23 March 2012
Welcome to our first charity briefing of 2012. This edition covers the implementation of the 2011 Charities Act as well as cross border regulation. We also bring you up to speed on the key dates in pensions auto enrolment and Real Time Information (RTI) as well as an update on the VAT cost sharing exemption.
In continuing times of austerity, it can be difficult to obtain a good level of return on cash balances and investments as well as not incurring significant management charges. We hope the articles included on treasury management and investment reviews may be able to help you in these areas.
We would also like to take this opportunity to thank all our clients that helped us achieve “Best overall service award” in the December 2011 Charity Finance Survey. Your support as always is gratefully appreciated.
And congratulations to all our clients who featured in the “The Sunday Times 100 best not for profit organisations to work for 2012”.
As ever, if you have any feedback on this edition of the briefing, or wish to discuss any of the matters raised, do contact one of our team.
Kathryn Burton
partner | 020 7969 5515
It was confirmed in November 2011 that the cost sharing exemption contained in EU law would be given effect in UK VAT law from the date of Royal Assent to the 2012 Finance Bill. At the time of writing the fine details are not known.
But what can be gleaned from the responses to the consultation, and HMRCs comments on it, is that a cost sharing entity will need to be created into which the relevant resources will need to be channelled. This entity will then be able to supply services to its members exempt from VAT provided the members use those services solely (subject to a 5% de minimis limit) for making non taxable supplies.
The services can only be charged at a level which allows for costs to be covered, and does not allow the entity to make a surplus. The exemption only allows supplies made by the entity, not supplies made to it, to be exempt. This means that any VAT on costs incurred by the entity will be irrecoverable.
HMRC have stated that they will provide more comprehensive guidance prior to the legislation coming in to force, but at present the exemption does not go as far as many charities had hoped, and seems quite limited.
Phil Salmon
director of VAT services | 020 7969 5611
Charity law has long been criticised for being fragmented and hard to follow. For the last five years, the Law Commission has been working hard to simplify and consolidate existing charities legislation.
After several attempts to get the new consolidated Charities Bill through Parliament, it finally received Royal Assent on 14 December 2011, becoming the Charities Act 2011.
The Act came into force on 14 March 2012 and updates the text and simplifies the structure of the existing legislation. It is not intended to make any changes to the existing law.
The Act brings together the provisions of:
- the Recreational Charities Act 1958 - which is repealed;
- the Charities Act 1993 – which is repealed; and
- much of the Charities Act 2006.
The new Act does not include the provisions of the Charities Act 1992, or the fundraising or public charitable collections provisions of the 2006 Act. This is because a decision was taken at the outset of preparing the consolidation to limit its scope to the law which relates to charities only. The fundraising and public charitable collections regimes apply more widely to philanthropic and benevolent organisations and so have not been included.
Whilst the Act is unlikely to have any substantive impact upon charities, charities will need to take care to ensure that:
- all references to charities legislation (particularly in their Annual Report and Accounts) are to the correct provisions of the 2011 Act;
- on disposals of land, the correct statements, referencing the correct section of the Act are included in the transfer documents. For example, Section 36 Reports will now be Section 119 Reports.
The Act has not been widely publicised and most charities are still unaware of. Charities should now check all their literature and materials for references to the 1993 and 2006 Acts and make sure they are taking steps to update them.
Jo Coleman
partner IBB Solicitors | 01895 207 809
Despite the Government’s recent announcement that employers with fewer than 50 employees will have an extra year to prepare for auto enrolment, the new regime still commences from 1 October 2012 for the largest employers.
A primary initial consideration affecting the preparatory process is establishing the date from which you need to auto-enrol. This is known as the “staging date”. Entry into the process is tiered between 1 October 2012 to 1 February 2017 starting with larger employers first.
Once the staging date is established you will be able to work back and plan appropriate timescales for examining the steps that need to be carried out in advance of this date. Employee communications, educating HR and employee benefits teams, changes to IT systems, establishing whether your current pension scheme meets the criteria of a "qualifying scheme", interaction with existing schemes, establishing opt-out procedures, assessing the costs and budgeting for them are just some of the issues which need detailed consideration.
The Pensions Regulator will write to all employers around a year before their staging date so that you are aware of when to automatically enrol those workers you need to. There are separate criteria for determining who these are. This is dependent upon age, salary, existing pension arrangements, opting out, amongst other factors.
These are fundamental changes and will be here to stay. Being ready for them is an essential element of making the new regime work for you.
Brendan O’Connor
senior manager | 020 7396 4394
With the establishment of the Charity Commission for Northern Ireland (“CCNI”) the regulatory picture for charities operating across the UK has, on the face of it, become more complicated, with up to three sets of regulatory requirements to be complied with. At present CCNI is still in the early stages of setting up its register of charities and publishing guidance for charity trustees, so its immediate impact on existing charities operating in the province will be minimal but that does not mean that it is too early for trustees to start thinking about what the potential impact will be on their charities. Reassuringly, CCNI states that it will apply a “riskbased, proportionate” approach to regulation.
Past experience with OSCR suggests that the actual impact of a new regulator will be more wide ranging than might be expected and the following areas are those which trustees will need to consider in particular:
- definitions of charitable purposes – there are slight differences in each of the three Acts, which could be a pitfall for charities set up under the Charities Act 1993 or 2006 now consolidated in the 2011 Act.
- public benefit tests – the OSCR test and definition of public benefit are both more prescriptive than those included in the 2006 Act. The NI Act appears to be closer to the latter in respect of public benefit but it remains to be seen how CCNI will apply the test in practice.
- regulation of activities – fundraising and campaigning activities in particular will be potentially sensitive and local requirements may vary between jurisdictions.
In February 2012, the Northern Ireland Assembly Minister for Social Development announced the decision that all charities registered in Northern Ireland would be required to demonstrate that they are established for the benefit of the public, in line with the requirements of the relevant Charities Acts in the rest of the UK. This requirement amends the Charities Act (Northern Ireland) 2008 and will therefore need to be included in a Bill for approval by the Assembly in due course. Once the Bill has gained Royal Assent, the CCNI will issue draft public benefit guidance for consultation, with the registration process to commence during 2013.
CCNI has already published guidance on campaigning and political activity, and fundraising, with public service delivery and international activities to follow in due course.
Further information on this evolving situation can be found on the CCNI’s own website, along with their guidance documents, and on the Charity Commission’s site:
Tom Brain
senior charities manager | 020 7969 5670
Real Time Information (RTI) will be introduced by HM Revenue & Customs (HMRC) in phases from
April 2012. The initial pilot implementation involves employers who have volunteered to be the guinea pigs.
RTI is about providing HMRC with information on employees’ pay as it happens.
The employer will be required to submit an online return to HMRC each time the employees are paid. A few groups of employers will be exempted from the online requirements, such as individuals who employ carers for an elderly or disabled person in their home, although paper returns will be required.
Employers will have to assign a reference number to each payment made to an employee using a ‘specified electronic payment method’. The reason for this is so that HMRC can match the payment to the RTI returns.
The RTI system will also include notification of names and joiners replacing forms P45/P46 with a leaver’s statement. The current year end P35/P14 will become obsolete although annual P60 forms for employees will continue.
The RTI concept is reliant on good quality data. Where incorrect or inconsistent data is sent to HMRC it will be impossible to match data submitted to the correct records. Employers should make efforts to ensure that their data is as good as they can get it and focus on:
- name
- date of birth
- gender
- address
- National Insurance number
Penalties will be levied for the late RTI returns from 2013/14. Penalties for the first year of RTI operation will also be applied but only for the final year end submission, the equivalent of the old P35 and P14. The ‘softer’ approach to first year penalties is intended to recognise the potential teething problems and that those running RTI in 2011/12 are doing so voluntarily.
However, once RTI goes live for everyone in 2013/14, watch out! Unless HMRC reconsider the position there will be little room for error.
If you require any further assistance or guidance please contact one of our team.
Lorraine Owens
employment tax manager | 020 7969 5578
Many not for profit organisations enjoy positive cash balances during the majority of the year, due to income often being received in advance.
The Treasury Management Service is designed to give you a straightforward solution to the problem of where to place large cash deposits safely. Epoch Wealth Management can help you ensure that you hold a range of deposits with different banking institutions to limit the impact of a banking collapse as far as it is possible to achieve it.
In addition, we will seek out the most competitive rates available and give you the best return on your assets with your demands for accessibility to cash/liquidity being a key consideration. All this can be structured so there is only one application form.
For further information about the Treasury Management Service or to book a review of your requirements please contact Jon Rolfe on 020 7969 5500.
about Epoch Wealth Management
Epoch Wealth Management is a regulated Financial Advisory business which specialises in offering high level financial planning advice to private clients, companies (including not for profit), charities and trusts.
Since forming a joint venture with haysmacintyre in 2010, Epoch have concentrated significant time and resource into providing services and solutions specifically aimed at charities. This predominantly revolves around treasury management, financial strategy reviews and investment manager performance analysis.
If you are a trustee, charity or not for profit organisation charged with considering, implementing and reviewing an investment strategy in line with your organisations aims and objectives, then you will want to ensure you have a thorough understanding of your investments.
The ‘Investment Strategy Review’ service offered by Epoch Wealth Management in conjunction with haysmacintyre is designed to help clients understand their portfolio and ask delving awkward questions of wealth managers that are not answered in a quarterly portfolio statement.
The benefit of this is that you will get a much deeper understanding of your portfolio and know whether it is performing in line with, above or below the competition. For further information or to book an exploratory meeting with our review specialist, please contact Jon Rolfe on 020 7969 5500.
Jon Rolfe
partner | 020 7969 5500
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