A number of new tax rules are coming into effect. Significant changes have been made to the Gift Aid Small Donations Scheme. On the one hand these changes make the scheme more accessible to more charities sooner, but on the other hand they also enforce the restrictions relating to community buildings. New rules relating to Gift Aid and intermediaries and off-payroll working are also now in force, and at last the apprenticeship levy comes into effect for charities with annual payrolls of more than £3m.
On the upside, HM Revenue & Customs has published two bits of useful guidance for charities. First, a helpbook (number 480) covering expenses and benefits for 2017. It explains the tax law relating to expenses payments and benefits received by directors and employees for current and previous tax years. This includes details of the exemption for employer-provided living accommodation, which is often an important issue for some charities. HMRC has also updated the helpsheet that explains how gifts are dealt with for capital gains tax purposes, which also covers gifts to charities.
The Charities Aid Foundation has published its annual UK Giving Report, which suggests that Gift Aid take up is still increasing, with 52 per cent of donors now using Gift Aid compared with 47 per cent the previous year. The 25 to 44 age group is the most likely to use Gift Aid. As before, older people are more likely to give than younger people, and apparently Brexit has had no impact yet on people’s giving habits.
Unilever has been much in the business news recently, and it features again in the Wall Street Journal, where is is cited as a champion of zero-based budgeting. This is the technique that effectively reboots the budget completely and starts afresh with no assumptions from previous years. It was a popular tool in the 1970s, but according to the WSJ it is experiencing a resurgence because modern IT gives us greater power to manipulate the data. Charities are expected to budget properly, and there is no reason why they should not adopt this technique too.
Matters of material significance
The Charity Commission has issued guidance for auditors and examiners on matters of material significance reportable to UK charity regulators. This new guidance is an expanded revision of previous guidance. There is no longer any need for auditors to report on resignation, but this is replaced with two new matters to report on: a modified opinion; and conflicts of interest not being managed by the trustees.
At the same time, a number of other matters have been amended: to add some proportionality through the addition of "material" to a number of matters relating to financial impact (such as fraud); to provide additional "application" material and examples to each matter; and to widen the application to all UK charities, including in Northern Ireland.
Stronger Charities for a Stronger Society is the title of the hefty 154-page report from the House of Lords Select Committee on Charities, which considers issues related to sustaining the charity sector and the challenges of governance. The report is wide-ranging, but touches on finance at a number of points, such as: improving governance and accountability; funding, grants, contracts and commissioning; supporting sustainability; alternative forms of charity finance; and regulation and the role of government.
This results in exactly 100 recommendations. Some of the finance-related suggestions are: charities should pay trustees only in exceptional circumstances; every charity should independently evaluate impact; long-term commissioning contracts should be the norm; government should review charity tax policies to maximise income and minimise bureaucracy; there should be better use of social finance; the government should assess the impact of Brexit on charities; and the Charity Commission should be adequately funded.
Three weeks after the report's publication, a general election was called. I hope this report will not get lost in the ensuing furore.
Don Bawtree is lead partner for charities at accountants BDO LLP