Charity News Speed Read - December 2016

Serious Incident Reporting Consultation

In October the Charity Commission began a consultation exercise in relation to its updated guidance on serious incident reporting, which is designed to clarify what is expected of trustees when something goes wrong.

Trustees will be aware of the obligation to report all serious incidents, which the Commission defines as "an adverse event, whether actual or alleged, which results in or risks significant loss of your charity's money or assets, damage to your charity's property or harm to your charity's work, beneficiaries or reputation".

The draft guidance includes the following changes:

• clarification on what to report, how and when – encouraging reporting at the time the incident occurs, or as soon as possible afterwards
• an updated section to help with multiple reporting for larger charities, or those that report incidents on a regular basis, due to the risks arising from the nature of their work
• removing the need to report some types of incident, where these are risks rather than serious incidents, and where the information is now requested in the annual return
• adding some new types of incidents – which charities are experiencing on a regular basis and/or struggling to manage properly, for example:
  • losses affecting solvency, significant fines and penalties from HMRC, ICO and other agencies, financial losses arising from litigation and losses resulting from loss of funding
  • something forcing an insolvency or winding up, for example unmanageable debts or reduced income, or the charity’s bank serving notice to close its account and withdraw all services and/ or the charity being unable to secure new services
• checklists to assist trustees when making a report.

The consultation on the new guidance is open until 12 January 2017.

VWV's Emma-Jane Dalley and Laura Chesham are part of the Charity Law Association's working party which is preparing a response to the consultation. Please let us know if there are any comments you would like to feed into that response. Following the consultation the Charity Commission may make further changes to the guidance.

Small Charitable Donations Bill

The Small Charitable Donations and Childcare Payments Bill has finished its passage through the House of Commons.

The Bill will enact changes to the Gift Aid Small Donations Scheme to ensure that it operates effectively. The Scheme was introduced in 2013, to allow charities to benefit from 'gift aid style' repayments on small cash donations, without the need for gift aid declarations.

It was intended for occasions where donors did not have time to stop and provide details (needed for a gift aid declaration) such as putting money into a charity bucket. Charities will be able to claim these repayments on small donations of £20 or less, up to a cap of £8,000 per year.

The Bill removes some criteria for charities to access the Scheme, such as the requirement to have made successful gift aid claims in previous years.

Under the Bill, donations made by contactless payment will be covered by the Scheme. Despite the efforts of some MPs, the donation methods were not extended to cheques, text donations and online payments, so only cash and contactless donations will be included.

The Bill is expected to pass through the House of Lords in December, and if passed the new system will apply to tax years from 6 April 2017 onwards.

Autumn Statement

Whilst the Chancellor Philip Hammond did not make any major announcements relating to charities,  the following announcements will affect the charity sector:

• A further £102 million will be paid to charities from the fines paid by banks as a result of the Libor-rigging scandal. This will mostly go towards military and emergency services charities.
• The investment limits on social investment tax relief will be increased. The amount that social enterprises (that are less than seven years old) can claim through the relief will increase to a lifetime total of £1.5m. The relief allows investors who put money into regulated social organisations, including charities, to claim back part of their investment against their tax bills.
• £3 million from the so called 'tampon tax' will be distributed among a range of women's charities by Comic Relief. Charities that deal with violence against women and girls will be able to apply directly for the next round of funding from December.
• Intermediaries, such as online giving platforms, will have a bigger role in administering gift aid
• The scope of tax relief for museums and galleries will be expanded to include permanent exhibitions
• Insurance Premium Tax will increase to 12% next summer and charities are not exempt

Proposals to change the charities accounting Statement of Recommended Practice

The Charities SORP Committee is currently consulting on the next version of the Charities SORP (FRS 102), which is expected to apply to accounts from 2019.

The proposals include:

• Introducing a third tier of reporting with additional requirements for only the largest charities with an income over £10.2 million and potentially simplified reporting requirements under this threshold
• Including a key facts summary sheet in the trustees' annual report. This would include total gross income, and charitable expenditure as a total and as a proportion of the charity's total income.
• Requiring more detail on a charity's reserves, such as why reserves are held, and possible reasons for using reserves.
• Clarifying disclosure on expenditure, with clearer definitions of administrative and fundraising costs, and staff pay disclosures to cover interim and agency staff for senior roles. Charities would also need to identify charitable expenditure outside of the jurisdiction of main registration.
• Requiring charities to identify donors. All charities would have to the name of the donor and the amount of any material donations from individuals, corporates, the government or other organisations.

Some sector bodies are concerned by the proposed disclosure of sensitive financial details without sufficient context, and there are also worries that the SORP is becoming too complex.

The consultation closes on 11 December 2016, with a summary of responses to be published in the second quarter of 2017.

For more information, please contact Laura Chesham in our Charity Law Team on 0117 314 5314.