Reclassifying housing providers, Gift Aid and Kids Company

Don Bawtree casts his expert eye over the latest financial news making the charity headlines

Don Bawtree
Don Bawtree

Several groups of charities are often informally considered to be outside the third sector. So it was interesting that the independent Office for National Statistics has announced that it will reclassify registered providers of housing as public non-financial corporations, mainly reflecting the existing regulatory regime overseen by the Homes and Communities Agency.

The only immediate effect of this change is to put housing associations onto the government accounts, which will tighten up reporting times if nothing else. It is interesting, too, that the powers referred to in the HCA's regulatory regime are not a million miles away from the those of charity regulators across the UK.

Another abstruse area of the charity world is cooperative and community benefit societies - what used to be called industrial and provident societies. Strangely, there is still confusion over who should actually sign the audit report - the auditor or the firm. Although the Co-operative and Community Benefit Societies Act 2014 is silent on this, the Institute of Chartered Accountants in England and Wales say it should be the auditor.

Gift Aid declaration

The important new requirement of the new model Gift Aid declaration introduced in October is that it must now include an explicit reference to the implications for the donor if they have paid insufficient tax to cover the Gift Aid claimed on their donation.

Some commentators have said it is unfair for the donor suddenly to be asked to make good this tax personally. It is depressing that people were unaware that this has always been the case, but it is also encouraging that the new declarations make this clearer.

This is not just an issue for the low paid - see the press reports that Ingvar Kamprad, billionaire founder of the flatpack furniture chain Ikea, has paid Swedish income tax for the first time since he left the country in 1973!

Living wage

Figures published by the financial services firm KPMG show that 5.84 million people (23 per cent of employees) are earning less than the Living Wage Foundation's living wage, up from 22 per cent last year and 21 per cent the year before.

The foundation sets an average fair minimum pay figure at £9.15 in London and £7.85 elsewhere. The new compulsory national living wage, announced in the last Budget, will be set at £7.20 an hour for those aged 25 and above from next year and will rise to £9 by 2020.

Charities entering their budgeting processes need to consider seriously what effect these changes will have.

Transparent accounts

The Financial Reporting Council and the Charity Commission are consulting on a taxonomy to enhance the quality of financial reporting for charities in the UK and Ireland.

This would allow charities to submit digital accounts and would allow a huge additional amount of more sophisticated analysis to be conducted across the charity sector. Without significant support from the sector, this is a project that might not be resourced and seen through.

At a time when the sector needs to demonstrate its commitment to transparency, this initiative should be applauded, even though it might cause some loss of flexibility in reporting formats. The consultation closes on 8 December.

Don Bawtree is lead partner for charities at accountants BDO LLP

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