Bates Wells Briefing for Charities & Social Enterprises | 5 September

Bates Wells highlights

Charities, Social Enterprise

Bates Wells and BOND have published a two page guide to safeguarding for all trustees, not just those whose charities work with children or vulnerable adults – see “Safeguarding – a summary for trustees”.

This Briefing covers the two week period since 20th August.

At a glance

The Charity Commission has published two reports relating to charity accounts – the first on whether charity accounts and reports meet the reader’s needs and the second on public benefit reporting.

Since 1st September a new framework is in place allowing a Community Interest Company (CIC) to convert into a CIO (charitable incorporated organisation).

Charity Tax Group has summarised some of the Government’s technical papers setting out guidance in the event of a “No-deal Brexit”.

The Information Commissioner’s Office has published a report summarising findings from information risk reviews at eight charities.

The Department for Education has published a new toolkit to help schools save money on non-staffing spend.

Charity Commission

Investigation into two independent school charities

The Commission has announced a class investigation into two independent school charities, The Martin Foundation (registered charity number 1110184), and The Collegiate Charitable Foundation (registered charity number 1012924). The inquiry was opened on 22 January 2018 and interim managers (Geoff Carton-Kelly and Tom McLennan of FRP Advisory) were appointed in August. The charities provide bursaries to enable students to attend independent primary and secondary schools; provide advertising, facilities and equipment for the schools, and assist the local community, however The Martin Foundation is not currently carrying out any activity. The inquiry is examining:

  • The extent to which potential conflicts of interest and connected party transactions have been properly managed
  • The extent to which there has been any unauthorised trustee benefit
  • Whether the charities operated for exclusively charitable purposes

Interim manager appointment

The Commission has announced that it has appointed an interim manager (‘IM’) at the charity Essex Islamic Academy (also known as Ripple Road Mosque) which has been under statutory inquiry since October 2017. The inquiry was opened following the conviction of an employee for terrorism offences and part of the inquiry was to consider whether the employee was able to attempt to radicalise children. The Commission has said that “the IM’s role is to implement safeguarding procedures, ensure all current trustees, relevant staff and relevant volunteers have understood safeguarding procedures and completed relevant training, and review the charity’s governing document, and its financial controls and policies. The IM assumes these duties at the exclusion of the charity’s trustees; however the latter retain control over the day-to-day running of the charity.”

Case report – Yorkshire MESMAC

The Commission has published its case report into the sexual health charity Yorkshire MESMAC (1040407).

The Commission engaged with the charity following media reports that the charity’s staff conduct policy appeared to permit personal relationships between employees and service users of the charity. The charity later submitted a SIR to the Commission relating to the conviction of a former trustee of sexual offences.

The Commission said that it looked at whether the allegations against the trustee had been reported appropriately to all relevant authorities – including the Local Authority Designated Officer (LADO) who has responsibility for safeguarding, and to the Commission. The trustee concerned had resigned from the charity in 2014 and had not been actively involved since 2013. The charity trustees had been aware of the allegations through the LADO and the police investigation since at least 2015, but had not reported a serious incident to the Commission at the time. The Commission obtained assurances that the police did not question the charity as part of their investigation, and that none of the subsequent criminal convictions of the trustee were linked to or related to abuse of charity beneficiaries.

The Commission has issued the charity with an Action Plan setting out various actions it expects the trustees to take, including drafting and implementing an updated safeguarding policy as a priority, and providing evidence to the Commission of how the policy will be used in practice.

As a result of the Commission’s engagement with the charity, the trustees have identified a number of additional historical incidents that have now been retrospectively reported to the Commission which has assessed them and concluded that the charity has dealt with these separate incidents appropriately. However, the case report says that given media attention around the charity’s activities, the trustees have taken the decision to end their targeted work with young men and boys at risk of sexual exploitation and made arrangements to ensure a winding down of this service.

Official Warning issued to RSPCA

The Commission has issued the RSPCA with an Official Warning under section 75(A)(1)(b) Charities Act 2011.

Accounts monitoring review

The Commission has published its latest reports in its Accounts Monitoring Review programme, the first on whether charity accounts and reports meet the reader’s needs and the second on public benefit reporting. It has also published a separate report on “double defaulting” charities.

Flowchart on setting up a charity

There is a new flowchart on the website setting out the steps for setting up a charity, which links to various pieces of existing CC and HMRC guidance.

Governance review of SORP-making process

The four charity regulators in the UK and the Republic of Ireland have announced a governance review into the SORP committee and SORP making process to be undertaken by an Oversight Panel comprising an observer representative nominated by the FRC and a representative from each of the four charity regulators. The panel will be assisted by the staff of the CC and OSCR.

There is also a news item on this subject on OSCR’s website.

Conversion of Community Interest Company to CIO

From 1 September it has been possible to convert from a Community Interest Company (CIC) into a Charitable Incorporated Organisation (CIO) using the legislative framework (section 234 Charities Act 2011 and the CIO Conversion Regulations 2017); the Commission has issued guidance on the procedure which they have set out as a four step process.

The existing guidance on changing your charity structure has been updated to include a link to this new guidance.

Charity Tribunal

A new appeal has been filed by Edward Smyth – no details available yet.

A recent tribunal judgment confirms that Mr Oguz has been unsuccessful in his appeal against an order of the Charity Commission removing him as a trustee of Save the Needy Worldwide, a CIO which distributes aid in a number of countries, including Turkey (where it assists those affected by the Syrian conflict). The Removal Order was made under section 79(4) of the Charities Act 2011 – it removed Mr Oguz as a trustee, charity trustee, officer, agent and employee of the Charity and the Removal Order also had the effect of disqualifying Mr Oguz from being a charity trustee of any charity, and from holding an office or employment with senior management functions in any charity. The tribunal judgment includes a full analysis of the grounds for removal.

Tax and VAT

BWB’s Bill Lewis has written this article about the most common corporation tax bear traps for charities.

Also see under Brexit below.


The Sunday Times (19th August) reports a test case is being prepared against Sherborne Preparatory School in Dorset seeking damages for child sex abuse, even though the school was sold two decades ago and is now a charity. It is understood that potential claimants allege they were victims of abuse by a former head teacher and owner of the school from 1972 to 1998. It is reported lawyers will argue that, although the school is a new entity, it is liable to pay compensation because the alleged abuser sold it to the charity for £1 and the buyers allegedly knew of the abuse.

The Royal College of Nursing has published “Adult safeguarding: roles and competencies for NHS staff”, an intercollegiate document designed to guide professionals and the teams they work with to identify the competencies they need in order to support individuals to receive personalised and culturally sensitive safeguarding. It sets out minimum training requirements along with education and training principles. What is particularly interesting is the guide to what is expected of CEOs and Board members in terms of safeguarding knowledge and involvement (pages 25 to 28).

BWB and BOND have published this two page guide to safeguarding for all trustees, not just those whose charities work with children or vulnerable adults – see “Safeguarding – a summary for trustees”.


Charity Tax Group has helpfully summarised some of the Government’s technical papers setting out guidance in the event of a “No-deal Brexit”. The summary covers:

  • VAT for businesses
  • State aid
  • Trading with the EU
  • Government’s guarantee for EU funded programmes
  • Horizon 2020
  • Delivering humanitarian aid programmes.

Civil Society Media reports the Scottish Council for Voluntary Organisations and a number of other organisations have written to the Home Secretary with concerns that Brexit will affect the number of volunteers.

Also see under Health and Culture and Creative below.

Data protection

On 29th August the Information Commissioner’s Office published this report “Findings from ICO information risk reviews at eight charities”. (It is dated April 2018 but seems only to have been published now.)



The Advertising Standards Authority has upheld a complaint about a website promoting charity scratch cards. The ASA concluded that ads on the website which depicted cartoons and images associated with children , marketed gambling products in a way that was likely to appeal more strongly to under-18s than to over-18s and therefore breached the CAP Code.



See under Safeguarding above.

The Department for Education has published a new toolkit to help schools save money on non-staffing spend.

Higher education

See under Social Impact below.


See under Safeguarding above.

The government has brought together this set of resources setting out information for the health and care sector about planning for a potential no-deal Brexit.

Social finance

The UK Social Impact Investing Implementation Taskforce responds to EC regulatory proposals on Sustainable Finance

The Implementation Taskforce for ‘growing a culture of social impact investing in the UK’ has responded to the European Commission’s consultation on a proposed regulation to establish a framework to facilitate sustainable investment. The Taskforce welcome the Commission’s Action Plan on Financing Sustainable Growth. They support the development of the market to high and consistent standards. However, the Taskforce’s view is that the proposals need to promote and develop the whole sustainable finance landscape. This includes the consideration of not only environmentally sustainable economic activities but also socially sustainable economic activities, from the outset.

The Prudential Regulation Authority (PRA) 2018 annual assessment of credit unions

The PRA, the body who regulate around 470 UK Credit Unions, has updated its webpage to publish letters sent to directors of category 5 credit unions, setting out the findings of its 2018 assessment of these firms.

Category 5 firms are those firms that the PRA has assessed as having no capacity individually to cause disruption to the UK financial system by failing or by carrying on their business in an unsafe manner. The PRA conducts an annual assessment of these credit unions as part of a large peer group rather than reviewing them individually.

Social impact

See this Guardian article about the social impact of Northampton University.

NCVO has published its August Impact update. It includes:

  • Details of the Inspiring Impact programme which has been awarded £600,000 of National Lottery funding to improve charity impact.
  • A link to a blog by Noise Solution, who run one-to-one music mentoring programmes for young people, who have shared their experience of creating a new content management system for impact measurement. The system is a bespoke micro social media platform that participants in Noise Solution’s programmes, their families and other professionals can use to interact. It’s already proving effective, helping Noise Solution track individual stories and user engagement.

International development

See under Brexit above.

Culture and creative

With fears of a “No-Deal Brexit” growing due to increasingly turbulent UK/EU negotiations, BWB has collaborated with the Creative Industries Federation to release a report which details what creative organisations (and Federation members in particular) need to do in order to prepare for this outcome. If you’d like to download this report from the Federation’s membership page click here in order to access a copy.

Procurement and state aid

See under Brexit above.


New Philanthropy Capital has published this blog “When (not) to merge”.

Company law

The government has published a response to its consultation on insolvency and corporate governance. Proposed changes include:

  • Giving the Insolvency Service new powers to fine or disqualify directors who dissolve companies to avoid paying workers or pensions
  • Asking the Investment Association to investigate if action is needed to ensure that companies are giving their shareholders an annual vote on dividends.
  • “raising standards by ensuring bosses explain to shareholders how the company can afford to pay dividends alongside financial commitments such as capital investments, workers’ rewards and pension schemes”.
  • introducing new measures to give financially-viable companies more time to rescue their business. These include:
  • giving viable companies more time to restructure or seek new investment to rescue their business, helping to safeguard jobs
  • enabling companies in financial distress to continue trading through the restructuring process, ensuring that small suppliers and workers still get paid
  • a new restructuring plan to help rescue viable businesses and preserve jobs.



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 5, 2018.