as we are” but there is suggestion that the SORP be written for smaller charities with “add-ons” for medium and large charities. We shall wait and see if this progresses.

http://www.charitycommission.gov.uk/publications/rs21.asp

PUBLIC BENEFIT

Speaking at the Headmasters and Headmistresses Conference in October, Dame Suzi Leather (chair of the Charity Commission) said that charities could have a five-year period to adequately meet new public benefit requirements without penalty.

It is quite clear that the Charity Commission will expect charities that fail a public benefit assessment to start the process of change straight away, and demonstrate continued progress until they meet the test within the five-year or any other agreed period.

For Dame Suzi’s speech, go to:

http://www.charity-commission.gov.uk/publicbenefit/schoolspeech.asp

In December the Charity Commission published its findings from research into the levels of awareness, understanding, and the attitudes towards the public benefit requirements across the charity sector.

Based on a survey of 1,483 charities, the key findings were:

76% of charity trustees say they know about the public benefit requirement (my comment is where have the other 24% been over the last few years – clearly not keeping abreast of developments in the charity world!).

Trustees of larger charities are significantly more likely to know about public benefit requirements than trustees of smaller charities.

98% of those responders who know about the requirement are confident that their charity can demonstrate its public benefit.

92% of those who have used the Charity Commission guidance on public benefit found it useful; 66% found it easy to understand.

48% of trustees who are aware of the requirements say they have thought about the benefits their charity has for the public (it seems to me that they should all do so in order to confirm in the Trustees’ Annual Report that they have had regard to Public Benefit guidance when considering the activities the charity should undertake).

96% of trustees identified an issue other than complying with charity regulations as their biggest challenge.

For the full report, see:

http://www.charity-commission.gov.uk/publications/rs22.asp

HM Revenue and Customs have indicated that charities deemed not to meet the public benefit when initially assessed, but which do take action and meet the requirements, will not lose the reliefs for the period they were deemed to be failing.

TAX UPDATE

Reits

If you are holding investments in Reits (Real Estate Investment Trusts), you will be able to reclaim tax deducted at 20% on such income.

The claim is made on the “R68 Other Income” supplementary schedule to R68 repayment claim form for charities and CASCs.

Time limits for repayment claims

A reminder that the new time limits come into force in April 2010, reducing the limit from six years to four years. This applies to all charities and CASCs.

Gift Aid

On 15 December the Treasury blocked certain schemes to buy foreign shares for less than they worth and then claim tax relief on the full value of the shares when donated to charity.

Such schemes do not help the image of Gift Aid tax relief, and a survey of donors was conducted for HM Revenue and Customs around the same time asking for responses to possible changes in Gift Aid. A Treasury spokesperson indicated that there would be no rush to reform what they considered overall to be a very successful system. We shall have to wait and see if reforms are proposed.

VAT on investment management fees

HM Revenue and Customs has announced that charities will be able to reclaim some VAT on investment management fees.

The amount charities will be able to reclaim will depend on the level of their VAT-registered business activities that are subsidised by income from investment.

Substantial donor legislation

The Pre-Budget report included details of proposed changes to substantial donor legislation, so that the emphasis would be on penalising donors, rather than charities, if a donation breaks the law.

Alistair Darling indicated that the new rules would deny tax relief on donations to charities where the donor is party to an arrangement, the purpose or one of the main purposes of which is to extract value from the charity.

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