This blog post covers the latest news updates on changes to the charity annual return, charity related law reforms, and the effects of the cost of living crisis.
If any of the information within this newsletter affects you or your business, please get in touch by calling 01454 619900 or emailing advice@dunkleys.accountants.
Charities and the continuing cost of living crisis
Recent research published by the Charities Aid Foundation as part of its Charity Resilience Index shows that:
- 57% of charities have seen an increase in demand for their services over the past year, with charities in the North of England among the hardest hit with a 67% increase
- Less than a third of charities are highly confident in their funding
- More than half of charities are worried about their survival
All of the charity regulators across the UK have addressed the crisis by updating their guidance. Whilst this often just refocuses existing guidance rather than offering anything new, it can be a useful reminder for trustees on issues they need to consider when tackling the financial challenges faced by charities. The CCEW guidance stresses the need for trustees to continue to act in their charity’s best interests and to act prudently and with reasonable care and skill at all times, taking advice when necessary. It goes on to set out what needs to be done when financial difficulties are being experienced and the need to develop options to support the continued operation of the charity, or in the worst case scenario what to do if the charity is unable to continue. Similar guidance has been published by OSCR and CCNI, and all of the guidance provides useful links to other sources of information and guidance.
For many charities the rising cost of fuel and energy is the main source of concern. As the days lengthen and the temperatures slowly start to creep up you would hope that the financial pressures placed on charities from rising energy costs would start to ease, but this may not be the case. The initial Energy Bill Relief Scheme for non-domestic customers came to an end on 31 March to be replaced by the less generous Energy Bills Discount Scheme. This is planned to last for a year until 31 March 2024 and will have three components:
1. A baseline discount that will apply automatically to eligible non-domestic customers across the UK including voluntary organisations.
2. The Energy and Trade Intensive Industries (ETTI) discount that provides a higher level of support to businesses and organisations in eligible sectors. Certainly some charities may be able to take advantage of the ETTI discount as it covers museum and library activities for example.
3. The Heat Network discount that will provide a higher level of support to heat networks with domestic end customers.
Both the ETTI and Heat Network discounts have to be applied for by businesses and organisations who believe they qualify for higher levels of support.
Annual return changes
CCEW have now published guidance on what information charities will need in order to be able to answer the new questions that are being included in the annual return for the first time, so that charities can prepare for the changes and ensure that they have the information required to complete the return.
The key changes to the annual return include:
- Identifying charities that are dependent on key supporters for a significant proportion of their income.
- Improving clarity on whether trustees have been paid by the charity or any connected organisations for the supply of goods and/or services.
- Requiring greater information on grants paid to individuals and other charities, highlighting whether any of those grants were to connected parties.
- Details of how overseas income was paid to the charity.
- Providing details on the premises from which the charity delivers services.
- Details of property belonging to unincorporated charities that is held by custodian trustees other than the Official Custodian.
- The location of any websites that are hosted outside the UK.
- Details of any wider organisations that the charity may be a member of.
- Details of any trading subsidiaries that have been dissolved.
- Information on the number of employees a charity has both in the UK and overseas, and the total payroll cost.
If any of this information effects you or your business, please contact our charity lead – nathan.pretty@dunkleys.accountants
Charity law reform
Reforms set out in the Charities Act 2022 took effect from 31 October 2022 in England and Wales. CCEW has now ensured that its guidance material has been updated for these legislative changes, in areas such as managing conflicts of interest, making payments to trustees and fundraising. New guidance has also been issued for the first time for charities governed by Royal Charter that addresses how to make changes to their constitution and also provides guidance to charities on how to apply for Charter status.
In addition the Fundraising Regulator has also issued guidance on how the Act amends the law in respect of fundraising, and what to do when more donations are received than is needed, or where an appeal doesn’t raise enough.
We can now consider the following changes which will come into effect for charities located in England and Wales later in the Spring:
Land transactions
Reforms are being introduced that will expand the range of advisers a charity can utilise when contemplating a potential disposal of land. Previously advice had to be sought from a qualified surveyor, this is extended to now also include fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers. It is also expanded to include trustees, officers and employees of the charity where they are suitably qualified.
There are further changes designed to simplify and add clarity to the restrictions that apply to disposals of land, but it remains a recommendation that a charity always seeks advice when doing so in what remains an area where complex regulations exist.
Using a permanent endowment
This is another complex area where there are some welcome changes which provide greater clarity of when CCEW consent is required before a charity can spend permanent endowment capital, along with a new power for charities to be able to borrow up to 25% of the value of its permanent endowment fund over a term of up to 20 years without having to obtain CCEW consent. There is also a new power enabling social investments that could not previously have been made due to the expectation that the return on that investment could be negative or uncertain.
Charity names
CCEW already has the power to direct a charity to change its name if it is too similar to that of another charity or if it is considered offensive or misleading. This power will be extended to also cover the working name that a charity may use instead of its full legal name, enable the Commission to delay the registration of a charity with an unsuitable name and use its powers in relation to exempt charities working in consultation with the principal regulator involved.
The last wave of reforms introduced by the Act are expected to come into force in the autumn and include changes to how charities can amend their governing documents. Plans to reform the treatment of ex gratia payments are being considered further and it has not yet been announced when these will come into effect.
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