HMRC has announced that it has updated the section on Payments to overseas bodies in the detailed guidance notes for charities.
Charities might like to take a look at this guidance, which deals with payments to bodies outside the UK and whether these can be considered to be charitable expenditure.
In general, a payment by a charity, which is in accordance with its charitable purpose, is classed as charitable expenditure. However, where the payment is to an overseas body, there are additional conditions that must be met in order for the payment to be charitable expenditure for UK tax purposes.
The criteria are that:
- The payment is made to a foreign supplier of goods or services in the ordinary course of the charity’s activities; or
- The charity takes reasonable steps to ensure that the payment is applied for charitable purposes.
Trustees are required to carry out appropriate research in relation to the overseas body in order to minimise risk to the charity’s finances and provide information and supporting documentation about:-
- The person or persons to whom the payment was given
- The specific charitable purpose for which the payment was given, the reasons, and how the decision to provide the payment was arrived at
- The guarantees or assurances that have been obtained from the overseas body that the payment will be applied for the purpose for which it was given (such as a partnership or other written enforceable agreements), and what financial controls were in place, including sufficiently detailed financial records providing robust audit trails
- The steps the trustees took to ensure the payment will in fact be applied for charitable purposes (such as safeguards, monitoring and oversight)
- The follow-up action taken by the trustees to confirm that payments were applied properly
For more detailed information and examples please see HMRC’s Guidance on Payments to overseas bodies.
Merging Your Charity
It may be that you would like to bring in more skills or additional funds to your charity but are not sure that standing alone will present the charity with the opportunity to grow, attract new funders or just retain stability.
It is possible for two or more charities to merge into one organisation by one of the charities taking over another’s activities and assets or by forming a completely new charity to take over the same for all charities involved.
If merging is something you, as Trustees, are considering, then be sure to check that the governing documents allow a merger and that all charities involved have similar charitable aims and core values. It may be that you will need to obtain permission from the Charity Commission.
Things to consider
The merger should be in the best interests of the charities’ beneficiaries, the Trustees should be united in believing that a merger is the best way forward and certain questions, amongst others, need to be answered:
- Have we approached our beneficiaries for their view?
- What will be the risks and benefits for our charity of a formal merger?
- Are there any other forms of collaborative working we could explore that might achieve the same benefits?
- Have we considered the full cost of merging?
- Are we carrying out a due diligence exercise?
Charities need to be clear about all factors influencing the decision, can the charity reach more services, will the merger reduce overall costs, can the charity overcome financial uncertainty, will it achieve a better public profile.
There is much to consider but it may be worth exploring and the Charity Commission provides good guidance on this subject.
For more information on this topic, please contact Clare Vaughan on 01872 271655 or at email@example.com.
Charity Annual Return
The Charity Commission, the independent regulator of charities in England and Wales, have updated the charity annual return form for 2014 in order to better serve the regulatory work and the public’s interest in charities.
The charity annual return must be completed by all registered charities with an income over £10,000 and must be filed within 10 months of their financial year end. All Charitable Incorporated Organisations (CIO’s) are required to submit an annual return regardless of their income.
Previously, charities with a gross annual income of over £1 million had to complete a Summary Information Return (SIR) in part C of the annual return – this requirement has now been removed.
The charity annual return is important because it is a key tool that the Commission uses to inform its regulatory approach, promote good governance and make sure that charities are accountable to the public. The information provided on the return will be used to update the charity’s profile on the Commissions website.
The charity annual return will require a charity to disclose whether it:-
- Has had its accounts qualified by an auditor or independent examiner
- Pays any of its trustees for acting as charity trustees
- Has a trading subsidiary
- Raises funds from the public
- Makes grants as its main activity
- Works with a commercial participator, and, if it does, whether it has an agreement with them
- Has written policies in place on risk management, investment, safeguarding vulnerable beneficiaries, conflicts of interest, volunteer management and complaints handling
- Is regulated by a regulator or registered with any other registrar than the Commission
In addition to this the Commission will also display on the register whether the charity:-
- Was formed by the merger of two or more charities or whether it is a charitable company set up to receive the assets of an unincorporated charity.
- Is a member of the Fundraising Standards Board (FRSB).
- Whether the charity has become insolvent
- Whether the charity is subject to enforcement action by the Commission for non-submission of accounts (where a charity has failed to submit its accounts after repeated reminders and remained in default six months after the filing deadline).
For more information or assistance with completing your charity annual return please do not hesitate to contact us on 01872 271655, or you can email James directly at firstname.lastname@example.org
The Charity Commission has recently updated and enhanced its guidance on public benefit. This has long been an area of scrutiny by the Commission particularly within existing charitable entities as to how they tick the tests of public benefit. With this detailed guidance, the Commission now recognises that there are three elements to public benefit in the life of a charity as follows:-
- Being a charity means being an institution which is for the public benefit. Understanding at the outset what public benefit means can help those looking to set up a charity.
- Running a charity means the charity trustees must carry out the charity’s purposes for the public benefit.
- Reporting public benefit provides a means to report within the annual accounts the main activities undertaken by a charity to carry out its charitable purpose for the public benefit.
There is guidance on the Charity Commission website regarding the detail of the above which seeks to clarify at the inception of a charity the purpose for its existence and to continually challenge trustees to ensure their charity’s purpose continues to be for the public benefit.
Should you require any assistance on this topic within your charity or are thinking of setting up a new charity, contact Clare Vaughan on 01872 271655 or email@example.com
HMRC are writing to all charities who have made gift aid claims in the past 3 years encouraging them to sign up for the HMRC Charities Online service. Launched in April 2013, this service allows for charities to make their claims for gift aid online rather than submitting the traditional paper form R68(i).
Although it is currently still possible for charities to submit gift aid claims by paper, from 30 September 2013 HMRC will no longer accept claim form R68(i) and reclaims can only be made online via the Charities Online service, or for larger claims (1,000+ donors) via third party software.
There are provisions in place for those without access to the Internet; in which case you would need to contact HMRC to order form ChR1
Signing up to the service is a straightforward process and instructions for signing up to HMRC Charities Online are available from the HMRC website. Initially, you will need to create an account with HMRC Online Services; you may have already done this, for example if you submit VAT returns online. Once signed-up and logged in you will be able to enrol for the Charities Online service.
HMRC provide full guidance on making a claim using the Charities Online system, however Kelsall Steele are on hand should you require assistance at any point in the process.
If you would like to discuss making a gift aid claim or HMRC Charities Online please contact Clare Vaughan on 01872 271655 or e-mail firstname.lastname@example.org