Charities Alert - Crowe Horwath International

Charities Alert - Crowe Horwath International

Issue 06/2011

November/December 2011



Inside this issue

Sector news

Charity Commission’s strategic plan

Findings of UK Giving 2011

Upper Tribunal’s ruling on public benefit

Big Society audit

Localism Act receives Royal Assent

Guidance and


Updated investment guidance for charities

New registration bulletins


OSCR update

VAT and tax

VAT cost sharing exemption

That’s entertainment...

Tax breaks on gifts of art to the nation

Charities Alert Issue 06/2011

The Commission intends

to place more emphasis

on helping trustees to help


Sector news

Charity Commission’s strategic plan

The latest edition of CC News is now

available on the Charity Commission’s

website. Its main focus is the

Commission’s three year strategic plan

to 2015, which was reviewed in light

of the cuts made to the Commission’s

budget. The Commission’s key strategic

priorities will be to develop:

the compliance and accountability

of the charity sector

the self-reliance of the charity


These underpin its vision of ‘charities

you can support with confidence’.

In improving charities’ compliance

and accountability, the Commission is

looking to meet the public’s expectation

of it being a robust regulator. This will

include assessing and improving ways of

managing risk, by continuing to provide

guidance to trustees on how to manage

risk and also acting decisively against

serious malpractice. Increased effort will

be directed at ensuring that the online

register is providing the right information

about charities; this will include being

tougher on charities who are not filing

their annual accounts and returns within

Findings of UK Giving 2011

the 10 month filing deadline.

In helping charities become more

self-sufficient, the Commission intends

to place more emphasis on helping

trustees to help themselves. This will

continue to include the publication of

guidance, which will be tailored where

appropriate for the different charity

sectors and will also be principle based,

thereby allowing trustees to apply

the guidance to their own charity’s

specific circumstances. There will also

be collaboration with charity umbrella

bodies with the longer-term objective

of allowing them to take over more

responsibility for providing one-to-one

advice to individual charities.

The newsletter also highlights the

Commission’s plans for utilising

technology by increasing the number

of services available online, making

its website more ‘user friendly’ and

looking at new and different ways of

communicating with trustees and the

public via social media.

A number of examples are provided as

to how the Commission is applying its

new approach in practice.

UK Giving 2011 has recently been published. The latest report commissioned by the

Charities Aid Foundation and NCVO shows that £11 billion was donated by the UK

public to charities during 2010/11. However, whilst an additional 1.1 million individuals

donated to charity, the average (median) donated per month fell from £12 in 2009/10

to £11. Despite the increase in people donating, the total value of donations remained

the same as in the previous year and donations are now worth £900 million less in real

terms than the amounts donated in 2007/08, the year before the UK entered recession.

Sir Stuart Etherington Chief Executive of NCVO said:

“This research is a timely reminder that even in straitened times, the British public are

prepared to dig deep and show goodwill towards those most in need……However,

these figures also highlight that charities will have to work extra hard to attract donors

and keep pace with inflation at a time of economic challenges and increased demand

for their services.”

Upper Tribunal’s

ruling on public


In October 2011, the Upper Tribunal

announced its ruling on the Independent

Schools Council’s challenge to the

guidance issued by the Charity

Commission regarding schools and the

provision of public benefit. Our public

benefit briefing for schools provides

further details on our response to this

key ruling.

Big Society audit

An audit has been commissioned into

the Big Society to see how effective

its policies have been to shift power

from government to civil society.

The audit will be undertaken by the

think tank, Civil Exchange; research

organisation, Democratic Audit; and

DHA, a social communications group,

following a consultation with a number

of stakeholders into the design of the

process and the best means of gauging

the Big Society’s effectiveness and

achievements. Three key elements

will be examined: community

empowerment; opening up public

services; and encouraging social action

and capital.

It is hoped that the findings will be

available early in 2012 and that, subject

to future funding, this will become an

annual exercise.

Localism Act

receives Royal


The Localism Act has now received

Royal Assent. Whilst the legislation

offers new freedoms and flexibilities for

local government and changes to the

planning system, it has also provided

individuals and communities with

additional rights and powers to bid for

land and run local authority services.

This includes:

making it easier for people to take

over local assets such as shops

and pubs (through the community

right to bid)

giving local groups the right to

express an interest in taking over

the running of a local authority

service (the community right to


enabling local residents to call local

authority services to account for the

management of taxpayers’ money.

Charities Alert Issue 06/2011

When starting out as a charity, it is essential

to have strong governance arrangements

in place. These are the foundations upon

which successful charities are built.

Guidance and technical

Updated investment guidance for charities

The Charity Commission has recently

updated CC14 ‘Charities and Investment

Matters: A Guide for Trustees’.

The revised guidance is a clear example

of the Commission’s new strategic

approach of encouraging self-reliance

and accountability. It also recognises the

Commission’s new regulatory approach

and wider changes in policy and

practice within the charity sector.

The guidance aims to provide a clear

framework confirming that trustees can

invest ethically, sustainably, for a financial

return or to achieve charitable aims or

for a mix of all or any of the above, but

any final decisions are for the trustees

to take. The guidance emphasises that

trustees must be clear about their motive

for making a particular investment and

must be able to demonstrate that they

are using their charity’s resources in its

best interests.

Sam Younger, the Charity Commission’s

Chief Executive, commented:

“…. It reassures trustees that, so long

as they can demonstrate that they have

reached a reasonable decision having

considered the relevant issues, they are

unlikely to be criticised for adopting a

particular investment policy.”

The guidance considers three methods

for investing funds.

Financial investment

This aims to achieve the best financial

return within an acceptable level of risk.

Trustees will therefore need to ensure

that they are acting within the charity’s

powers to invest, and exercise due skill

and care.

Programme related investment


This is aimed at helping a charity

further its objectives in a way that might

also yield a financial return. When

considering investments of this nature,

trustees must be confident that doing so

wholly furthers the charity’s aims for the

public benefit.

Mixed motive investment

This is an emerging approach where

investments are made which do

not totally fall into either the financial

investment or PRI categories, but which

the trustees consider are still likely to

be in the best interests of the charity.

For these types of investment, trustees

will need to be satisfied that both the

anticipated return and contribution to

the charity’s aims can be sufficiently


The new guidance has received a

positive response from the sector,

particularly in relation to social

investments where greater clarity is now



Office of the Scottish

Charity Regulator

(OSCR) update

OSCR’s first public focus strategy

consultation document was published

in October 2011. The document

considers the work and responsibilities

of OSCR and is a response to the

Public Services Reform (Scotland) Act

2010. Its purpose is to set out how the

regulator will improve quality of service

and the involvement of its users when

conducting its regulatory functions.

The document covers the following five

broad areas:

OSCR’s current role

developing its public focus

clear and accessible reporting

demonstrating continuous


delivering public focus.

The consultation period closes on Friday

23 December 2011.

OSCR is also in the process of compiling

‘Scottish Charities 2011’, its latest three

year profile of the charity sector, drawn

from information collected as part of

its annual monitoring programme. It is

expected that Scottish Charities 2011

will be available on OSCR’s website early

in 2012.

New registration bulletins

The Charity Commission has launched

a new series of registration bulletins,

which will provide facts and figures on

new registrations and highlight themes

and emerging trends in the sector,

as well as promoting good practice.

The information is drawn from recent

registrations and current applications

between April and September 2011.

The first of these bulletins is on the

theme of trusteeship and governance

and includes findings from a survey of

applicants to the charity register, which

focused on trusteeship issues such

as recruitment, training and diversity.

The bulletin highlights that many

organisations joining the register do not

provide any training to new trustees and

were still in the process of recruiting

a trustee or trustees. Illustrative case

studies based on the findings are also

provided which highlight the governance

challenges that new charities sometimes


Sam Younger commented:

“The survey findings highlight the

importance of our guidance to trustees

in helping new charities get off to a good

start….When starting out as a charity, it

is essential to have strong governance

arrangements in place. These are the

foundations upon which successful

charities are built.”

Charities Alert Issue 06/2011

VAT and tax

VAT cost sharing exemption

HM Revenue & Customs (HMRC) has now issued draft

legislation in respect of the cost sharing exemption, which is

due to take effect from 1 April 2012. We have been following

the progress of this proposed exemption for some time and

details can be downloaded from our website here.

There still seems to be uncertainty within the sector as to how

a separate independent cost-sharing group can be set up and

the control criteria which will apply. In addition, there is concern

about the type of service that will qualify under the exemption.

HMRC uses the phrase ‘directly necessary’ for the members

performing their non-taxable activities. Whether this will

include HR, IT, accountancy and back office support functions

remains to be seen.

HMRC will be issuing detailed guidance in the New Year.

We will debate this and other topical VAT developments at

our next charity VAT update evening in our London office on

Wednesday 11 January 2012.

That’s entertainment…

For many organisations, entertaining plays an important role in

their continuing development, particularly as we approach the

Christmas break with many employers preparing for their office

Christmas party. Entertainment expenses are often high on the

agenda when HMRC conducts on-site reviews, in particular,

the distinction between business and staff entertaining. Further

information on this important area is available in our November

issue of Employers’ Briefing.

Tax breaks on gifts of art to the


The Chancellor’s Autumn Statement announced proposals

for tax relief to encourage gifts of ‘pre-eminent works of art’ to

the nation. The new rules will allow up to 25% relief on income

tax or capital gains tax for donors who gift major works of art

or historical objects to the nation. Companies which make

donations will be eligible for a reduction in corporation tax.

This scheme will be in addition to the existing ‘acceptance

in lieu’ scheme which enables inheritance tax to be settled

through gifts of works of art, meaning relief will be available

both during and after a person’s lifetime. The two schemes will

work in parallel and will allow combined tax reductions of £30

million per annum. Under the proposals an expert panel is to

decide whether a potential gift is sufficiently ‘pre-eminent’ to

be accepted.

This is our last Charities Alert of 2011 and we wish

all our readers a Happy Christmas and relaxing

New Year. Charities Alert will be back in

January 2012.

We hope you find Charities Alert of interest. If you have questions about any of the topics covered,

please call Pesh Framjee, Head of our Not for Profit group, or Sally Kirby, editor of Charities Alert.

Office locations and contacts

Cheltenham – Mike Hall

01242 234421

Kent – Ian Weekes


01622 767676

Tunbridge Wells

01892 700200

London – Pesh Framjee

020 7842 7100

Midlands – Helen Drew

0121 543 1900

Manchester – Vicky Szulist

0161 214 7500

Thames Valley – Alastair Lyon

0118 959 7222

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entity. Crowe Clark Whitehill LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically

disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. © 2011 Crowe Clark Whitehill LLP

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