Bates Wells Briefing for Charities & Social Enterprises | 21 January

Bates Wells highlights

Services
Charity
Sectors
Social Enterprise
Type
Updates

Commission seeking views on responsible investment by charities

The Charity Commission is seeking views from charity trustees, charity investment managers, employees or other interested parties on the subject of responsible investment by charities, including what trustees think are barriers to more widespread responsible investment and what could support them to invest to reflect their charities’ purpose and values. See below for more background.

Charity trustees

If your charity is looking for new trustees then you might be interested to hear that you can now share your advert on the Trustee Unlimited website and connect with their networks. Trustees Unlimited is one of the UK’s leading trustee and board recruitment agencies, working with a broad portfolio of organisations such as charities, social enterprises, housing associations, student’s unions and more. As a proud partner of Trustees Unlimited, we are excited to share this news with our contacts, so make sure you click here to find out more and get started with posting your ad!


At a glance

The Fundraising Regulator has published new guidance on the fundraising reporting requirements in the Charities (Protection and Social Investment) Act 2016. 

With many charities grappling with the question of how best to handle their reserves, Laura Soley and Lucy Rhodes from our Charity & Social Enterprise team have blogged on how organisations can respond effectively to challenges in this area.

Baroness Stowell, Chair of the Charity Commission, has written an article for Civil Society, reflecting on a positive start to the year for the sector and discussing the public expectations of charity.

Charity Tax Group reports a business rates appeal affecting museums has been dismissed. 

NPC has published “Where are England’s charities?  Are they in the right places and what can we do if they are not?”.


Charity Commission

Blogpost – Commission seeking views on responsible investment by charities

In a blogpost written by Charity Commission Strategic Policy Adviser, Sian Hawkrigg, the commission is seeking views from charity trustees, charity investment managers, employees or other interested parties on the subject of responsible investment by charities, including what trustees think are barriers to more widespread responsible investment and what could support them to invest to reflect their charities’ purpose and values. Views should be sent to the commission by 31 March 2020. We’ll be circulating a more detailed briefing on this later this week. In the meantime please see the following which include quotes from Bates Wells’ Partner Luke Fletcher:

New inquiry

The commission has announced that it has opened an inquiry into the Professional Footballers Association Charity. This follows earlier engagement by the commission to explore concerns raised about the charity’s relationship with the Professional Footballers’ Association trade union and their management of conflicts of interest. The commission says that it continues to have serious concerns which have led to the opening of this inquiry.

Inquiry and regulatory compliance case reports

Name of organisation Brief description Anything unusual e.g. unusual facts or novel/rare use of Commission’s powers


Chichester & District Dog Rescue Society (255866)
Inquiry report
CC press release
The commission was alerted to problems at the charity by an independent examiner who had found discrepancies in the charity’s bookkeeping.
The two trustees at the time were a married couple and conflicts of interest were not managed appropriately; this led to decisions such as allowing the trustees to live rent-free at the charity’s centrally heated property and install a wood burner at the property using the charity’s money. Charity funds were also used to pay for a holiday taken by one of the two trustees and other family members.
The inquiry identified £316,120 had been withdrawn in cash from the charity’s bank account and could not be accounted for. This matter was referred to the police.
Both former trustees have been disqualified from acting as a charity trustee and/or from holding an office or employment with a senior management function in charities, for a period of 7 years.
A new trustee board was appointed and a commission follow up visit found the charity to be operating effectively.
Foundation for Relief and Reconciliation in the Middle East (1133576)
Inquiry report
CC press release
The commission investigated after the charity reported that a trustee and employee (Trustee A) was believed to have, in a personal capacity, transferred $17,500 raised at a fundraising event for the charity’s sister organisation FRRME US, to proscribed terrorist organisation, Islamic State (IS), to secure the release of two hostages.
The inquiry suspended Trustee A as a trustee of the charity, and they subsequently resigned from their position. Investigators shared information with the police, who carried out their own investigation into allegations of terrorist financing (this contributed to the length of the commission inquiry); no charges were subsequently brought.
The commission did not identify any evidence of charitable funds being used to secure the release of hostages held by IS. However, the inquiry identified a number of documents written by Trustee A that the commission considers indicate an intent to pay funds – either directly or indirectly – to IS.
The commission made an order suspending Trustee A from acting as a charity trustee, pending the commission’s consideration of their removal as a trustee, in July 2016. Trustee A resigned from their position as a trustee of the charity on 28 October 2016; consequently, the commission was not able to further consider removing them by subsequent Order. (This was before the provisions of the Charities (Protection and Social Investment) Act 2016 had amended the Charities Act 2011 so that the commission can proceed with consideration of removing trustees, after issuing notice of intention to remove, when they have already resigned).
St Margaret’s Somerset Hospice (279473)
Regulatory compliance report
The commission has published a regulatory compliance report into the charity, whose trustees took the decision to close the in-patient unit at Yeovil and increase community services.  A social media campaign was started with the aim of preventing the closure and complaints were made to the commission.
The commission reviewed documents and information, and established that the trustees had acted appropriately. The trustees had undertaken a comprehensive county wide review, consulted widely with stakeholders, undertaken research and taken advice from experts in palliative and end of life care.
Overall, the commission found that the trustees demonstrated a desire to act in the best interests of their charity and the community it serves, and that the charity’s mission and purpose guided their decision-making. The regulator concluded that the trustees made an informed decision consistent with charity law.
The case was opened when the trustees reported their proposed decision to the commission as a serious incident report, as they were conscious that the proposal would be a sensitive issue.

Baroness Stowell article in Civil Society

Baroness Stowell has written an article for Civil Society, reflecting on a positive start to the year for the sector and discussing the public expectations of charity we have seen her comment on regularly.


Reserves

With many charities grappling with the question of how best to handle their reserves, Laura Soley and Lucy Rhodes from our Charity & Social Enterprise team have blogged for Charity Finance Group on how organisations can respond effectively to challenges in this area.


Unincorporated association – capacity to bring judicial review or statutory change

A recent case has confirmed that an unincorporated association can bring a judicial review or statutory challenge.  Aireborough Neighbourhood Forum –v- Leeds City Council – https://www.bailii.org/ew/cases/EWHC/Admin/2020/45.html


Tax and VAT

There has been a further case (Aozora) where HMRC has successfully argued the public cannot rely on what’s in HMRC’s manuals because the point at issue was out of date. Bates Wells’ Bill Lewis comments “The case made clear that any unfairness to the taxpayer as a consequence was overridden by the right of the treasury to collect tax due under the law. A parallel. The speed limit signs say the limit is 40mph. You drive at 40mph but are stopped by the Police and prosecuted because the speed limit is 30mph; the speed limit had been reduced to 30mph recently and the authorities had not got round to changing the signs yet but no matter – you should not have relied on the signs but instead have understood what the speed limit would be bearing in mind the type of road you were driving on and because there had been an article in the local paper saying the limit had changed. I wonder what the magistrate’s court would make of that?

The Aozara case follows the recent Tribunal decision involving Westow Cricket club where a CASC relied on an HMRC clearance letter which said that they “appeared” to qualify for the VAT zero rate relief on their new club house but HMRC successfully arguing that the word “appear” meant there was a question of doubt. HMRC were legally correct – CASCs are not entitled to the VAT zero rate on construction of new premises, but the club was run by laymen and they took the letter at its word.”  

Both cases highlight the risks associated with relying on HMRC assurances or guidance – for high value or grey areas it is worth getting specialist tax advice. 


Business rates

Charity Tax Group reports a business rates appeal affecting museums has been dismissed. For the full judgment see here. The Valuation Office Agency was challenging a 2018 decision by the Valuation Tribunal for England that the Rateable Value of the Royal Albert Memorial Museum (RAMM) and Art Gallery in Exeter was £1. The parties had agreed that the café should be the subject of a separate entry in the list at a Rateable Value of £14,750.


General

NPC has published “Where are England’s charities? Are they in the right places and what can we do if they are not?”  In this “provocation paper designed to spark discussion and debate across the sector” Dan Corry uses data to ask if the current distribution of charities around the country is what we would want in an ideal world and explores what government, funders and charities could do about it.


Fundraising

New guidance on requirement to report on fundraising in annual report 

The Fundraising Regulator has published new guidance to “help charities fully comply with the fundraising reporting requirements in the Charities (Protection and Social Investment) Act 2016”. The reporting requirements apply to charities above the audit threshold.  

Fundraising Regulator enquiries service

The FR has published this blog about its enquiries service which is open to queries from members of the public and fundraisers. You can contact the enquiries service via this online form or call 0300 999 3407.  

Lotteries

The Gambling Commission has announced a ban on gambling businesses allowing consumers in Great Britain to use credit cards to gamble. The Gambling Commission has also announced that all online gambling operators must participate in the multi-operator self-exclusion scheme GAMSTOP. This is the scheme that has been developed for the online sector to enable consumers to self-exclude from online operators with one request rather than from each operator individually.

Helen Whately, Parliamentary Under-Secretary of State for the Arts, Heritage and Tourism, has confirmed the draft Order to change the limits for per draw sales, annual sales and maximum prize for society lotteries is expected to be laid in Parliament in January 2020, with the changes to come into force during 2020. The Order will include transitional arrangements for the first year.


Education

Schools

The Department of Education has published governance updates for:

  • Academy trusts 
  • Local authority maintained schools.

Health

The Secretary of State for Health and Social Care, Matt Hancock, has announced that he intends to introduce the NHS Long Term Plan Funding Bill to Parliament. The Bill, which was originally proposed in the December 2019 Queen’s Speech following recommendations by the NHS in relation to its Long Term Plan legislative proposals, enshrines the NHS’s multi-year funding settlement into law. The Bill will:

  • Require HM Treasury to ensure the annual supply estimates for its NHS budget cannot be reduced, creating a legal exception in order to protect frontline NHS funding.
  • Not place any limits on the NHS deciding how the funding should be spent. This will be decided locally.
  • Place a legal duty on the government to guarantee a minimum level of spending every year, rising to £148.5 billion by 2024.

Housing and homelessness

Jobcentres are to receive a new £3 million fund to support homeless people.  


Social finance

See first item above under Charity Commission.

Charities launch ‘ESG investing Olympics’. Three charities, the Joffe Trust, the Blagrave Trust and Friends Provident Foundation, have invited asset managers to make proposals for the investment of £32 million in an initiative aiming to send a market signal that asset owners are demanding higher standards of Impact and ESG investment.

Making Change Happen – An emerging approach to planning for impact at scale. Social Finance has published its report on its Impact Incubator approach, with learnings from the last few years of testing its model.

The new European Social Catalyst Fund has launched, designed to impact some of Europe’s most pressing social challenges by deploying financial and capacity building support into the scaling of proven social service innovations. The ESCF aims to bring together public and private resources – philanthropy and social investment – to improve social services for European citizens. For more, EVPA issued a press release about the launch.

The Banker article: Identifying the opportunity in impact investing. This short Impact Investing Institute blog looks at some of the issues and opportunities the Institute is working on, to make it easier for investment to reach impactful ventures such as social enterprises.


Culture and creative

See under Business rates above.


Public services/commissioning

The FRC has released an update relating to its investigations into KPMG’s audit of Carillion plc’s financial statements for the years ending 2014, 2015 and 2016, as well as the additional audit work during 2017. According to the FRC, its investigation of these audits is now ‘well advanced’. The regulator also notes that it ‘expects to complete the first stage of its investigation by summer 2020, rather than by January 2020’.


Company law

Company names

A not-for-profit unincorporated association established in 2005, Central Association of Nigerians in the UK (CANUK), has successfully obtained an order that a company registered in 2017 with virtually the same name change its name.  The case arose from a dispute within the unincorporated association which led to the company being registered by a splinter group.  Costs of £2050 were awarded in favour of the unincorporated association, with two directors of the company jointly and severally liable for the costs as well.  For the full Company Names Tribunal decision, see here


Scotland

OSCR is asking Scottish charities which have missed their reporting deadlines to submit their annual reporting documentation as soon as possible.


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 January 21, 2020.