With the snowfall this month, you could be forgiven for thinking it was December, but with the end of March on the horizon and the whiff of the possibility of Spring as the daffodils flower, there is plenty for charities to be considering.
The 2023 annual returns are raising their head but with a new hat on as the form and process for submission has changed. There is also plenty more news on the financial side, with the HMRC’s new anti-tax avoidance scheme, funds being released from dormant assets, a news story bringing restricted funds into focus and changes to auto-enrolment pensions in the pipeline.
Away from finances, news about The Science Museum has raised questions about gag clauses and the ability of charities to enter into public debates. On a related note, the Charity Commission’s consultation on social media guidance has drawn to a close with more media interest than anticipated because of the Gary Lineker/BBC spat.
As always, if you have any questions or would like to see a particular focus in next month’s newsletter, please do let us know.
Annual returns 2023
With 31 March marking the end of the financial year for many charities, it is time to start thinking about the charity annual return 2023. The annual return needs to be submitted to the Charity Commission within ten months of the end of the financial year and, especially if your charity has income over £25,000, there are quite a few documents to get together. There also some changes from last year. The 2023 annual return includes new questions. Charities are also expected to submit their 2023 annual return, and all future annual returns, using the annual return filing portal via the new My Charity Commission Account platform that is due to launch in spring 2023.
What you need to provide varies depending on your charity’s income and whether it is a charitable company, an unincorporated organisation, or a charitable incorporated organisation (CIO). For further information about what you need to submit, visit prepare a charity annual return.
The Charity Commission has also produced a useful guide and glossary on what is included in the 2023 annual return.
HMRC’s campaign, Tax avoidance – don’t get caught out
HMRC are reaching out to charities as part of its new campaign to combat tax avoidance. Charities that use contractors (as opposed to having/as well as having employees) are encouraged to help their contractors understand the risks for the charity of them using tax avoidance schemes i.e., that the charity might face an unexpected tax bill. As part of the campaign, HMRC are providing tools to educate contractors about checking what they are being paid, what tax avoidance is and how to recognise it.
If you have concerns about recognising tax avoidance, and particularly if your charity uses contractors, please feel free to speak to a member of the charities team or your usual Anthony Collins contact.
Funds being released to charities from dormant assets
It has been reported that the Government is releasing £31m of dormant assets to charities and social enterprises. Dormant assets are financial products, such as bank accounts, which have not been used for many years and for which the owner cannot be found. These assets can be redistributed to support social and environmental initiatives through the Dormant Asset Scheme via investors such as The National Lottery Community Fund. The £31m for charities and social enterprises is being distributed by social investors Access and Big Society Capital.
Following a public consultation on dormant assets, the Government has also announced that community wealth funds will be able to access the scheme in the future. Community wealth funds are planned to be pots of money available for communities in deprived areas, with local residents deciding how the money is used. The Government has said it will launch a public consultation for public and industry views on how to design the community wealth funds. The scheme can also provide funds directly to individuals in financial difficulty, for example, through no-interest loans distributed by Fair4All Finance.
For further information about the scheme –
Millions released from dormant accounts to support vulnerable people with cost of living
The Dormant Assets Scheme
A cautionary tale about restricted funds
Restricted funds are gifts, grants or other assets given to a charity with binding conditions on how the assets can be used. Third Sector has reported that the international health charity Merlin has been trying to deal with its restricted funds in its merger with Save the Children and that Merlin had struggled with liquidity because of assets being tied up in such funds. This is a helpful reminder for charities to check whether their funding is restricted and to consider restricted funds if contemplating a merger.
If you require any advice in relation to restricted funds, please do get in touch with Esther Campsall or your usual Anthony Collins contact.
Changes to auto-enrolment pensions
The Government has announced planned extensions to auto-enrolment pensions. As explained in Doug Mullen’s recent blog post, under a bill which is currently going through parliament, workers will be enrolled from age 18 rather than 22 and the Government will be able to increase the amount of earnings on which pension contributions are payable by lowering or removing the earnings threshold for contributions. Reducing the threshold would mean contributions are payable on a larger proportion of earnings and may be payable for part-time workers.
It is not clear when each part of the bill will come into force or the exact form these changes will take. However, these changes may mean larger pension contributions. With the high cost of living, it is possible that some workers may opt out of auto-enrolment schemes because they cannot afford the employee contributions, but nevertheless employers may want to budget for higher contributions going forwards.
For advice about auto-enrolment pension schemes, please contact Doug Mullen.
Public statements and gag clauses
Following criticism about gag clauses attached to their donations from oil and gas companies, the Science Museum has announced that it will remove such clauses going forwards. Gag clauses are clauses which prevent charities from making statements which could damage the reputation of the donor. As discussed in Natalie Barbosa’s recent blog post, gag clauses can prevent charities from being able to join in on public debates for fear of damaging their donors’ reputations. Charities may already be reluctant to speak out in light of the social media guidance published by the Charity Commission (see our monthly round-up February 2023).
Charities have a crucial role to play in public debates. If you have any questions or concerns about public statements, or about gag clauses in your donation agreements, please contact Natalie Barbosa or another member of the charities team.
Social media guidance
As reported in our February monthly round-up, the Charity Commission consultation on its new draft guidance on the use of social media closed on 14 March 2023. The consultation was open to charities, trustees, representative bodies and the public. See Natalie Barbosa’s recent blog post. In light of the consultation, we will cover any updates to the guidance in future editions of our charities monthly round-up.
Jeremy Hunt’s first budget as chancellor contained a few points of interest for charities. The most eye-catching is the announcement of £100m of funding for charities. It is expected that about £75m of this will go towards charities providing emergency support for those in the cost-of-living crisis. Around £25m will be available for those in the voluntary, community and social enterprise sectors to spend on energy efficiency. An extra £10m will also go towards charities addressing suicide over the next two years and the funding to nurseries for free hours offers will increase by £204m in September 2023.
On the tax side, the charitable tax reliefs for charities based in the EU and EEA will be phased-out from 15 March 2023. Also, the social investment tax relief scheme, which provided tax relief for certain investments in charities, community interest companies, community benefit societies and social impact contractors’ companies, will be expiring next month (April 2023). However, the community investment tax relief scheme will be expanded, such that Community Development Finance Institutions will be able to increase their lending.
Other tax points to note are that the tax relief for theatres, orchestras, museums and galleries will remain at its higher rate of 45-50% until 1 April 2025 and the Government has announced a call for evidence about extending VAT relief for the installation of energy-saving materials in buildings which are only used for relevant charitable purposes.
For more information
For more information or advice on the topics raised in this month’s newsletter, please contact Edwina Turner. Edwina leads our charity governance work and she specialises in advising charities on compliance issues, mergers, joint ventures and restructures. She currently acts as interim manager for three charities having been appointed to those roles by the Charity Commission.