Fines for late filers will not increase public confidence

We must address the root cause of non-compliance, writes Caron Bradshaw

Caron Bradshaw
Caron Bradshaw

During my training as a barrister, it struck me that in the UK we have a confused approach to criminal justice. Do we set out to prevent, deter, punish or reform, or all of these? Without clarity about what you're trying to achieve - or, worse, if you try to achieve multiple and sometimes conflicting outcomes - you risk not delivering well on all counts.

I feel the same about fines for charities that file their accounts late. The chair of the Charity Commission, William Shawcross, said in his Rathbones Annual Charity Symposium address last month that he intended "to come down like a ton of bricks" on defaulting charities. So would such an approach set an example to others, or is it intended to reform the poor behaviour of the erring organisations? Perhaps the view is that if failing, fraudulent or criminal charities often fail to file on time, then the reverse should be true - that if we drive up compliance, we drive out wrongdoing and restore trust and confidence?

Changing behaviour

I shall be completely up front: I'm tempted by filing penalties. Companies House fines for late filing, and research published last year by the Charity Commission showed that about 39 per cent of defaulting charities complied with company law requirements. HM Revenue & Customs had a record number of online returns filed on time this year - it also imposes fines. Penalties can change behaviour. They can reinforce the importance of the fact that failure to comply is a serious matter.

Charitable status is a privilege, not a right. Filing accounts is one of the few things a registered charity has to do to demonstrate compliance with charity law. We have a responsibility to our donors and funders to be transparent and accountable. We know that demonstrating your impact is the key driver of public trust in the sector.

Many Charity Finance Group members are in favour of a penalty for late filing, particularly for repeat offenders - about 41 per cent told us they agreed with the principle. A minority of them even agreed with the view - again echoed by William Shawcross - that Gift Aid or tax benefits ought to be suspended for defaulting charities.

However, I would caution against believing that fines or suspending Gift Aid will do much more than improve compliance in the 14 per cent of charities that default. I doubt that penalising late filers will improve the general confidence in charities, nor will it increase donors' understanding of the charity or protect beneficiaries. As for removing Gift Aid, I'm concerned about the workability and equity of this proposal.

Tall order

Members of the public I speak to are surprised that there is currently no fine imposed, that being the norm for companies and individuals. But they are more surprised that the Charity Commission does not examine and actively accept or reject accounts. So should the commission review the accounts they receive and refuse non-compliant ones? That would be a tall order, given the number of charities.

However, this deeper consideration might allow charities with more fundamental problems to be discovered and addressed. Returning to my analogy with crime - and both Labour and the Conservatives have told us that being tough on crime only gets you so far - you have to be tough on the causes too. So by all means fine late filers; but let's also address the root cause of non-compliance.

Caron Bradshaw is chief executive of the Charity Finance Group

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