charity newsletter...2020/02/10 · review panel have taken swift action in announcing a major...
TRANSCRIPT
In this issue...
Probate fee increases scrapped 3
Multi-employer defined benefit pension plans 4
Latest on Making Tax Digital for VAT 5
Changes to the Charities SORP 6
Improving your Trustees’ Annual Report 7
Charity Commission warns of fraudsters 8
Charity NewsletterFEBRUARY 2020
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Charity Newsletter | February 2020
Welcome
As reported in our Autumn newsletter, after the governance review of the Charities SORP, the review panel have taken swift action in announcing a major overhaul to the development of accounting rules. The Charity Commission has also issued words of warning to the sector, in light of further fraudulent attacks with staff members being impersonated in order to secure bank payments.
Charity Partner Philip Griffiths provides guidance on what makes a good Trustees’ Annual Report to be not only compliance with statutory requirements, but to improve public trust and engagement.
At the time of going to print we have just exited the EU. As 2020 progresses we will learn more of the withdrawal agreement details and the continued challenges Brexit will pose for charities over the next 12 months. Naturally we will keep you updated as to the potential ramifications on UK charities.
As always, we hope you find the topics in this edition informative. If you have any suggestions for topics for inclusion in the future please don’t hesitate to get in touch. If you have any questions about anything raised in this edition, or would like to arrange a meeting, please contact one of our Charity partners:
Welcome to the February 2020 edition of Mitchell Charlesworth’s charity newsletter.
Philip GriffithsPartner0151 255 2300 [email protected]
Alison BuckleyPartner0161 817 6100 [email protected]
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Charity Newsletter | February 2020
Under the Government’s proposals, probate fees would have risen from the current fixed fee of £215 – or £155 with a solicitor – to a sliding scale of up to £6,000 depending on the size of the estate.
Dubbed a ‘stealth tax’ on the recently bereaved, the changes were due to come into force last April but were delayed indefinitely. The Government has now changed its position and says it will review probate fees as part of an annual assessment of family and civil court charges.
A Ministry of Justice spokesperson said: “Fees are necessary to properly fund our world-leading courts system, but we have listened carefully to concerns around changes to those charged for probate and will look at them again as part of a wider review to make sure all fees are fair and proportionate.”
The charity sector had raised concerns that the planned fee increases could discourage legacy giving and estate planning altogether. They welcomed the announcement that the proposed changes are to be scrapped.
Rob Cope, Director of Remember A Charity, says: “We’re hugely relieved to hear that there will be no major increase to probate fees and that the current structure will be retained, at least for the time-being. Charities large and small rely heavily on gifts in Wills. Worth around £3 billion a year, we simply can’t afford to risk jeopardising such an important income stream or to reverse the trend for growth in legacy giving.”
“We’ll continue to work closely with Government to ensure the sector’s views are heard and that the legacy environment is protected. This includes ensuring that concerns about the prolonged delays to probate are addressed and the sector keep informed.”*
The Government has decided to scrap controversial plans to raise probate fees which would have seen some bereaved families pay almost £6,000 more.
Probate fee increases scrapped
*Source: www.rememberacharity.org.uk
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New guidance for charities with multi-employer defined benefit pension plans
In May 2019 the Financial Reporting Council (FRC) issued an amendment to FRS 102 relating to multi-employer defined benefit plans. The joint SORP-making body decided not to include the amendments in the SORP (FRS 102). However, it agreed that additional guidance via the information sheet would be useful when a charity participates in a defined benefit plan, which is a multi-employer plan accounted for as if the plan were a defined contribution plan, and sufficient information to use defined benefit accounting becomes available.
The guidance is called Information Sheet Four and takes effect for accounting periods beginning on or after 1 January 2020 and applies to charities in the UK and Republic of Ireland with multi-employer defined benefit pension plans.
A copy of Information Sheet Four can be found here:www.charitysorp.org/media/648163/information-sheet-4-frs- 102.pdf
If you would like further information or advice on reporting pension liabilities, please contact our Charities team.
The charity regulators behind SORP have recently published new guidance for charities participating in multi-employer defined benefit pension plans who will now have to include figures for liabilities in their annual accounts.
Charity Newsletter | February 2020
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At Civil Society Media’s Charity Finance Summit in October, HMRC told charities it was not rigidly enforcing Making Tax Digital. HMRC understands that MTD is a huge change for charities and is being ‘very lenient’ on non-compliance penalties as long as they are making a genuine attempt to comply with MTD.*
According to Verna Gellvear from HMRC’s customer readiness and external stakeholder team, HMRC is being ‘quite lenient’ with exemptions and charities should not be put off applying for them if they think they might qualify, although it was highlighted that being too old will not be accepted.
Expensive software is not needed and if charities have not yet got the ability to submit their VAT returns to HMRC through compatible software, then bridging software may be the answer or compatible (API enabled) spreadsheets.
Do you need help with MTD?
At Mitchell Charlesworth we are offering an MTD VAT return submission service to ensure charities who do not yet have compatible software or would prefer to maintain their current VAT recordkeeping process are able to comply with MTD.
Charities can choose from a submission only service or upgrade to include the review of the return prior to submission. Opting for the review of the VAT return will include ensuring the VAT return is correct and making suggestions as to how the process can be updated to comply when the soft-landing period ends, and the VAT return process is required to be more automated.
Please contact VAT partner Alison Birch on 0161 817 6100 or email [email protected] if you would like further information about MTD and how it might impact on your charity.
HMRC says it is being ‘lenient’ on Making Tax Digital (MTD)
Latest on Making Tax Digital for VAT
*Source: Civilsociety.co.uk
Charity Newsletter | February 2020
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Changes to the Charities SORP
Following the governance review, the Charities SORP-making body has taken swift action and announced a major overhaul of the way accounting rules are set so that they better meet the needs of users of charity reports and accounts. A new process for developing the SORP is intended to be in place from 2020.
Reforms to the SORP committee
There will be reforms to the SORP committee, which are designed to ensure a stronger culture of constructive challenge, better stability, and better representation of small charities and funders with an interest in the impact charities have.
New stakeholder groups to help establish charity accounting rules
There will be a new engagement process, with seven stakeholder groups working in partnership with the SORP committee. Each group will involve individuals and organisations with an interest in charity financial reporting, giving charities and trustees the opportunity to be involved. The views of the stakeholder groups will shape the future form and content of the next SORP.
Updated version of Charities SORP published
An updated version of the accounting and reporting rules for charities was published in November in order to consolidate changes that have been released in separate documents over recent years.
This is the second edition of Charities SORP (FRS 102) and brings together the two update bulletins and the original SORP text so charities no longer have to refer to more than one document when compiling their annual reports and accounts.
The effective date for using the reissued document is financial years starting 1 January 2019.
To download a full SORP, please use the following link: www.charitysorp.org/media/647945/charities-sorp-frs102-2019a.pdf
No new SORP until 2022/23
Civil Society News reported last month that minutes from the July meeting of the SORP Committee have revealed there will be no new SORP until 2022/23 following the publication of the current SORP in November.
If you require any further clarification surrounding the changes to Charities SORP, please contact our Charities team.
In the last issue, we reported on the recommendations of the SORP governance review panel which was set up to review the future development of charity reporting and accounting. You can read the full article by using the link at the bottom of this page.
READ OUR LAST ISSUE: https://www.mitchellcharlesworth.co.uk/resources/articles/charity-newsletter-autumn-2019/ charity-reporting-accounting-needs-to-change-says-sorp-panel/
Charity Newsletter | February 2020
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The form and content of such a report is set out in the Statement of Recommended Practice “Accounting and Reporting by Charities” (SORP 2015) in addition to the Charities (Reports and Accounts) Regulations 2008 and the Companies Act 2006, where applicable.
Whilst a number of the headings which form part of the requirement contain information that could be regarded as statutory in nature, many of the headings under which the trustees have to report provide an opportunity for trustees to tell a story about what the charity has been doing over the last year, highlight its successes and set out its plans for the future.
Many people find annual reports dull and informative and charities need to change the way they compile their annual report and focus on the impact they are making if they are to improve public trust.
So, what makes a good trustees’ report?
To begin with you should identify who your key audience is likely to be. This is likely to be influenced by how the charity is funded and the beneficiaries. If the charity is funded by the general public then the style and language of the report may be different to charities funded through contracts and grants where a more corporate style may be appropriate.
A guide to some of the key elements of a report is set out below:
Objects of the charity - What does the charity do and how? This is likely to start with the objects as set out in the rules or Articles of Association of the charity but go on to explain in more detail what activities it carries out to achieve those objects.
Achievements - You should set out the key achievements measured against the objectives set. Statistics are an important way to demonstrate the performance of your charity, for example, the number of people the charity has provided help to, or the number of recipients and value of grant awards. This could also be better demonstrated by the use of graphs rather than tables of raw data.
The best annual reports pay as much attention to non-financial data as they do financial data and make the appropriate links and connections between the two. A more ‘human’ angle could involve providing case studies involving the people that have been supported including good quality photographs of some of the individuals involved.
As well as providing statistics, it is crucial that the impact of the services provided is demonstrated. Claims you make about the impact you have made should be backed up by supportive evidence. For example, ‘as a result of the training provided, 154 individuals have now secured full time employment’.
Volunteers - You should include in detail the impact that volunteers have on the outcomes of the charity. This could include a view from one or more volunteers as well as estimating the monetary value of the benefits they have provided.
Plans for future periods - How will this year’s activities translate into the plans for future years? How will funding be affected by future plans? What other challenges lie ahead for the charity and how does the charity plan to overcome them?
As well as thinking about the content of the report you should also think about how it may be published. Whilst it may be necessary to include a “hard copy” report as part of your financial statements you may also require this to be available on your website, which provides further opportunity for interactive elements such as links to videos. In addition, consider whether this allows for the report to be optimised for tablets and mobile phones.
Whilst it is important to tell a story, it is equally important to ensure that your trustees’ report is compliant. In 2019 the Charity Commission criticised the quality of audited charity accounts, stating that only half of the accounts reviewed met their external scrutiny requirements.
Every charity is required to compile a Trustees’ Annual Report for inclusion with their accounts for submission to the Charity Commission, and if the charity is a limited by guarantee company, to the Registrar of Companies.
Improving your Trustees’ Annual Report
Charity Newsletter | February 2020
Charity Commission warns of fraudsters impersonating staff
The Commission said it has received a number of reports from charities who have been targeted by fraudsters impersonating members of staff, specifically attempting to change employees’ bank details. In all these cases the request was made through an email.
It is advising charities to look out for signs of fraud, including requests to HR departments, finance departments or staff with authority to update employees bank details, usually from a spoofed or similar email address to that of the subject being impersonated.
The Commission warned that fraudsters often state they have changed their bank details or opened new bank accounts.
The alert offers protection and prevention advice, suggesting charities should review their procedures for amending and approving employee details, particularly in relation to verifying if such requests are genuine. In addition, if an email is unexpected or unusual, then links or attachments should not be clicked.
It warns that email addresses can be spoofed to appear as though an email is from someone you know so it is important to check email addresses and telephone numbers when changes are requested and if in doubt, request clarification from an alternatively sourced email address or phone number.
The Commission said charities should always shred confidential documents before throwing them away and warned that fraudsters can use sensitive information that has been posted publicly on the internet to attempt to carry out a fraud.
Alan Bryce, head of development, counter fraud and cyber crime at the Commission, said: “We know several charities have been targeted by this fraud and we want to ensure others are equipped to protect themselves.
“So our message to charities is clear: read and understand our guidance on fraud, and check who’s sending an email whenever you receive a message about changes to staff bank details.”
The Commission states that any charities affected by fraud should report it to the police through Action Fraud – www.actionfraud.police.uk – and to the Commission as a serious incident.
The Charity Commission has issued an alert to charities warning of fraudsters targeting the sector.*
*Source: Gov.uk
Whilst the information is believed to be true, the communication may not be comprehensive and recipients should not act upon it without seeking professional advice.
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Charity Newsletter | February 2020