Bates Wells Briefing for Charities & Social Enterprises | 7 January

Bates Wells highlights

Charities, Social Enterprise

Happy New Year! We wish you the very best for 2020. 

The Information Commissioner has issued the first fine under the General Data Protection Regulation. See today’s briefing for details and for comment from Victoria Hordern, Bates Wells’ Head of Data Privacy.

This review covers the period from 16 December to 3rd January.

At a glance

The Charity Commission has published additional guidance on serious incident reporting for charities, for incidents involving a partner organisation.

A trustee has been unsuccessful in an appeal to the First Tier Charity Tribunal against a three year disqualification order. 

The Queen’s speech included a reiteration of the Conservatives’ manifesto commitment to seek cross-party consensus to reform adult social care. There are also government plans to review business rates which could potentially affect charities. 

The Gambling Commission is consulting on reforms to society lotteries.  

Charity Commission

New guidance – serious incidents involving a partner organisation

The commission has published additional guidance on serious incident reporting for charities, for incidents involving a partner organisation. The guidance repeats the approach of the main serious incident reporting guidance, stating that partner in this context includes:

  • a delivery partner or sub-contractor of the charity
  • a subsidiary trading company of the charity
  • an organisation that receives funding from the charity
  • another charity or organisation that is linked to your charity, for example as part of a federated structure.

The guidance goes on to separate incidents into the following three categories:

  • The incident involves the charity’s funds, brand, people or an activity that it funds or is responsible for – these are the most likely to trigger the requirement to report, according to the commission;
  • The incident does not involve the charity’s funds, brand or people but could have a significant impact on the charity – less likely to require a report than the first category;
  • The incident does not involve the charity’s funds, brand or people and has little or no impact on the charity – these would not usually require a report.

The guidance emphasises that an assessment of the incident is required in each case, whatever the category, to determine whether the requirement to report has been triggered.

The guidance includes confirmation that where there is a federated structure of charities operating in different locations in England and Wales and an incident happens in one local charity, the commission would generally only expect that local charity and the national/umbrella body to consider whether to report.

Regulatory case decision

The Charity Commission has criticised the trustees of Marie Stopes International in relation to the process and recording of their decision in relation to the CEO’s remuneration. Bates Wells’ Lawrie Simanowitz comments “this case highlights the need for detailed minutes to be kept, especially of significant decisions. In making significant decisions, trustees should find the Commission’s guidance, ‘It’s your decision’ very helpful; certainly, it should help them avoid regulatory criticism of their decision-making processes.  The Commission does not directly criticise the pay award but it is clear from Helen Stephenson’s comments that the Commission is concerned about public reaction to the payment. The Commission’s sensitivity to press criticism of charities remains high.”

New inquiries

The commission announced that it had opened four new statutory inquiries at the end of last year:

  • An inquiry into Under Trees Schools, a charity with objects to relieve poverty and advance education in Aweil County, South Sudan, in relation to the charity’s financial controls, particularly in relation to conducting due diligence on those receiving funds, and its transmission of funds to Africa
  • An inquiry into the charity The Retreat Animal Rescue, an animal charity previously included in the double defaulter class inquiry for failing to submit annual accounts and returns and which is now in default again, to examine concerns about the charity’s financial operations and governance, including related party transactions, which may have been made in breach of the charity’s governing document and/or without having appropriately managed any conflicts of interest:
  • An inquiry into the women’s charity Kamyabi due to concerns that trustees are failing to operate the charity for the public benefit because the charity’s main activity appeared to be the recycling of clothes; the commission also has concerns about discrepancies between funds held and the charitable expenditure and income declared in the charity’s annual return, the charity’s transactions with the trustees and companies related to the trustees, that the sole signatory on the charity’s bank accounts is not a trustee and that the charity is in default of it’s statutory filing obligations
  • An inquiry into Islamic charity The Alauddin Siddiqui Trust, which previously ran a mosque but whose activities appear to have changed; there are concerns about the potential loss of charitable assets (as the former mosque does not appear to be registered as an asset of the charity with the Land Registry) and that the charity and a company by the same name have become merged to some extent.

Public notice: Dove Trust

The Charity Commission has issued public notice of its intention to make an application to the High Court in relation to the application of the residual funds held by The Dove Trust (287401). The Dove Trust ran the online charity donation site which ran into problems in 2014 when the amount of funds it held was less than what was owed to charities donated to via the site. 

The commission opened a statutory inquiry into the charity in 2014 and shortly afterwards appointed an interim manager (IM). The commission took the unusual step of covering the costs of the IM.  The IM has now paid out approximately 67p in the pound to each charity to which donations were made via the site.  The IM is now seeking to wind up the charity and the commission is applying to the High Court for permission to apply the remaining £84,458 funds towards the costs of the IM’s fees.

As this is an unusual step, the commission is making public the statement that has been produced in support of the application (The Dove Trust: statement in support of application), so that anyone with a potential interest in this matter can seek independent legal advice and/or make representations by the deadline of 4pm on 17 January.


The commission has published statistics about its work from the period 1 April 2018 to 31 March 2019:

  • Inquiry cases: There were 98 registered charities and 5 unregistered charities subject to statutory inquiries during this period
  • Operational compliance cases: There were 2297 operational compliance cases during this period:
  • Monitoring cases: There were 390 cases of charities subject to monitoring by the commission.

It has also published the statistics for monitoring cases from the previous year, when there were 369 charities subject to monitoring.

Each set of statistics provides a breakdown of the charities involved in the cases by charity classification (including further breakdown by specific religion), beneficiary categories, income and age of charity.

Charity law cases

A trustee has been unsuccessful in an appeal to the First Tier Charity Tribunal against a three year disqualification order. The order was made by the Commission against Abraham Solomon, a trustee of Aid for the Needy and Oppressed, which fundraised in the UK and distributed funds in Somalia, Togo and on the Turkish/Syrian border.  The Tribunal agreed with the Commission that the following amounted to misconduct and mismanagement, justifying the disqualification order:

(i) transferring large sums of cash from the Charity to his bank account and the accounts of another trustees;

(ii) withdrawing such funds in cash and taking them overseas, or seeking to do so;

(iii) handing such funds over to third parties without exercising due diligence on their integrity, competence or capability; and

(iv) having no credible plan for monitoring such expenditure.

Other factors included that the Tribunal concluded that Mr Solomon was reckless, but not dishonest, and that he had very little interest in taking steps to improve his performance as a trustee or educating himself in the legal and regulatory duties of a trustee when the opportunities to do so were presented to him.  The commission had been engaging with him over a prolonged period (since 2014) and he had failed to comply with Action Plans issued by the commission. 

The First Tier Charity Tribunal has rejected an appeal by Tamara Lloyd of the Alternative Animal Sanctuary against an order by the Charity Commission widening an interim manager’s appointment.  The Commission added the following to the IM’s functions “Having determined the viability of the charity’s future, to take such steps as are necessary to wind the charity up”. While the Tribunal had no hesitation in dismissing the appeal, the Judge, Alison McKenna, expressed a concern that the Commission’s approach to winding up the charity gave no direct right of appeal. 

There is a new appeal in the First Tier Charity Tribunal brought by Adnan Ali Khan – no details given.

Also see case under Company law, Names below.

Tax and VAT

Charity Tax Group reports:

  • HMRC has published a consolidated version of “How to tax living accommodation given to employees”
  • the Upper Tribunal has supported VAT zero rating for electronic newspapers.

Queen’s speech

The Queen’s speech included a reiteration of the Conservatives’ manifesto commitment to seek cross-party consensus to reform adult social care. There are also government plans to review business rates which could potentially affect charities.  For more detailed analysis of what it means for charities see:


£165 million of funding for the Troubled Families programme has been confirmed for 2020 to 2021.

Charity Bank has published its inaugural UK Social Sector Health Check Report. To compile the report, it polled 182 social sector leaders to understand the challenges they face, and to assess the impact of the current climate on the sector’s ability to respond to the needs of people and communities. It found that 85% of charities expect demand for their services to grow over the next two years. 86% are concerned about future grant funding and 82% don’t think they’ll be able to sustain donations over that period.

This is an interesting blog for NPC “What role do charities have in the process of democracy?

Data protection

Charity data breaches

Civil Society Media reports charities reported 108 data breaches in the second quarter of 2019.  See here for the ICO’s published data.

First ICO fine under the GDPR

The Information Commissioner’s Office (ICO) has issued its first fine under the GDPR.  It has fined a London-based pharmacy £275,000 for failing to ensure the security of special category data. Doorstep Dispensaree Ltd, which supplies medicines to customers and care homes, left approximately 500,000 documents in unlocked containers at the back of its premises in Edgware. The documents included names, addresses, dates of birth, NHS numbers, medical information and prescriptions belonging to an unknown number of people. See here for comment from Bates Wells’ Head of Privacy, Victoria Hordern.


See item about The Dove Trust under Charity Commission above.

Christmas cards/modern slavery

Towards the end of last year, the Guardian among others reported allegations that Tesco’s charity Christmas cards were packed using the forced labour of prisoners in China. Bates Wells’ Philip Kirkpatrick comments “Charities cannot be expected to check the supply chains of all businesses that sell products to benefit them – it’s just impracticable and would cost more than the sums received. What they can be expected to do is to choose reputable businesses on which they can reasonably depend to monitor their own supply chains and generally engage in ethical trading. Tesco is such a business and indeed is a member of the Ethical Trading Initiative, which has a code that prohibits all forced labour. Every business that makes public statements that money from the sale of their products will be paid to a charitable, philanthropic or benevolent organisation must by law have an agreement with that organisation. Those agreements tend to allow charities to terminate if the business does anything that would bring the charity into disrepute. It may be advisable for charities to require in those agreements a warranty from the business that its products have been manufactured without the use of forced labour and that the business regularly assesses its supply chains to give it that assurance. Charities might also seek assurances in relation to harmful child labour, for example.They might also check whether the business is a member of the Ethical Trading Initiative or can otherwise demonstrate it is a responsible business – for example, B Corporations. Ultimately, no system of assurance put in place by charities or businesses can guarantee that exploitation will not occur. What is needed is vigilance and the ability to put an end to exploitative relationships.”

Lotteries and prize draws

The Gambling Commission is consulting on reforms of society lotteries. The consultation covers changes to licensing to reflect government plans to increase proceeds limits, and will also cover other regulatory requirements “to ensure that issues related to the fair and open licensing objective, regarding transparency to consumers, are addressed.”  The Commission is also seeking views on strengthening some aspects of the Licence conditions and codes of practice (LCCP) and producing guidance related to information available to consumers. The consultation closes on 12 March 2020.

The Department for Communities in Northern Ireland has launched a consultation on possible changes to gambling law in Northern Ireland, including the rules governing sales promotions.



The Supreme Court (by a majority of 3 to 2) has allowed two appeals against the registration of areas of land adjoining a school and a hospital as town or village greens (TVGs). The issue before the court was whether there was an incompatibility between the general statutory purposes for which the areas of land were held by the local authority and NHS company and the provisions of the Commons Act 2006 (CA 2006). The majority held that the issue of statutory incompatibility had to be decided according to the statutory purposes for which the areas of land were held, regardless of their existing or proposed use in the future. In these cases, there was a statutory incompatibility and the CA 2006 did not apply to the areas of land. Therefore, they could not be registered as TVGs.  PLC comments “The important point in this decision is that when considering if there is a statutory incompatibility with the CA 2006, there does not need to be any factual assessment of how a public body is actually using, or might be proposing, to use the land under its statutory powers. This means that public bodies holding land for general statutory purposes will find it easier to oppose applications to register land as TVGs.” (Lancashire County Council, R (on the application of) v Secretary of State for Environment, Food and Rural Affairs and another and NHS Property Services Ltd, R v Surrey County Council and another [2019] UKSC 58.)

Also see under Children’s services below.

Higher education

See under Company Law – Names below.

Children’s services

The government has:

  • announced £11.8 million boost to breakfast clubs in disadvantaged areas and £9 million funding for summer holiday activities.
  • announced £80 million investment in music hubs coupled with further investment in film, dance, theatre and design. The curriculum schemes that will receive a total of £85 million for 2020/21 are:
  1. Music Education Hubs
  2. In Harmony
  3. National Youth Music Organisations (NYMOs) and Music for Youth; and
  4. Cultural education (Heritage Schools, BFI Film Academy, Museums and Schools, ACE Bridge Network, National Youth Dance Company, Saturday Art and Design Clubs).

Health and social care

See under Education, Schools above.


Over £260 million has been committed by the government to local authorities to support people who are homeless or at risk of losing their homes.

Social finance

What does Boris Johnson’s new government mean for UK social enterprise? Pioneers Post provides commentary on what the result of the general election might mean for the social enterprise movement.

World’s first $10m sanitation development impact bond (DIB) launches, aiming to bring safe sanitation to some of the poorest and most vulnerable households in Cambodia. Upfront funding for the DIB will be provided by the Stone Family Foundation. Social Finance undertook the feasibility study and facilitated the DIB’s design by USAID, Stone Family Foundation and iDE, the in-country implementation partner.

The next ESELA Annual Conference will take place on 27-28 April 2020 at the London School of Economics.

International development

Over 100 charities have signed a statement in support of the UK’s leadership on international development and humanitarian aid. The charities are asking the government not to merge the Department for International Development into the Foreign and Commonwealth Office.


The European Commission has announced the European Green Deal, a roadmap for a sustainable economy for the EU. Key measures include:

  • A “European Climate Law”, which will set a statutory target for the EU to be carbon neutral by 2050. The Commission will introduce the proposed legislation in March 2020.
  • Extending the EU Emissions Trading System (EU ETS) to maritime emissions. The Commission will also consider extending it to road transport emissions and building emissions.
  • A new circular economy action plan, which will include a sustainable products policy to support the circular design of all products, stronger extended producer responsibility, and measures to encourage reusable, durable and repairable products, including analysis of the need for a right to repair.

See under Audit and accounting below.


As you may have seen, Bates Wells successfully represented the respondents in Forstater v CGD Europe. This significant case has been the subject of widespread national media coverage, and potentially has important implications for how the protected characteristic of philosophical belief in the Equality Act 2010 is interpreted by employers. See here for our Briefing on the case.  

Company law

Imperial College of Science Technology and Medicine (ICSTM), a charity set up by Royal Charter, has successfully challenged the use of the name “Imperial Education Collage Ltd” (IEC) by a company set up in 2015. The Company Names Tribunal relied on section 69(1) of the Companies Act 2006 to order IEC to change its name and pay costs of £800.


The EU Fifth Money Laundering Directive (known as 5LMD) must be implemented in the UK by 10 January 2020.  To that end, the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 were published on 20 December.  They amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to oblige “relevant persons” (eg law firms) to check a company’s PSC register before establishing a business relationship with the company.

The new Regulations do not cover the aspects of 5MLD which relate to registration of trusts. As we’ve reported previously, these could require all charitable trusts to register centrally, whatever their size, and would have a potentially significant impact on thousands of small charities, including those with restricted funds. On 24 December, ICAEW reported that HMRC has confirmed that it will publish a more detailed technical consultation in early 2020 covering the detailed proposals for trust registration. HMRC has said that the consultation will include additional information on the proposals for the type of express trusts that will be required to register and has said that it understands that sufficient notice of the new legislation will be required in order to ensure business readiness. We will keep clients updated as more information is published by HMRC.

Audit and accounting

See under Environment above.

On 18 December 2019 BEIS published the final report of its independent review into the quality and effectiveness of audit, led by Sir Donald Brydon, including various recommendations.  The report and its list of recommendations are available here.

The Financial Reporting Council has announced its 2020/21 corporate reporting and audit quality review programme – it will include reviewing climate change disclosures given in companies’ annual reports.

Winding up

See under charity law cases above.

Northern Ireland

See under Fundraising above.

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 7, 2020.