Don Bawtree: Most common Gift Aid claim errors

Plus: Guidance on Brexit from two regulators and does good governance lead to more successful charities?

Don Bawtree
Don Bawtree

HM Revenue & Customs has released a list of the most common errors in Gift Aid claims for the last tax year. The top five includes the wrong person submitting the claim and claiming excessive amounts on the Gift Aid Small Donations Scheme, which had an annual limit of £5,000 up to 5 April 2016 and £8,000 from 6 April 2016.

Another is out-of-date GASDS claims. The GASDS runs on a tax-year basis: you can claim back for the previous two years. This is different from Gift Aid, which runs on the charity year-end basis and you can claim for the previous four years.

The other two in the top five are errors completing a paper claim form, including filling in boxes that should be blank, adding extra comments, ticking boxes incorrectly and missing information; and claiming for non-qualifying donations - usually out-of-date joint donations or company donations.

HMRC is also about to demand a new report from some charities under the Common Reporting Standard. All UK financial institutions are required to report their financial activities every year directly and separately to HMRC.

Unfortunately, the definition of what is a financial institution can include a charity if more than half of its income comes from financial assets that are managed by a third party - most types of investment portfolio. The first deadline for this regime is 31 December, with a filing deadline of 31 May 2017. There are penalties for non-compliance and there is also no de minimis, so some smaller charities could be caught by this. The one helpful exclusion will be property rental income, which does not represent a financial activity under these reporting rules.

Guidance on Brexit

With year-ends in mind, trustees will be thinking about budgets and/or year-end reporting. And two regulators have issued guidance on Brexit. The Financial Reporting Council says boards of quoted companies should consider if Brexit will affect solvency or liquidity, or create other risks that will threaten the long-term viability of the business. It says market volatility might have an impact on balance-sheet values and requires directors to consider whether the going-concern basis of accounting is appropriate.

Closer to the world of charities, the Scottish regulator the OSCR says that although it is unlikely that a charity is immediately thrown into jeopardy by the referendum result, it is clear that, in the medium to long term, the consequences of exiting the EU will be far-reaching. Emerging issues include political policies and priorities, the economic impact on public finances, as yet unknown changes to the legal parameters within which charities operate and potential changes to staff policies and practices. The OSCR also posits technological issues, but these seem less clear-cut. However, it does make sense to consider all this, as the OSCR suggests, in the light of a charity's strategy and particularly in relation to reserves and contingencies.

Governance index

There has always been a question as to whether good governance means a more successful charity. It seems common sense that it should prevent the worst failures, but does it actually improve a charity's performance? A recent survey of the governance of the top FTSE 100 companies, conducted through the Institute of Directors and Cass Business School, looked at how they stick to rules on executive pay, transparency and board structure. British American Tobacco came out top, Tesco bottom, but it was noted that Aviva, Next and Marks & Spencer all performed well on governance, but were also among the firms experiencing the largest falls down the index.

Don Bawtree is lead partner for charities at accountants BDO LLP

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