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Charities Alert

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Using deep sector expertise, we have gathered some of the most important updates that you need to be aware of.

Updated January 2024

If you are involved in the charity sector, it is vital to remain up-to-date with the various requirements that may impact you and your organisation. We cover guidance on governance, compliance, financial reporting and taxation.


Changes to Scottish charity law

The Charities (Regulation and Administration) (Scotland) Bill received Royal Assent on 9 August 2023 (the “2023 Act”).

The Act is intended to strengthen and update current law by increasing the powers available to the Office of the Scottish Charity Regulator (‘OSCR’) and provide consistency with certain elements of charity regulation in England, Wales and Ireland.

The key changes include:

  • OSCR will be required to publish additional information on the public Scottish Charity Register, including:
    • the names of trustees
    • unredacted annual accounts
    • a list of individuals barred from acting as trustees
  • a widening of OSCR’s inquiry powers, to include organisations which are no longer charities and former trustees
  • the creation of a register of merged charities (similar in purpose to the register maintained by the Charity Commission for England & Wales)

Further details on the changes can be found on the OSCR website here:

The Charities Act 2022: Implementation

The Charities Act 2022 (the Act) received Royal Assent on 24 February 2022 and brings into force several key changes to the Charities Act 2011, aimed at simplifying a number of processes.

The Charity Commission are currently working through implementing the various changes brought about by the legislation, and have set out an indicative timetable here:

Other provisions of the Act in force from 31 October 2022

  • Section 5: Orders under section 73 of the Charities Act 2011
  • Section 8: Power of the court and the Commission to make schemes
  • Section 32: Trustee of charitable trust: status as a trust corporation
  • Section 36: Costs incurred in relation to Tribunal proceedings etc
  • Part of Section 37: Public notice as regards Commission orders etc.
  • Part of Section 40 and Schedule 2: Minor and consequential amendments

Other provisions of the Act in force from 14 June 2023

  • Sections 9-14 and 35a: Permanent endowment
  • Sections 17-23: Charity land
  • Sections 25-28: Charity names
  • Sections 38 and 39: Connected persons

Provisions of the Act expected to come into force Autumn 2023

  • Section 1-3: Charity constitutions
  • Sections 18 and 23: Charity land
  • Section 24 and Sch 1: Amendments of the Universities and College Estates Act 1925(*)
  • Section 29: Powers relating to appointments of trustees
  • Section 31: Remuneration etc of charity trustees etc
  • Sections 33-35: Charity mergers
  • Section 37: For remaining purposes
  • Section 40 and Schedule 2: For remaining purposes

The key provisions of the Act that have been implemented to date are set out below, and further information can be found here:

Failed appeals

The Act introduces new rules granting the power for trustees to apply cy-près, allowing charities more flexibility in response to a charity appeal that has failed, allowing donations to be applied for another charitable purpose rather than having to be returned to donors under certain conditions:

  1. The donation is a single gift of £120 or less, and the Trustees reasonably believe that during the financial year the total amount received from the donor for the specific charitable purpose is £120 or less (unless the donor states in writing that the gift must be returned if the charitable purposes fail); or
  2. The donor, after all agreed actions have been taken, cannot be identified or found; or
  3. The donor cannot be identified (for example cash collections)

The Charity Commission published guidance in relation to failed appeals on 31 October 2022, which can be found here:

The Charity Commission has also updated its guidance CC20 ‘Charity fundraising: a guide to trustee duties’ to reflect these changes.

The Fundraising Regulator has also published guidance, further details of which are provided below.

Payments to Trustees for providing goods to the charity

The Charities Act 2011 provided a statutory power for charities, in certain circumstances, to pay trustees for providing a service to a charity beyond usual trustee duties.

The Act extends this power to allow, in certain circumstances for payments to trustees for providing goods to the charity.

Updated guidance can be found here:

The Charity Commission has also updated its guidance CC29 ‘Conflicts of interest: a guide for charity trustees’ and CC11 ‘Trustee expenses and payments’ to reflect these changes.

Power to amend Royal Charters

Royal Charter charities are able to use a new statutory power to change sections in their Royal Charter which they cannot currently change, if that change is approved by the Privy Council.

Updated guidance can be found here:

Trust and confidence in charities

The Charity Commission has published the latest annual report into public trust in charities, the report shows that although public trust has risen the increase is small though the situation appears more stable than previous years. There is still a divide in the perception of charities when it comes to size, with smaller charities faring better than larger organisations. The research includes interviews with members of the public from various demographics, and reveals that half of the population are aware of the Charity Commission.

The full report can be found here Public trust in charities 2023 - GOV.UK (

Defined Benefit Funding Code of Practice

The Pensions Regulator (TPR) is currently analysing responses to its second consultation on the new Defined Benefit (DB) funding code of practice. The new Code includes a requirement for a ‘funding and investment strategy’ (FIS) where trustees will be required to articulate their approach and decisions on funding and investments. Trustees must prepare a written statement of strategy which records the FIS and supplementary details, is signed on the trustees’ behalf by their chairperson, and submitted to TPR with each triennial valuation.

Under the proposals, TPR sets out a “twin-track” model where trustees will be able to choose either a prescriptive “Fast Track” option or a more flexible “Bespoke” approach to completing and submitting an actuarial valuation for TPRs assessment. The proposed requirements for the fast track route include a number of areas such as suitable long-term objectives for schemes to achieve low dependency by the time a scheme is significantly mature (measured as 12-year duration) and discount rates of gilts plus 0.5% p.a. The fast track does not explicitly take account of covenant strength. TPR plans to consult separately on proposed changes to covenant guidance.

The code is now expected to come into force in April 2024, rather than 1 October 2023.Details of the consultation can be accessed via TPRs website:

The Future Charity Chair

Crowe are pleased to be involved in a new research project looking at the essential attributes that charity Chairs of the future will need to embrace. This research will explore the topic through roundtable discussions and in-depth interviews, with a thought leadership report due in Spring/Summer 2024.

The research aims to:

  • Contribute ideas that will help to shape the future development and recruitment of charity Chairs.
  • Enhance the future sustainability of the charity sector by highlighting longer term considerations for Board discussion.
  • Provide fresh thinking to positively influence regulation and best practice guidance for the sector.
  • Emphasise the value of good charity governance and the need for it to continually evolve to remain relevant.

The future charity chair | Bayes Business School (

Investing Charity Money
CC14 has been updated, it is now called Investing Charity Money, and takes account of the High Court Judgement on the Butler Sloss case.

CC14 states that all charities should have a written investment policy if their governing document requires they have one or if the charity is a trust and where it gives an investment manager powers to make decisions on its behalf. It includes:

  • Examples of various issues which may be relevant for trustees to consider when making investment decisions, such as the potential for an investment to conflict with the purposes of the charity, or the reputational impact of an investment decision.
  • Steps trustees ‘must’ take to be compliant with the law and those trustees ‘should’ do as best practice but not legally required.
  • Explanations on acting in the best interests of a charity, ensuring that above all else any decision furthers its purposes.
  • Guidance on social investment and no longer uses terminology that could get in the way of trustees’ understanding, such as ‘ethical investment’, ‘mixed motive investment’ and ‘programme related investment’.

It also provides example approaches to financial returns including avoiding those investments which can reduce support for a charity and harm its reputation, and is more specific on ESG factors:

  • aiming only for the best financial return you can achieve, within the level of risk that you have decided is acceptable for your charity
  • alongside the financial return you are aiming for, avoiding investments that conflict with your charity’s purposes.
  • alongside the financial return you are aiming for, avoiding investments that could reduce support for your charity or harm its reputation, particularly amongst its supporters or beneficiaries.
  • alongside the financial return you are aiming for, avoiding or making investments in companies because of their practice on environmental, social and governance (ESG) factors
  • alongside the financial return you are aiming for, using your shareholder vote, or other opportunities that come with your investment, to influence practice at companies that your charity is invested in.

Investing charity money: guidance for trustees (CC14) - GOV.UK (

Guidance on hybrid working by ACAS

ACAS published guidance for employers on hybrid working, following the extended period of remote working as a result of the coronavirus pandemic.

The guidance is broken down into the following five sections:

  • Considering hybrid working for your organisation
  • Consulting and preparing to introduce hybrid working
  • Creating a hybrid working policy
  • Treating staff fairly in hybrid working 
  • Supporting and managing staff in hybrid working

The guidance also considers other legal matters that employers should consider, including data and privacy issues, health and safety issues and working time requirements.

The guidance can be found here.

Charity Commission: Consultation on charity use of social media
On 18 September 2023 the Charity Commission published guidance for charities on their use of social media, following a consultation carried out earlier in 2023.

A knowledge gap was identified through the Charity Commission’s casework where trustees were not always aware of the risks that may arise from the use of social media, meaning that some do not have sufficient oversight of their charity’s activity, leaving them and their charity vulnerable.

The aim of the guidance is to help trustees improve their understanding in this area, and to encourage charities to adopt a policy on social media as a way to set their charity’s approach. The guidance does not introduce new trustee duties but seeks to make clear how existing duties are relevant to a charity’s use of social media.

The guidance sets out that social media use can raise issues and risks for charities, relating to problematic content:

  • posted or shared by the charity on its own social media channels
  • posted by the public or third parties on a charity’s social media channel
  • posted on a personal social media account that can be reasonably associated with the charity

The new guidance is clear that charities using social media should have a social media policy in place, explaining how it will help deliver the charity’s purpose, include guidelines for expected conduct and should ensure the policy is followed.

The guidance contains a checklist to help trustees and senior employees have informed conversations on what the right policy for them looks like.

The updated guidance can be found here:

Charity Commission: Manage financial difficulties in your charity arising from the cost of living pressures

In December 2022 the Charity Commission published additional guidance “Manage financial difficulties in your charity arising from cost-of-living pressures”, recognising that many charities are facing difficult circumstances as a result of rapidly increasing costs.

At the same time, some charities are also experiencing an increase in demand, particularly those providing services to people in need, further compounded by donors also suffering from similar issues leading to reduced income.

The guidance reminds trustees of their responsibilities in providing effective financial stewardship and ensuring that any decisions made are in the best interest of the charity. The key is the evaluation of the charity’s financial position and robust and regular reviews of the cashflow forecasts. This will help ensure the charity is able to continue carrying out its charitable activities, identifying any potential shortfalls and enabling actions to be taken in a timely manner.

The guidance can be obtained here:

Charity Commission: Internal financial controls for charities 

In April 2023 the Charity Commission published updated guidance “Internal financial controls for charities (CC8)”

The guidance has been updated to reflect changes in legislation and practise across the sector, including new areas such as mobile payment systems (e.g. Apple Pay) and donations of crypto assets. Existing guidance has also been refreshed in areas such as payments to related parties and operating internationally.

An updated checklist is also included in the guidance to allow charities to assess themselves against the new guidance.

The guidance can be obtained here:

Economic Crime and Corporate Transparency Bill
The Economic Crime and Corporate Transparency Bill (‘the Bill’) represents the second element of the Government reforms aimed at preventing the abuse of corporates structures The first element, The Economic Crime (Transparency and Enforcement) Act, received Royal Assent in March 2022.

The Bill introduces new measures aimed at strengthening anti-money laundering regulations and enhancing corporate transparency. These measures apply to all large corporate bodies and partnerships, including not for profit organisations incorporated as a company or CIO. There are also changes to Companies House procedures to assist in identifying and preventing economic crime.

A key introduction is a new ‘failure to prevent fraud offense’, which places a requirement on companies to ensure that they have reasonable procedures in place to prevent fraud. It should be noted that the legislation does not include fraud carried out for personal gain. A company found guilty of failure to prevent fraud under the proposed legislation would be liable to an unlimited fine.

The Bill is currently undergoing its third reading at the House of Lords, and the latest version of the bill can be found here. Practical guidance is expected to be issued by the Government once the Bill receives Royal Assent.

Compliance and other regulatory matters

Charities and campaigning 
With the UK due to hold a general election by January 2025 at the latest, there presents an opportunity for charities to raise awareness and shape policy decisions.

The majority of charity campaigning does not fall under election law rules, however, care must be taken when campaigning that the charity does not stray into election campaigning and remains independent from party politics.

Various guidance is available from the Charity Commission to charities to assist in assessing the risks to the charity:

The guidance emphasises the need for any campaigning to be carefully considered by the Trustees, particularly in respect to the risks, costs and benefits of any such activity.

Charities will be required to register with the Electoral Commission as non-party campaigners if they spend more than £10,000 on regulated campaign activities and may be required to provide financial returns after the election.

The Electoral Commission has produced guidance to support organisations which can be found here.

The Charity Commission have urged charities to ensure that they have read and understood the Code of Practice for non-party campaigners which has also been produced and can be found here.

Holiday entitlements – where are we now?
In July 2022 the Supreme Court’s judgement in Harper Trust v Brazel made headlines. In response to a strong reaction from industry, the government opened a consultation exercise to review the apparent disparity and determine how to formulate a better method of calculation.

Following the consultation the government have made revisions to the Working Time Regulations (WTR) that address the confusion caused by recent cases such as Harper Trust.

Key Takeways

The revisions to the WTR should be welcome news for most employers, although in some areas they lack detail – such as a lack of definition around normal earnings for the calculation of holiday pay.

Employers of irregular and part year workers will be eager to adapt their processes to accommodate ‘accrue as you go’ and rolled up holiday pay.

For some employers it will be the much-needed spur to start and correctly calculate holiday pay and for others a need to evaluate the true status of their self-employed contractors.

However, for almost all employers there will be a need to look at policies and procedures to ensure that they align with the new rules on holiday carry over and ensure that ‘use it or lose it’ prompts are timetabled before the end of the holiday year. The revisions are effective from the 1 January 2024, read our latest guidance here.

Updated guidance on campaigning and political activity 

In November 2022, the Charity Commission published updated guidance on campaigning and political activity for charities (CC9) following the passing of the Elections Act 2022.

Although the basic legal position regarding charity campaigning has not changed, this guidance focuses first on the freedoms and possibilities for charities to campaign, and then on the restrictions and risks that trustees must bear in mind.

As with previous guidance, it also includes guidance on areas of good practice.

The updated guidance can be found here:

Charities and terrorism

The Charity Commission guidance on ‘Charities and Terrorism’, first published in December 2012, was updated in November 2022.

The guidance forms Chapter 1 of the Charity Commissions compliance toolkit, which:

  • provides advice and information on key aspects of the UK’s counter-terrorism legislation
  • highlights how particular provisions are likely to affect charities and their work,
  • explains the various ‘terrorism lists’ that exist
  • advises trustees what to do if they discover their charity may be working with or connected to people or organisations on terrorism lists.

The updated toolkit signposts to new guidance from the Crown Prosecution Service on proscription offences and terrorist financing offences and cases involving humanitarian, development and peacebuilding work overseas.

The updated toolkit can be found here:

Fundraising Regulator: Annual complaints report
In November 2023 the Fundraising Regulator has published its latest Annual Complaints Report which covers the period 1 April 2022 to 31 March 2023. The report analyses complaints received by the Fundraising Regulator and complaints reported to 58 of the UK’s largest fundraising charities.

The number of complaints to the sample charities rose proportionally for most methods in line with increased fundraising activity – with 13 of the 23 fundraising methods having increased complaint numbers in 2021/22 compared to 2020/21. The overall number of complaints had increased since 2021/22 which is reflective of increases in fundraising activity since the pandemic.

Over the same period, complaints about fundraising methods including door to door fundraising (60), charity bags (57) and addressed mail (51) accounted for the majority of the 270 complaints within the Fundraising Regulator's scope. A common theme was that of misleading information, highlighting the importance of clarity in fundraising materials.

You can see the full report here.

Fundraising Regulator: ‘Failed appeals’ guidance

Following the changes introduced by the Charities Act 2022 (‘the Act’), the Fundraising Regulator has also published guidance ‘What to do if you raise more donations than you need, don’t raise enough, or cannot achieve your purpose’.

The guidance includes practical measures that can be taken to avoid triggering the legal requirements of the Act, such as the inclusion of a secondary purpose in appeals literature.

The guidance should be read in conjunction with the guidance issued by the Charity Commission noted above.

The guidance is available here:

Gender pay reporting

Any employer with 250 or more employees on a specific date each year (the ‘snapshot date’) must report their gender pay gap data. For most entities the snapshot date is the 5 April of each year.

You must report and publish your gender pay gap information within a year of your snapshot date. You must do this for every year that you have 250 or more employees on your snapshot date.

Guidance on what and how to report can be found here:

Financial and other reporting

Charity Commission: Guidance on accepting donations

In March 2024, the Charity Commission published new guidance to help charities when deciding whether to accept, refuse or return a donation.

The guidance explains when donations must be refused or returned and when these might likely need to be refused or returned. The guidance makes clear that trustees should start from a position of accepting donations, but from time to time a charity may face a difficult decision as whether to refuse or return a donation. The guidance sets out an approach for trustees to take on these occasions, advising they:

  • consider the risks involved in refusing or returning the donation, and how likely and serious these are. These include negative financial impact, ability to deliver services and ability to attract donations in future
  • consider the risks involved in accepting or keeping the donation, and how likely and serious these are. These include the likelihood of reduced support or reputational harm, particularly among supporters or beneficiaries
  • determine how any decision aligns with their charity’s purposes
  • determine what steps they can take to mitigate the risks. These include negotiating the terms of a conditional donation with the donor or developing a public explanation for a decision

It explains that if a charity is considering refusing or returning a donation, the charity must have the legal power to refuse or return a donation. In some situations, there are additional legal rules to consider e.g. disposal or land or properties of a special trust.

The charity should also consider whether it needs to make a SIR when it refuses or returns a donation.

Ultimately, as the guidance states: “Deciding whether to accept, refuse or return a donation is likely to involve a careful balancing exercise. There may be no right or wrong answer, but your decision must be rational and reasonable, and supported by clear evidence.”

The full guidance can be obtained here: 

Amendments to FRS102

The Financial Reporting Council (FRC) issued amendments to financial reporting standards on 27 March 2024, the changes are mostly effective for accounting periods beginning or after 1 January 2026. This follows the consultation impact assessment during 2023.

The amendments include:

  • a new model of revenue recognition in FRS 102 and FRS 105 based on the IFRS 15 five-step model for revenue recognition with appropriate simplifications;
  • a new model of lease accounting in FRS 102 based on IFRS 16 on-balance sheet model (again with appropriate simplifications); and 
  • various other incremental improvements and clarifications.

The FRC intends to publish new editions of the standards and updated staff factsheets with guidance during 2024, they will also host a webinar to discuss the new standards at 11am on 15 May 2024.

You can find the full amendments here.

We will be reviewing the final FRS102 and sharing further guidance in due course.

Charity Commission: Changes to the Annual Return

In June 2022, the Charity Commission began consulting on a range of changes to its Annual Return, through which it hopes to gather more data about charities. There have not been major changes to the Annual Return since 2018. The Commission has stated its desire to be more data-driven, and the Annual Return feeds many of the Commission’s analyses.

The consultation closed on 1 September 2022, and the Charity Commission published its consultation response on 21 December 2022.

The updated Annual Return includes 17 new questions, several of which are aimed at gathering more in-depth information on charity income streams and the extent of any overseas activities.

New questions in the updated Annual Return include:

  • What was the value of your charity’s single highest value donation received from a corporate donor during the financial period of this return?
  • What was the value of your charity’s single highest value donation received from an individual during the financial period of this return?
  • What was the value of your charity’s single highest value donation received from a related party during the financial period of this return?
  • How was income from outside of the United Kingdom received by your charity in the financial period of this return?
  • Does your charity have formal written agreements in place with any partners delivering charitable activities on its behalf outside of the United Kingdom?

Annex 8 contains a full list of the revised Annual Return questions that are set out in the Charities (Annual Return) Regulations 2022 that came into force on 1 January 2023.

A question guide was published by the Charity Commission in March 2023 to provide additional details on the information being requested and the reason why.

For some charities, the additional questions will require a significant amount of data collection, and we recommend charities obtain the list of questions and begin collating the information required as soon as possible.

The Annual Return needs to be completed by all charities with an annual income of £10,000 plus, within 10 months of the end of their financial year.

Full details of the outcome of the consultation, along with guidance on completing the annual return can be found here:

NCSC publishes “Cyber Threat Report: UK Charity Sector”

NCSC publishes “Cyber Threat Report: UK Charity Sector”

The National Cyber Security Centre has published a report outlining the cyber threats currently facing charities of all sizes.

The 2022 DCMS Cyber Security Breaches Survey, which measures the policies and processes organisations have for cyber security, as well as the impact of breaches and attacks, highlighted 30% of UK charities had identified a cyber-attack in the last 12 months, with 38% of these having an impact on the service.

The report notes that the charity sector is particularly vulnerable as they can hold significant amounts of sensitive or valuable data, making them attractive targets, alongside a perception that charities have fewer resources to commit to cyber security.

The report provides details of the commonly perpetrated cyber-attacks, as well as a few recommendations and links to guidance that assists charities with strengthening their defences.

A copy of the report can be obtained here:

In addition, the Charity Commission has updated its guidance Protect your charity from fraud and cybercrime’ The updated guidance includes a number of links to organisations and resources helping to protect against fraud and cybercrime.

FRC publishes "What makes a good Annual Report and Accounts" 

In December 2022, the FRC published its latest report on the attributes of a good Annual Report and Accounts (‘ARA’) from their perspective as an improvement regulator. It draws on previous FRC publications alongside their day-to-day work.

The report states that A high-quality ARA:

  • complies with relevant accounting standards, laws and regulations, and codes;
  • is responsive to the needs of stakeholders in an accessible way; and
  • demonstrates the corporate reporting principles and effective communication characteristics outlined in this publication.’

Whilst the report is focused on corporate reporting, there are several quick tips and pointers, along with examples, which might be of interest when preparing your Trustees’ Annual Report.

The full report can be found here:

Sustainability Reporting and the Charity SORP 

Sustainability and environmental issues continue to be a high priority for all sectors. The Charity SORP Committee produced a briefing note reflecting on the current approach to sustainability reporting.

The Committee sought to identify whether elements of sustainability reporting should be introduced into the trustees’ annual report and discuss preferred options should this be the case.

The current SORP ask charities to identify the difference their work has made to society as a whole.

The Committee noted that additional support would likely be required to enable charities to comply with additional reporting requirements, and the need to address the scope of the sector. The current requirements are different for large charities, this would need to remain consistent to avoid burdening smaller charities.

The full briefing can be found here.

Our guidance on climate change can be accessed here.

We have recently published a review of annual reports, all including a relevant disclosure, which identified a wide variety in the level of detail provided and the format used. A copy of our report, which includes examples of best practice and areas of improvement can be obtained here.

Guidance on Fundraising Reporting Requirements

The Fundraising Regulator has published new research and updated guidance to support compliance with the fundraising reporting requirements in the Charities (Protection and Social Investment) Act 2016).

The Fundraising Regulator has reviewed the annual reports of almost 200 charities with income over £1 million, to provide a benchmark for the sector and highlight good practice and identify areas for improvement.

The research noted that an increasing number of charities reported on their fundraising approaches and complaints compared to previous years, however only a low proportion of the reports reviewed included a statement on how fundraising carried out on their behalf is monitored or a statement of how they protect the public and vulnerable donors.

The results of the review can be found here:

and the updated guidance can be found here:
Dispelling common myths about charities

ICAEW has published guidance exploring ten myths surrounding charities and their operations and covered.

  • Charities spend too much on fundraising.
  • They should not make a surplus or build up cash reserves.
  • Too much is spent on highly paid executives.
  • They should not undertake commercial activities.
  • Charities should be run and staffed [for free] by volunteers.
  • Too much is spent on overheads.
  • Charities don’t pay taxes, so need less money.
  • Professional qualifications are needed to become a charity trustee.
  • Charities are less vulnerable to fraud than other organisations.
  • Charities should not engage in campaigning and political activity.

The guidance includes access to a webinar discussing some of the key myths with voices from the sector. Dispelling common myths about charities | ICAEW

Charity Digital Skills report

The Charity Digital Skills annual report has been running since 2017 and tracks the sector during a time of significant change due to the impact of the pandemic. As we continue to navigate the cost of living crisis and the impact on the sector, this report aims to shed some light on how the digital capabilities of charities have evolved highlighting key trends. The gaps seen in previous years persist, these include funding and leadership. With the rapid growth in AI development charities must ensure that digital skills remain a priority to avoid being left behind.

Digital Skills Report for the Charity Sector - Introduction (


Consultation: Charity tax compliance

The Government has launched a consultation into several aspects of tax compliance by charities, to consider how to reform some of the tax relief rules that are not working as intended.

The consultation seeks views on several areas, including:

  • preventing donors from obtaining a financial benefit from their donation
  • preventing abuse of the charitable investment rules
  • closing a gap in non-charitable expenditure rules
  • sanctioning charities that do not meet their Filing and Payment Obligations.

It is important that charities have their say and engage with the consultation, to ensure that any decision making can take account of the practical implications for a wide range of organisations across the sector. Crowe is preparing a response to the consultation.

The consultation closes on 20 July 2023, and the response can be submitted by email to [email protected]

The consultation can be found here:

Autumn Statement 2022

The Chancellor’s Autumn Statement 2022 was published in November 2022.

The key measures relevant for charities are set out below. A copy of the full statement can be found here:

National Minimum Wage (NMW) and National Living Wage (NLW)

Following recommendations from the Low Pay Commission, the NLW will increase for individuals aged 23 and over to £10.42 an hour from 1 April 2023.

The NMW increased from 1 April 2023 as follows:

  • for 21-22 year olds to £10.18 an hour
  • for 18-20 year olds to £7.49 an hour
  • for 16-17 year olds to £5.28 an hour
  • the apprentice rate to £5.28 an hour
  • accommodation offset rate to £9.10 an hour.

Income tax additional rate threshold

The income tax additional rate threshold was lowered from £150,000 to £125,140 from 6 April 2023.

Corporation tax rate

The planned increase in the Corporation Tax rate to 25% for companies with over £250,000 in profits will go ahead. Small companies with profits up to £50,000 will continue to pay corporation tax at 19%, with profits between these two figures subject to a tapered rate.

Business Rates: Retail, Hospitality and Leisure Relief

Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24.

Spring Budget 2023

The Spring Budget 2023 was published in March 2023.

The key measures relevant for charities are set out below. A copy of the full statement can be found here:

UK charitable tax reliefs

With effect from 15 March 2023, UK charitable tax reliefs no longer apply to charities and CASCs outside of the UK. Previously the reliefs were extended to cover charities in the EU or the EEA.

Non-UK charities that have previously been accepted for charitable tax reliefs will continue to qualify for these reliefs for a transitional period until 1 April 2024.

Extension of creative industry tax relief higher rates

The temporary increased rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibitions Tax Relief have been extended for a further two years until 1 April 2025. The rates will then taper down before returning to their original levels from 1 April 2026.

Additionally Museums and Galleries Tax Relief, which was due to expire on 31 March 2024, has been extended for a further two years and will now expire on 31 March 2026.

VAT: Changes to Penalty Regime

For VAT accounting periods starting on or after 1 January 2023 there are new penalties for VAT returns that are submitted late and VAT which is paid late, in addition the way interest is charged has also changed. The changes are aimed at simplifying and separating penalties and interest.

The system has changed to a penalty points system, where for each return submitted late, a penalty point is issued. The penalty point threshold is determined by the accounting period, with a higher threshold for more frequent submissions. When the threshold is reached, a penalty of £200 will be issued, with a further £200 penalty for each further late submission.

Penalty points will have a lifetime of two years, after which they will expire. The period is calculated from the month after the month in which the failure occurred, e.g. submission due January 2024, so the penalty point will expire in February 2026.

Once a taxpayer reaches the threshold, all points accrued will be reset to zero when the following conditions are met:

  • a period of compliance
  • the taxpayer has submitted all submissions in the previous two years (even if late).

The new late payment penalty will apply in instances where the return is submitted on time but the payment is not.  This penalty considers the length of the delay in making payment and the penalty increases over time.

As part of the new penalty regime, HMRC has also updated its Late Payment Interest (LPI) rules to bring these in line with other tax regimes.

Full details of the updated regime can be found here:

VAT and charity fundraisers: dual purpose?

UK VAT law allows one-off fundraising events to benefit from applying the VAT exemption to the income generated. It could also zero-rate programmes, children’s clothing, and the sale of donated goods.

The recent Tribunal decision involving the Yorkshire Agricultural Society (YAS) focused on the conditions imposed when applying the fundraising exemption. VAT law states that a charged event cannot qualify for VAT exemption unless its primary purpose is fundraising. HMRC had taken a rigid approach to interpreting this rule, insisting that there can be no other motive behind the event in order to qualify for the exemption. 

This approach has restricted the application of the fundraising exemption from organisations that they consider ‘run such events anyway’ (and so do not meet this fundraising primary purpose test). 

The YAS decision was heavily influenced and referred frequently to the Loughborough decision, which HMRC won. However, in YAS the Tribunal did not read Loughborough as determining that fundraising must be the sole or overriding purpose of an event. This appears to have undermined HMRCs arguments significantly. 

YAS run an annual show which has a dual educational and fundraising purpose. HMRC argued that the event income could not be VAT exempt as the primary intention was not fundraising.  The Tribunal determined that there can be more than one primary purpose in this instance, without undermining the conditions of the exemption.

The Tribunal also agreed with the Upper Tier Tribunal case involving Loughborough Students’ Union (and others) in another important point around the fundraising event rules.  It agreed that the requirement to clearly hold out (advertise) an event as a fundraiser as an exemption condition, was ultra vires of EU VAT Law. 

HMRC sought to argue that its assessment was all made within the relevant time limits but lost on these points also. HMRC are out-of-time if both of the following time limits are exceeded:

  • the VAT period is more than two years old
  • HMRC had the full facts for more than one year.

HMRC argued that they hadn’t been given the full facts until the most recent adviser’s letter, but from the evidence it was clear this merely re-confirmed the full facts already provided. 

Whilst this case does not set a legal precedent as a First Tier decision, it does rely very heavily on the Upper Tribunal decision in Loughborough, which set a legal precedent. It appears to have pushed back the boundaries of HMRCs restrictive approach to charity events qualifying for the fundraising VAT exemption. HMRC must abide by time limits when assessing taxpayers.

Employment Tax: what’s keeping us hot this summer?

In the recent Budget and fiscal events, changes to employment taxes have been relatively low-key, excluding the introduction and repeal of the Health & Social Care Levy and the repeal of the off payroll working rules!

However, we are seeing three key areas which employers are seeking our assistance with:

  • compliance and de-risking
  • cost reduction
  • driving efficiencies.

Compliance and de-risking

Recently, we have seen HMRC increase their programme of performing checks of employer records. This is unsurprising as a Public Accounts Committee report informs that HMRC recovers £18 in income tax/ National Insurance Contributions (NICs) for every £1 spent on compliance activities. This contrasts with the reported £4 return for every £1 spent on the task force recovering Coronavirus Job Retention Scheme (CJRS) claim error or fraud.

The total tax gap (being the difference between the tax HMRC expects to collect and that actually paid) in 2020/21 was £32 billion, and Income Tax/NICs made up £12.7 billion (39%) of the gap. Therefore, it’s not surprising HMRC target employers for potential income tax and NICs irregularities.

To mitigate the risk of undergoing an invasive HMRC check, employers can initiate a self-review and voluntarily disclose any income tax/ NIC irregularities to HMRC.  Voluntary disclosure may be beneficial as it can be viewed as good behaviour by HMRC. Additionally, this can also help protect the employer’s reputation as a “good citizen”, and support ESG considerations.

Cost reduction

The cost-of-living crisis remains a concern for all, including the social purpose and non profit sector.

An effective salary sacrifice arrangement can help both employees and employers, and potentially ease some of the economic pressures. This is a way to provide attractive, ethical, and environmentally responsible benefits to employees at a time when the need to attract and retain key talent is a high priority for employers.

Salary sacrifice is, in simple terms, an arrangement whereby an employee gives up some of their gross pay in return for a non-cash employer provided benefit. Typically, we see salary workplace pension contributions paid via salary sacrifice.

An effective salary sacrifice means that although the employee’s gross pay is lower, their take-home pay increases through NIC savings and tax savings on some benefits. Employers will also save on NICs.

Driving efficiencies

During the pandemic, there was talk about what the ‘new’ normal would look like.

Employers should now take stock of their employment tax processes and procedures, to check that their current ways of working are effective and efficient. Some areas of focus should include:

  • identify areas of robustness and conversely, where improvements could be made
  • maximise available tax exemptions
  • restructure and streamline current processes
  • tighten controls to reduce errors or fraud
  • underpin with sound governance.
VAT rates on new buildings, energy supplies and disabled building works
0%, 5%, or 20%? Navigating the VAT rate for the various activities that your organisation is involved in can be challenging.

Can I get zero-rating on a new charity building?

There is often a common misconception that a new building purchased or built by a charity should automatically be zero-rated.

A recent VAT Tribunal case (Paradise Wildlife Park) has reconfirmed the position that for the building to be zero-rated, the building must be used by the charity in one of the following ways:

  • otherwise than in the course and further of business
  • as a village hall or similarly in providing social or recreational facilities for the local community.

It is important that charities are aware of whether their activities are deemed to be business under the interpretation of VAT law. Only last year, HMRC issued new guidance on what they consider to be in the course and furtherance of business. The tests are easy to meet where the activities undertaken by the charity in the building, are done for free or totally funded by grants and donations.

However, as seen in the Paradise Wildlife Park decision, it is important to note that not charging VAT does not automatically mean that you are not in business.

There is a small 5% threshold for business use in a charitable building but in our experience, many charities acquire or construct a new building which will be used for business purposes exceeding this level and will therefore not qualify for zero-rating.

If the building does qualify for zero-rating, the charity is required to issue a certificate to the supplier of the property who is either selling the building to the charity or constructing it for the charity.

Can I get the reduced rate of 5% on gas and electricity?

A charity can only get the reduced rate of 5% on gas and electricity when it applies to a building that is used by a charity for a ‘qualifying use’.

This means that the reduced rate of 5% is not automatically applied by virtue of charity status.

Although there are various de minimis limits and tests, for the most part the 5% qualifying use applies to gas and electricity used for:

  • buildings used by a charity for a relevant charitable purpose (a non-business use)
  • relevant Residential Properties
  • domestic Properties.

If you have a building that does qualify for the reduced rate and the supplier has been incorrectly charging you VAT at 20%, you can get the VAT incorrectly charged to you amended to the correct 5% for the preceding four years.

Please note there may be buildings owned by a charity which have 'mixed use' of qualifying and non-qualifying areas. These buildings can have the charges apportioned with the 5% VAT levied on the qualifying areas, based upon any fair and reasonable method of calculation. The remaining part will be charged at the full standard rate of 20%. 

If more than 60% qualifies at the reduced rate, the entire building can be invoiced at 5% although the charity has a responsibility to review this situation on a regular basis to ensure the apportionments remain consistent and reflective of how the building is being used.

VAT reliefs on building works and disability

This is not an exhaustive list and takes only part of the VAT law, but all charities are entitled to zero rating on ANY of their buildings in relation to the following building works:

  • Services to facilitate a disabled persons entry to or movement within any building.
  • The supply to a charity for the service of providing, extending, or adapting a washroom or lavatory to use by disabled persons in a building, or any part of a building, used principally by a charity for charitable purposes.

If you have been incorrectly charged 20% VAT by your supplier for building works that should have been zero-rated, you can go back four years and have the VAT incorrectly charged to you refunded.

Charities are not always able to recover VAT in full on costs, therefore it is important to take advantage of VAT rates below the standard 20%. In all the above scenarios it should be noted that the charity is required to issue a certificate to the supplier in order to get the zero or reduced-rate of VAT.

HMRC guidance states that a certificate incorrectly issued could lead to a penalty of up to 100% of the VAT which has not been charged to them. Charities should check their status before claiming the reduced or zero-rates and issuing a certificate to their supplier. If you have been overcharged there is still an opportunity to reclaim the VAT from the supplier.

Contact us

Naziar Hashemi
Naziar Hashemi
Head of Social Purpose and Non Profits