Trustees must make sure they can prove that funds spent overseas are used for charitable purposes or face paying tax on the full amount, the Charity Commission has warned.
In its compliance guide for trustees, Protecting Charities From Harm, the final chapter of which was published on Friday, the regulator provides advice on what trustees should consider when banking money or making or receiving payments, including the use of cash or payments through intermediaries.
The guidance looks at the risks charities might run and the sort of financial controls they need to have in place. It includes a number of toolkits and checklists charities can use to ensure compliance.
It says a change in the law brought about by the Finance Act 2010 means charities' expenditure overseas could be considered "non-charitable and therefore liable for tax" if organisations had not taken whatever steps "HMRC considers are reasonable to ensure that the funds were used for charitable purposes".
Other issues highlighted in the guidance include the need to take care when transferring funds to countries where banking services are unreliable, the importance of using the most appropriate service when transferring money abroad and the need to reconcile accounts against bank details at least once a month.
"When receiving, holding and moving funds, trustees need to ensure they take proper care to ensure the charity's money is held safely, not placed at undue risk and reaches the intended destination for the purposes intended," the guide says.