Bates Wells Briefing for Charities & Social Enterprises | 22 October

Bates Wells highlights

Last week several government and parliamentary reports were published on sexual exploitation and abuse in the aid sector. Bates Wells’ Emma Dowden-Teale comments

“Few would disagree that it is absolutely critical that momentum is maintained in optimising the mechanisms for safeguarding and people protection. Nevertheless, it should be recognised that a good deal of the work carried out by the working groups following the DfID summits was on an unpaid basis within the third sector against the backdrop of evolving expectations on the part of public bodies. It is positive to see that the Charity Commission in its updated guidance on  Safeguarding and protecting people for charities and trustees published today recommends that charities read Good governance for safeguarding developed by one of the Bond working groups, which sets out a section on appropriate transparency in safeguarding”.

At a glance

The Supreme Court has decided that a legacy left by a Jersey resident to a Jersey charitable trust (with purposes regarded as exclusively charitable under English law) is exempt from UK inheritance tax, overturning rulings by the High Court and Court of Appeal. 

The Court of Appeal has decided that HMRC was not bound by a representation made in one of its manuals. 

The Treasury has launched a pilot of a new PrizeSaver account, designed to raise awareness of credit unions and the services they offer.

Charity Commission

Charity Fraud Awareness Week 2019

The commission is promoting Charity Fraud Awareness Week 2019. Resources available for charities include those on the Fraud Advisory Panel website and the Charity Fraud Awareness Hub (a free online awareness hub, broadcasting webinars during the week, provided jointly by the Fraud Advisory Panel, UK Finance and the Charity Commission).

The commission and the Fraud Advisory Panel have published a new research report about fraud in the UK against charities, see also the press release from the commission which says that the report says that many charities are still not taking basic steps to protect themselves from fraud.

Next week Bates Wells is hosting an event “What’s new in the fight against charity fraud and cybercrime? The Charity Commission explains”. Alan Bryce, Head of Development, Fraud & Cybercrime at the Charity Commission, will be reporting on the findings from the largest ever charity specific survey undertaken on fraud and cybercrime. The event is currently sold out but you can register here to be added to the waiting list.   

CC News

The latest edition of CC news has been published. The newsletter signposts charities to recent news stories or existing guidance (rather than containing completely new material); issues covered in this edition are:

  • your responsibilities around political campaigning
  • get ready to submit your charity annual return
  • improvements to reporting charity fraud and working together to prevent it
  • preparing your charity for Brexit
  • safeguarding and protecting people
  • updated guidance on independent examination of charity accounts
  • reporting of related party transactions in charity accounts
  • how to get help for an inactive or ineffective charity.

New inquiry

The commission has announced that it has opened an inquiry into the charity Human Care Hands Foundation UK (1127148), a charity with objects to relieve poverty and advance education throughout the world. The commission says that it has opened the inquiry due to serious concerns over the financial management and governance of the charity, including  the late filing of the charity’s annual accounts and returns, a number of irregularities in the submitted accounts, inadequate financial controls and the couriering of cash overseas with insufficient controls.

Double defaulter inquiry

The commission has published a report on its class inquiry into “double defaulting” charities which have failed to comply with annual reporting and accounting requirements for two years or more, for the period April 2018 to March 2019. During this period, 28 charities (listed in Annex A of the report) submitted their outstanding annual documents, and a further 28 charities (listed in Annex B of the report) were found to have ceased to exist or do not operate and were removed from the register of charities. See also the accompanying press report from the commission.

SORP Committee

New members are being sought for the committee that oversees the Charities Statement of Recommended Practice (SORP). The current committee has been in place for nearly 5 years; the plan is to change the composition of the committee to include greater representation from smaller charities and funders.

Tax and VAT

Inheritance Tax – Supreme Court decision

The Supreme Court has decided that a legacy left by a Jersey resident to a Jersey charitable trust (with purposes regarded as exclusively charitable under UK law) is exempt from UK inheritance tax, overturning rulings by the High Court and Court of Appeal. The Supreme Court held that Jersey is a “third country” within the meaning of the EC Treaty, meaning that the principle of free movement of capital applied.  Restricting relief from inheritance tax to trusts governed by the law of the United Kingdom was incompatible with EU law – as was the 1956 House of Lords decision of Camille & Henry Dreyfus Foundation Inc v Inland Revenue Comrs. Routier and another v Commissioners for Her Majesty’s Revenue and Customs [2019] UKSC 43

Making Tax Digital: update

Charity Tax Group reports:

  • HMRC has published an updated sign-up timeline for organisations (including charities) that had their MTD mandated start date deferred until October 2019: see Deferred sign up timelines – v1.0  Charities need to sign up themselves. Charities can sign up to MTD VAT here and agents can sign up their charity clients to MTD VAT here.
  • HMRC has opened the process for businesses to apply for additional time, if needed, to put digital links in place in order to comply with the requirements of Making Tax Digital (MTD). This additional time will be provided for businesses with complex or legacy IT systems, who are unable to comply with MTD digital links requirements by the end of the initial soft-landing period.

Digital advertising and VAT

HMRC is continuing to adopt a narrow interpretation of the VAT rules as they apply to digital advertising. This is notwithstanding Charity Tax Group engaging in a dialogue with HMRC and obtaining a Counsel’s opinion favourable to CTG’s view. See here for further details including HMRC’s final stance.

Reliance on HMRC Manuals

The Court of Appeal, in the case of Aozora v HMRC [2019] EWCA Civ 1643 has decided that HMRC was not bound by a representation made in one of its manuals.  In this case, the tax payer had taken professional advice and the court concluded that the advisor should have used their skill to  interpret the law rather than rely on the HMRC interpretation of the law.  Bates Wells’ Bill Lewis comments “Many will find this decision bizarre.  This is akin to a policeman telling a driving instructor the speed limit on a road is 40mph and then later prosecuting the instructor for speeding because the correct limit was 30mph and the instructor as a professional driver should have known better!  The end result will be that HMRC will receive a big increase in tax clearance applications given advisors can no longer rely on HMRC manuals for guidance.”

Manufactured Overseas Dividend Regime

The Court of Appeal has ruled that this regime, under which tax was automatically withheld from certain dividend income, was an unjustifiable restriction on the movement of capital under EU law.  Although the withholding tax was withdrawn in January 2014, it is estimated that charities, pension funds and other entities may be able to reclaim close to £1billion in wrongly deducted tax.  Any charity with a pension fund or investment portfolio could conceivably be affected. HMRC v Coal Staff Superannuation Scheme Trustees, 2019 EWCA Civ 1610.


The Chancellor has announced plans to deliver his Budget on 6 November 2019, provided the UK leaves the EU with a deal on 31 October 2019. If there is no deal, the government has confirmed it would ‘take early action to support the economy, businesses and households’, and a Budget would occur in the weeks following.


The Parliamentary International Development Committee has published a Follow-up report: sexual exploitation and abuse in the aid sector”. According to Civil Society Media the report warns that the sector has been “too slow” to address problems and calls on Bond to do more to improve transparency across the sector. 

At the same time, the Department for International Development has published three reports showing some of the progress made since the Safeguarding Summit held this time last year. 

  • The first report has updates from each of the eight groups which made commitments at the summit: donors, UK NGOs, private sector suppliers, the United Nations, International Financial Institutions, CDC, research funders, and Gavi and the Global Fund. Initiatives include new tools and guidance for NGOs; mechanisms to collaborate and learn lessons among private sector suppliers; a new reporting tool for United Nations staff; the development of a Good Guidance Note by International Financial Institutions and CDC; an evidence review of safeguarding challenges by research funders; and the rollout of new training by Gavi and the Global Fund.
  • The second report covers how donors are meeting their commitments. This includes the adoption of a new OECD Development Assistance Committee recommendation on ending sexual exploitation, abuse and sexual harassment (SEAH) in the aid sector; work to align donor SEAH clauses in funding agreements with multilateral agencies; and collective leverage to drive change across the UN.
  • The third report gives more details about what DFID has done. The International Development Secretary Alok Sharma said in relation to the Misconduct Disclosure Scheme, which allows employers to share data on conduct and disciplinary records related to sexual misconduct “It is still early days, but the over 1,500 requests for information since January have prevented the hiring of at least 10 individuals.”

This Civil Society Media article reports the response from BOND Chief Executive Stephanie Draper. 


Fundraising fraud

The Fundraising Regulator has published “Five top tips to avoid fundraising fraud”. 


See under Tax and VAT above.



The Department for Education has published two sets of guidance relating to relationships education, following the teaching of this becoming compulsory for all primary age pupils (and relationships and sex education for secondary age pupils) from September 2020:

The Department for Education has published a consultation on changing the conditions of grant and the regulations that apply to the dedicated schools grant (DSG) to clarify that the DSG is a ring-fenced specific grant that is separate from the general funding of local authorities. The consultation closes on 15 November 2019.

Children’s services

Education Secretary Gavin Williamson spoke last week at Coram’s National Adoption Week reception, announcing further funding to support new adoptive families.

Health and social care

The Queen’s Speech included the announcement of a new legal duty for local authorities to deliver support to survivors of domestic abuse. 

Social finance

Chance to ‘win while you save’ with new credit union prize account. The Treasury has launched a pilot of a new PrizeSaver account, with savers who put away as little as £1 with participating credit unions having the chance to win up to £5,000 a month. The pilot is designed to help improve people’s financial resilience by encouraging greater saving for the future, as well as raise awareness of credit unions and the services they offer.

Apply now to £5.75m fund to find innovations that will prepare adults for employment. Charities are being invited to apply for a share of a £5.75m fund launched by Nesta and the Department of Education to find technical innovations that will equip adults with skills for future employment.

The devil in ‘investment opportunities’: Why funding solutions must be the new paradigm in impact investing. Uri Grabenwater, from the European Investment Fund, writes for the Pioneers Post/EVPA Impact Papers series, asking why impact investing has failed so far to have a visible impact on these challenges to our society.

Pioneers Post launched its new series, Untold Banking: 20 years changing people’s lives, in partnership with NatWest: From barren lands to rich seas of responsible investingModelling a path that mainstream finance could follow and It took 20 years to damage inclusion.

London Stock Exchange launches Green Economy Mark and Sustainable Bond Market

London Stock Exchange has announced the launch of two initiatives designed to support sustainable finance on its markets. The Green Economy Mark recognises listed companies with 50% or more of revenues from environmental solutions, while the Sustainable Bond Market incorporates new Sustainability, Social and Issuer-Level Segments. The initiatives are designed to support issuers implementing sustainable business models, and investors who are increasingly focusing on environmental products and services supporting the transition to a low carbon economy. Full announcement here.

Community interest companies (CICs)

The CIC Regulator has updated its ‘Do’s and Don’ts’ of completing an application to incorporate a CIC so that it now covers online applications as well.

International development

See above under Safeguarding.


OSCR’s has published a webinar giving an overview of charity accounting rules for Scottish charities from Head of Professional Advice and Intelligence Laura Anderson.

Disclaimer – The information contained in this update is not intended to be a comprehensive update – it is our selection of the website announcements 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 October 22, 2019.