Bates Wells Briefing for Charities and Social Enterprises | 12 September 2017

Bates Wells Highlights

Charities, Social Enterprise

After a long wait, Parliament has begun the process for approving the necessary regulations to allow companies to convert to Charitable Incorporated Organisations.  See today’s Briefing for details.

In our latest blog, BWB’s Lindsay Draffan highlights why charities need to think about competition law.

At a glance

The Fundraising Regulator has started issuing letters and invoices for Year 2 of the Fundraising Levy.

The Department of Health and Public Health England are inviting applications to set up a new social prescribing scheme or to support the expansion of an existing scheme.

A reminder, the HCA (Homes and Communities Agency) is introducing fees for social housing regulation from 1 October 2017.

The Government has established an independent review of full time social action in the UK.

The Office of the Scottish Charity Regulator has opened a consultation on its draft fundraising guidance.

Charity Commission

New inquiries

The Commission has announced that it has opened statutory inquiries into two religious charities which have repeatedly failed to file their accounts on time:

  • Chabad Lubavitch UK (227638) is a charity for the advancement and promotion of the Jewish religion and Jewish education. The charity is currently in default of its annual accounting obligations, having failed to file its return which was due by 31 October 2016. The charity has failed to file its accounting documents on time for five consecutive years – filing at least 300 days late for the past 4 years – and the Commission has said that the trustee has demonstrated a repeated pattern of behaviour and continuing evidence of mismanagement in the administration of the charity. The Commission has issued an order under section 84 of the Charities Act 2011 directing the charity to submit the outstanding accounting information. It has also directed the charity to undertake a review, and implement changes to ensure that the charity fully complies with its legal obligations in the future for the preparation and submission of annual accounts and returns.
  • Kingdom Life Ministries (1109664) is a charity whose objects include providing a place of worship for those of Christian faith and to encourage and promote education. Last year, the charity was included in the class inquiry which was opened by the Commission to examine charities that had repeatedly defaulted on their accounting obligations. The charity submitted the outstanding documents to the Commission in April 2017 and ceased to be a part of the class inquiry. However, the Commission has said that, despite receiving regulatory advice and being repeatedly reminded to meet their legal duties, the trustees again failed to file the statutory accounting information for financial year ending 2016 on time. The trustees have failed to file their accounting documents on time for three consecutive years, and the Commission has said that they have shown repeated evidence of mismanagement in the administration of the charity and that, having been provided with regulatory advice and guidance, it is of serious regulatory concern to the Commission that the charity has continued to default on its statutory duties.

Mike Ashley has been reappointed as a Board Member of the Charity Commission, for 1 year from 1 November 2017 to 31 October 2018.

Conversions of companies to Charitable Incorporated Organisations (CIO)

After a long wait, Parliament has begun the process for approving the necessary regulations to allow companies to convert to Charitable Incorporated Organisations.  The process requires Parliamentary approval of two sets of regulations: 

Government is currently proposing an implementation date of 1 Jan 2018 though, a timetable allowing conversions on a phased basis is also expected.


This is a helpful Civil Society Media article flagging various Government initiatives in the coming months which will impact on charities.


Great Repeal Bill

MPs debated the European Union (Withdrawal) Bill 2017-19 during day 1 of the Second Reading in the House of Commons on 7 September 2017. The Bill is returning for day 2 of its Second Reading today 11 September.  The full debate and transcripts can be accessed here.

Dispute resolution

The Government has released a position paper revealing its opening gambit in relation to the negotiations on dispute resolution between the UK and EU and the role of the Court of Justice of the European Union (CJEU) after Brexit. The paper states that the Government’s commitment to “taking back control” of the UK’s laws and “ending the jurisdiction” of the CJEU is a reference to an end to the CJEU’s direct jurisdiction in the UK.

Third Sector reports that charity leaders have said that the charity sector is failing to connect with MPs and needs to adjust to a more unstable political environment with a greater focus on the short term and on Brexit.


Fundraising levy

The Fundraising Regulator has started issuing letters and invoices for Year 2 of the Fundraising Levy. More information, including a timetable and list of frequently asked questions can be found here. A copy of the letter being sent out for Levy Year 2 can be found here. The levy is still based on figures from charities’ annual returns for the year ended 31 December 2014

Fundraising Preference Service

According to the FR’s September Newsletter, the latest statistics, taken as of the 31st August, are as follows:

  • Total number of suppressions: 7145 (includes 6182 across all direct marketing channels) 
  • Total individual registrations:   3718 (includes 1206 registrations on behalf of someone else).


Higher education

In a speech last week at the Universities UK annual conference, Universities Minister Jo Johnson unveiled a series of new measures designed to curb Vice Chancellor pay. He said he will instruct the new Office for Students (OfS) to:

  • insist all universities justify any Vice Chancellor pay over £150,000 as part of their condition of registration. If an institution fails to do so, then the OfS could use its powers to address this, including imposing fines 
  • issue new guidance on university senior staff pay, including on the role and independence of pay committees – to help universities understand the new rules
  • require providers to publish details of all senior staff earning over £100,000 per year, to ensure transparency across the sector.

Children’s services

The Department for Education has issued directions to the London Borough of Croydon Council in respect of its children’s social care functions and has appointed a Children’s Services Commissioner to review and oversee its compliance with these.  This follows a July 2017 OFSTED report that the council’s children’s social care services were “inadequate”.

Health and social care

The Department of Health and Public Health England are inviting applications to set up a new social prescribing scheme or to support the expansion of an existing scheme.

New Philanthropy Capital has published some research about how organisations can use their funding to tackle loneliness in older people.


As you probably know, the HCA (Homes and Communities Agency) is introducing fees for social housing regulation from 1 October 2017.  In preparation for this, the HCA has now published fees guidance for registered providers and will be issuing invoices this month. The new fees regime will include:

  • a one-off flat-rate registration fee of £2,500 for successful registration with the regulator
  • a fixed annual fee of £300 for providers with fewer than 1,000 social housing units
  • an annual per unit fee for large providers with 1,000 or more social housing units, for 2017/18 this will be £4.72

BWB, in partnership with the Social Stock Exchange, are hosting an interactive panel session on 8th November which will explore the social challenges arising from the current housing crisis and discuss the ways we can collectively contribute to the financing, construction and efficient operation of the homes we so desperately need. Click here for more information and to book your place.

Social finance

Social Investment Tax Relief (SITR) – Finance Bill 2017

The second Finance Bill of 2017 was published on Friday 8th September 2017 (the Bill). The Bill contains provisions for various venture capital tax reliefs which were disregarded prior to the General Election and is due for a second reading in the House of Commons on 12th September 2017.

Amongst others, it includes various changes to the social impact tax relief scheme (SITR) which will, from the date on which the Bill actually comes in to force, apply retrospectively from 6th April 2017. For example:  

  • the total investment a social enterprise can raise through SITR during a 3 year period increases to £1.5 million, provided the social enterprise is less than 7 years old
  • specific activities will no longer be SITR qualifying, these include trades such as on-lending to other social enterprises and asset leasing
  • investments in to nursing homes and residential care homes will be excluded, though the Government may introduce an accreditation system to allow such investments to qualify for SITR
  • a financial health requirement will apply to a social enterprise raising funds under SITR which will be that it is “not in difficulty…for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02)
  • the limitation on the number of full-time equivalent employees of the social enterprise concerned will be reduced to 250 from 500

There are various exclusions to be mindful of too, for example SITR relief will not be available in circumstances where:

  • an investor already holds an investment in the social enterprise, unless that investment is SITR qualifying
  • there is an arrangement in place, the main purpose of which is to deliver a benefit to a party connected to the social enterprise
  • any other “disqualifying arrangements” exist

You can track the progress of the Bill at the Parliament’s website and the timetable here. See also the explanatory notes to the Bill here.

For clarity, the enactment process of the Bill is likely to involve passage through parliamentary committee where it may be subject to amendment. It will then proceed to the House of Lords for scrutiny and following further approval there would be cleared for Royal Assent.

Third Sector reports on the set up of the world’s first ‘humanitarian impact bond’ by The International Committee of the Red Cross. The new bond will help build and run three physical rehabilitation centres in Nigeria, Mali and the Democratic Republic of the Congo. The UK government is one of five “outcome funders” that will pay the ICRC if the scheme performs.

Civil Society shares details of the National Audit Office’s investigation which has found that HM Treasury and the Ministry of Defence do not know if the recipients of Libor funding spent the money as intended. Of the £592m distributed through grants, two-thirds came about through direct requests for money, while millions of pounds have still not been dispersed.

Writing for the Huffington Post, Cliff Prior (Chief Executive of Big Society Capital) reveals that Big Society Capital and its co-investors have committed a billion pounds of social investment to the sector. Over half of this is already drawn down and is being used at the front line. According to Cliff, this is just the beginning. 

Faith based organisations

See under Business rates below.


The Government has established an independent review of full time social action in the UK. The Review is chaired by Steve Holliday who, with a panel of experts, will make recommendations to Government by the end of December 2017. The Government currently defines social action as practical action in the service of others to create positive change; this includes fundraising, supporting charities, tutoring and mentoring, supporting other people and campaigning. The Government further defines ‘full time’ as, on average, at least 16 hours a week of social action activities for 6 months or more. The consultation will look at the opportunities available and the current status of full-time volunteers. The responses from the consultation will inform an independent review into what the voluntary sector, industry, and government can do to support full-time volunteering. The consultation closes on 13 October 2017.

Campaigning and elections

The Minister for the Constitution has launched a Call for Evidence, asking for views on how people with disabilities experience registering to vote and voting itself.  The deadline for comments is 14 November 2017.

Data protection

The latest blog from the Information Commissioner’s Office challenges a few of the myths that have sprung up around GDPR and data breach reporting.

Business rates

In Hughes (VO) v York Museums and Gallery Trust (Rev 1) [2017] UKUT 200 (LC), the Upper Tribunal (Lands Chamber) has considered a business rates appeal for a historic property. The property comprised a number of elements, including a museum, abbey ruins and a building known as the Hospitium. These elements formed one historic landscape enclosed within the same walled gardens (former abbey) although the Hospitium was not open to the public but could be rented for private events.  The appeal considered a number of issues, including whether the Hospitium’s use meant that it should be rated separately from the rest of the former abbey.  The Upper Tribunal concluded that while the difference in use between the Hospitium and the rest of the former abbey might indicate that each part should be treated distinctly for business rates purposes, this was outweighed by the spatial, visual and historic relationship between the two, and the former abbey should be listed as one property for rating purposes.


The Office of the Scottish Charity Regulator (OSCR) has opened a consultation on its draft fundraising guidance, for details see here.

OSCR has published a new factsheet about fraud and cybercrime.


Disclaimer – The information contained in this update is not intended to be a comprehensive update – it is our selection of the website announcements made in the week up to last Friday which we think will be of interest to charities and social enterprises. The content is necessarily of a general nature – specific advice should always be sought for specific situations.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of September 12, 2017.