Bates Wells Briefing for Charities & Social Enterprises | 1 March

Bates Wells highlights

Social Enterprise

Social Enterprise UK has published a report “Trading for Good”, aimed at understanding the impact of smaller social enterprises. See today’s Briefing for more details.

Just a reminder to consider whether your organisation is affected by the Charity Commission’s draft guidance for charities that are “connected” with non-charitable organisations. The consultation closes in May – see this BWB Briefing for more details.

At a glance

The Charity Commission has issued a report about the reporting of matters of material significance by auditors.

The Charity Commission and OSCR are inviting comments on 21 proposed amendments to the Charities Statement of Recommended Practice (SORP) following changes in UK-Irish accounting standards.

The Office of Tax Simplification has published a scoping document for its review of inheritance tax.

The Government has announced the new post May 18 charging structure by the Information Commissioner’s Office.

The Government is consulting on options to strengthen consumer redress in the housing market.

Charity Commission

Appointment of Chair

The Government’s choice of candidate for the new Chair of the Charity Commission, Baroness Stowell, has proved controversial. Following her pre-appointment hearing in front of the DCMS Select Committee on 20 February, the Committee sent a letter to Minister Matt Hancock saying that it was unanimous in its view that Baroness Stowell should not be appointed – the first time a DCMS Committee has not supported a Government candidate.

The Government responded that it would go ahead with her appointment, see here. The Parliament.UK website has published the Government’s statement expressing their full backing for Baroness Stowell’s appointment, together with a further response from the Committee requesting a fuller response to their concerns by 12 noon today (Monday 26 Feb), following which the Committee has said it will issue a report setting out its reservations in further detail. The page also contains the link to the recording of the pre-appointment hearing.

In the meantime, in the sector media, Julia Unwin, one of the independent members of the appointments panel, has said that Baroness Stowell was the best candidate though former Charity Commission Chief Executive Andrew Hind had already commented that Baroness Stowell was chosen in preference to at least one candidate with much more relevant experience.

Inquiry report – trustee benefit and trustee liability

The Commission has published its report of an inquiry into a grant-making charity which, unusually, it has not named in the report, following submissions from the charity arguing that its identification in the inquiry report would be severely detrimental to the charity and its beneficiaries. See also the Commission’s press release.

The inquiry was opened after the charity’s newly appointed solicitors contacted the Commission seeking consent for the charity to sell the shares in its non-charitable subsidiary to three former trustees and 2 current trustees and also seeking relief from liability for the current and former trustees in relation to unauthorised payments for services to the three former trustees amounting to approximately £650,000.

The Commission did give consent to the share sale under section 105 and 201 Charities Act 2011, as the trustees could demonstrate that the transaction was expedient and in the best interests of the charity and the inquiry was satisfied that the trustees had taken reasonable steps to obtain the best price for the charity and followed the principles of a properly taken decision in respect of the transaction. However, the Commission was not able to provide relief from liability for the unauthorised benefits to the former trustees, as the payments were prohibited by the terms of the governing document. Following further engagement with the Commission, the current trustees agreed to seek recovery of the payments and the charity has now recovered the unauthorised trustee benefits of approximately £650,000.

Case report

The Commission has published its report of a regulatory compliance case regarding City of Worcester Gymnastics Club.

The case was opened when the Commission was made aware of concerns about the governance and financial management of the charity, including that a trustee had been recruited into the role of general manager without advertising the position and that the charity had lost £10,000 in cash following a burglary.

The Commission found that the trustee had resigned before becoming general manager, but was in a long-term relationship with another trustee. The burglary was at their joint home where cash belonging to the charity was being kept, and no action had been taken to reimburse the charity. The Commission also found that record keeping was poor (including missing financial records), there was no evidence of the decision about the general manager role or a decision to lease a motor vehicle, there was no conflicts of interest policy and there was evidence of large related party transactions. The Commission issued formal advice under an action plan to address a number of the issues and has now followed up with the charity to ensure compliance with the plan.

Accounts Monitoring Review

Under its Accounts Monitoring Review project, the Commission has issued a report about the reporting of matters of material significance by auditors. The Commission says it has found that, of the 114 auditors who gave audit opinions containing information they were required to report to the regulator in the six months to October 2017, only 28 contacted the Commission to actually file the report. The Commission says it is now working with the accountancy profession to raise auditors’ awareness of requirements and address this under-reporting, which it describes as raising a ‘significant concern’ about the adequacy of reporting to the Commission by auditors. See the full report here and the Commission’s press release.

SORP consultation

The Charity Commission and OSCR are inviting comments on 21 proposed amendments to the Charities Statement of Recommended Practice (SORP) following changes in UK-Irish accounting standards, in a six week consultation. See the Commission’s statement and the SORP website.


The Office of Tax Simplification (OTS) has published a scoping document for its review of inheritance tax (IHT) on 15 February 2018. The OTS review will run alongside HMRC’s project on administrative changes for estates where there is no tax to pay. The review will look at:

  • The process for submitting IHT returns.
  • Rules surrounding the annual gifts exemption, small gifts exemption and normal expenditure out of income.
  • Administrative and practical issues involved in estate planning, compliance and disclosure including probate procedure.
  • Complexities arising from reliefs.
  • To what extent IHT rules distort taxpayers’ behaviour.
  • The public and professional perception of the IHT regime’s complexity.

There will be a call for evidence in early 2018. The report will be published in autumn 2018.


Penny Mordaunt, the International Development Secretary has issued this statement about safeguarding in the aid sector.

23 charities working internationally have signed this joint letter recording their commitment to take better action on safeguarding.

Data protection


See here for Elizabeth Denham’s keynote speech, screened at the Direct Marketing Association’s Data Protection 2018 event on Friday 23 February in London.

ICO fees

The Government has announced the new post May 18 charging structure by the Information Commissioner’s Office (ICO). The charging model is divided into three tiers and is based on a number of factors including size, turnover and whether an organisation is a public authority or charity. The fees are:

Tier 1 – micro organisations. Maximum turnover of £632,000 or no more than ten members of staff. Fee: £40 (or £35 if paid by direct debit)
Tier 2 – SMEs. Maximum turnover of £36million or no more than 250 members of staff. Fee: £60
Tier 3 – large organisations. Those not meeting the criteria of Tiers 1 or 2. Fee: £2,900

Charities will only be liable to pay the tier 1 fee, regardless of size or turnover – but may not have to pay any if they fall within one of the exemptions.

ICO prosecutions

A former local authority education worker who illegally shared personal information about schoolchildren and their parents has been prosecuted. She took a screenshot of a council spreadsheet concerning children and their eligibility for free school meals before sending it to the estranged parent of one of the pupils via Snapchat. She also sent a copy of a school admission record relating to another child. She was fined £850 and was also ordered to pay £713 costs.


EU Withdrawal Bill

Proposed changes to Clause 11 of the EU Withdrawal Bill to ensure all devolved EU powers transfer directly from Brussels to Belfast, Cardiff and Edinburgh have now been shared with the devolved administrations ahead of a Joint Ministerial Committee (JMC) meeting on European Negotiations (EN) in London.


This article by Accountancy Live considers how Brexit opens a way for a ‘culture shift’ on tax policy.

Human Rights, Equality and Discrimination

Amnesty International has warned that the EU Withdrawal Bill is set to ‘substantially reduce rights in the UK’ in its annual report.


See this Third Sector article about developments in methods to donate, including “fingerprint” donations.

Also see under Scotland below.


The House of Commons Library has published a briefing paper, Home Education in England. It includes commentary on a private members bill, the Home Education (Duty of Local Authorities) Bill [HL] 2017-19 which was introduced in the House of Lords in November 2017. The Bill, which provides for local authorities to be placed under a duty to monitor the development of children who are home-educated and to conduct annual assessments, also includes a requirement for parents who home educate their children to register with the local authority. The Bill is unlikely to pass into law unless it is supported by the government. The government’s view is that local authorities already have the powers they need in section 437 of the Education Act 1996 to act in cases where children are not being well educated at home. The government does however intend to consult on revised guidance on home education for parents and local authorities shortly.


The government is consulting on options to strengthen consumer redress in the housing market. The Ministry of Housing, Communities and Local Government (MHCLG) is concerned that the current framework for complaints and redress in the housing market needs improvement. In particular, it notes that there are over four different complaints bodies in the housing market (rather than a single ombudsman), that private-rented sector landlords are not obliged to register with a complaints system, and that consumers are often left with nowhere to turn when home builders fail to fix snagging issues in new build homes. The consultation seeks views from tenants, landlords, homeowners and existing ombudsman schemes on the effectiveness of the current redress framework, and also invites feedback on options to improve it, which include:

  • Introducing a single housing ombudsman to cover the whole of the housing market.
  • Requiring private landlords to join a redress scheme.
  • Naming and shaming poor practice.

The policy proposals primarily relate to England and the consultation closes on 16 April 2018.

Social finance

Big Society Capital is offering a package of support to help charities and social enterprises raise investment using Social investment Tax Relief. Free resources, access to free workshops and surgeries are available on Big Society Capital’s website.

Social Enterprise UK has published a report commissioned by the Lloyd’s Bank Foundation for England and Wales. The report, “Trading for Good” is aimed at understanding the impact of smaller social enterprises. It calls for charitable foundations and other funders to change the way they work to offer more support to small social enterprises. Read the full report here.

Louise Wain (Eduserv), writing for Third Sector provides readers with an insight into what a digital-ready finance team of the future would look like. This includes, for example, finance leaders demonstrating softer skills of influencing and leadership and finance being able to talk to IT and digital and vice versa.

Organisations working internationally

See under Safeguarding above.

See here for a speech by the International Development Secretary to the Bond Conference.


Philanthropy Impact has published this artlcle “Meeting the demand for professional philanthropic support”.

Company law

People with Significant Control

Companies House has issued guidance on People with Significant Control.

Company secretarial

Draft Companies (Disclosure of Address) (Amendment) Regulations 2018

The Government has published draft Regulations which will make it easier for company directors to remove their residential addresses from the public register held at Companies House. This is prompted by research showing that company directors are twice as likely to be victims of identity fraud. Under the draft Companies (Disclosure of Address) (Amendment) Regulations 2018, which are due to take effect by the end of summer 2018, these restrictions are lifted so that a director can apply to remove a residential address from the public record regardless of when it was originally sent to Companies House, and without needing to show any risk of violence or intimidation. Current directors of live companies will need to provide a replacement service address. The “serious risk of violence or intimidation” test will also be removed where a company applies to suppress residential addresses for all of its members: this could affect share companies which have filed information about their members with Companies House. It will continue to apply to individual members making an application for suppression, and to a person registering a charge.


The Crown Commercial Service has published an updated Model Services Contract (MSC) developed for services contracts with a value over £10 million and produced in forms for use under both Scottish law and the law of England and Wales. PLC says “This version reflects developments in government policy, regulation and the market.” The MSC is also accompanied by:

  • Guidance on the MSC for those users involved in the contracting process who may not have specialist backgrounds.
  • A Statement of Changes showing what has changed and where from the previously issued version.

On 13 February 2018, the European Commission published Public Procurement Guidance for Practitioners on avoiding the most common errors in projects funded by the European Structural and Investment Funds. The aim of the document is to support public procurement officials in Europe’s member states, taking them step-by-step through the process, highlighting areas where mistakes are typically made and showing how to avoid them. The guidance is aimed primarily at procurement practitioners within contracting authorities in the European Union who are responsible for planning and delivering the purchase of public works, supplies or services whilst ensuring compliance, efficiency and value-for-money. It is not legally binding but aims to provide general recommendations and to reflect best practice. The guidance is structured around the main stages of a public procurement process from planning to contract implementation. In addition, it contains a toolkit with instruments and resources on specific topics.

NCVO reports The Kings Fund has published some new research on commissioner perspectives on working with the voluntary sector, from both local authorities and clinical commissioning groups. While relatively small scale, the research has some fascinating insights into different approaches and attitudes to working with charities.

Intellectual property

The Intellectual Property Office (IPO) has published a consultation on the implementation of the draft Trade Secrets (Enforcement, etc.) Regulations 2018 which implement the Trade Secrets Directive (2016/244/EU). The IPO states in the consultation document that the draft Regulations:

  • Provide for a statutory definition of the term “trade secret” and set out rules concerning time periods for bringing proceedings.
  • Include provisions concerning the preservation of confidentiality of trade secrets during and after proceedings have concluded, as well as measures relating to interim orders for “delivery up”.

The closing date for responses is 16 March 2018.


OSCR has published fundraising guidance for charity trustees in Scotland.

OSCR has issued a statement on the SORP consultation (see Charity Commission above).







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 March 1, 2018.