The Charities Act 2011 brings together provisions of the Recreational Charities Act 1958, the Charities Act 1993 and much of the Charities Act 2006, all since amended by other legislation. The Act updates the text and simplifies the structure of the existing legislation, but it does not change the existing law or introduce new policy.

Charity legislation has been criticised for being fragmented and hard to follow, particularly for people acting in a voluntary capacity. The Charities Act 2011 will improve access to the law.

The Charities Act 2011 was prepared by the Law Commission working with the Office for Civil Society with the support of the Charity Commission. The Act will come into force in March 2012.

SOURCE: CABINET OFFICE

Full business rates are due on empty commercial properties that remain unoccupied after three months, including lower value properties such as small shops. However, charities occupying commercial property qualify for a mandatory 80% discount on business rates, provided the property is used wholly or mainly for charitable purposes. Local authorities also have the discretion to grant the remaining 20% as a further discount.

The Charity Commission, the independent regulator of charities in England and Wales, is aware of cases where charities are being approached by retailers and landlords of hard to let property to enter into tenancy agreements that would relieve the landlords of the requirement to pay full business rates. Equally, some charities are actively marketing their willingness to enter into tenancy agreements with commercial landlords.

This can be advantageous for charities and provide good opportunities for them to lease accommodation for low or nominal rents. They may also sometimes receive charitable donations from landlords that reflect a percentage of the business rates that they would otherwise be liable for.

However, this does raise potential risks for the charities involved if they do not follow a proper and reasonable decision making process before entering into these tenancy agreements, and if they are not physically occupying the premises.

We have received information from a number of local authorities concerned about situations where charities are entering into tenancy agreements on commercial property but where in practice the property is, or appears to be, empty. Charities often claim they require the properties for storage or other purposes.

As the regulator, we are concerned that these charities may find themselves involved in what local authorities might consider to be business rates avoidance by landlords. This could potentially result in charities losing the discretionary discount and being required to pay 20% of the business rates.

Before entering into any tenancy agreements to occupy empty properties, charity trustees need to:

• be assured that the tenancy agreement is for the exclusive benefit of the charity, will further the charity’s purposes and is in its best interests
• ensure the property is genuinely required and is fit for purpose
• consider the potential liability of the charity to pay outstanding rates if the local authority disputes occupation and refuses discretionary rates relief
• very carefully safeguard the charity’s independence and ensure the charity is not being abused for the benefit of a commercial company
• where appropriate, take suitable professional advice, including legal advice, before entering into a tenancy agreement

The Charity Commission has been made aware of over 700 tenancy agreements where this may be the case. We have been examining whether the trustees of the charities involved have properly discharged their trustee duties when making the decisions to occupy those properties to further their charitable purposes, and whether any benefit to the landlord is incidental to that.

Visit HM Revenue Customs website for more information about charity business rates relief.

Charities with an income over £10,000 must complete an Annual Return and all charities are required to keep their details up to date on the Register of Charities.  From 2011 onwards all charities are now being asked to submit the required information online, via the Charity Commission’s website.

To help those charities who have not previously submitted information online, the Commission has produced a helpful video showing how easy it is to complete the Annual Return, available through its website. The video tutorial explains, step-by-step, how charities can update their financial information and amend the details that are shown about them on the Register of Charities.

The Charity Commission aims to provide all its services online by 2012.

You can view the video tutorials via the following links:

• Annual income under £10,000
• Annual income over £10,000 and up to £25,000
• Annual income over £25,000 and up to £500,000

Vin Mc Dermott, Lead Community Accountant for the project said “The investigation was carried out as part of our work towards improving compliance amongst local charities and we subsequently wrote to each of these charities offering our free support to put things right”.

“In the vast majority of cases, these charities had failed to submit their Annual Return within the statutory 10 month deadline, triggering their entry onto the charity commission’s defaulter’s list of those charities with due documents overdue”

Surprisingly, although the support offered from CANNY was free of charge, only a handful of the 250 charities responded to the offer, leaving a significant number of local charities still listed as defaulting.

“Although it was a very disappointing response, one of the main reasons for this could well be that the registered contact details, taken from the Charity Register, were out of date.  This stands to reason given the latest Annual Return had not been submitted and could also explain why these charities had failed to respond to the reminders issued by the Charity Commission itself” said Vin.

Submitting an Annual Return to the Charity Commission is a regulatory requirement for all registered charities, regardless of turnover, and failure to do so can have significant consequences.

This was highlighted recently after CANNY came across two local charities that were completely unaware they had been struck off the Charity Register by the Commission having failed to submit Annual Returns or respond to correspondence over a number of years.  In both cases it turned out the registered contact details (those of a former trustee) had never been updated by the charity trustees.

Charities can view the Charity Register via the commission’s website at www.charity-commission.gov.uk .  Alternatively, contact your local Community Accountant who can provide further guidance or help submitting your Annual Returns on-line.

The Payments Council Board also announced that it will continue to focus on security, efficiency and encouraging innovation in all types of payments to ensure customers have options best suited to the 21st century.

Richard North, the Chairman of the Payments Council said:

“It’s in the DNA of the Payments Council to consult and listen to all those people who actually make payments and use cheques. Listening to over 600 stakeholder groups, working with the banks and following our appearance before the Treasury Select Committee, we have concluded we should reassure customers that the cheque is staying.

“Over the last two years we have learnt a great deal about what is important to our many stakeholders and we are really grateful to all of those groups and individuals who took the time to talk to us and help us reach this decision. We will use what we’ve learnt to keep improving existing systems, as well as introducing innovation, so that customers benefit from 21st century ways to pay.  Innovation must be at the heart of what we do.”

For further information about the Payments Council visit: http://www.paymentscouncil.org.uk

The research, by Sheffield Hallam University, assessed how well registered charities are getting to grips with the new requirement, introduced in 2008, to report on public benefit in their Trustees’ Annual Report (TAR).

Put simply, public benefit reporting is about explaining:

• What a charity’s aims are and what it has done to carry them out
• Who it seeks to benefit
• How people have benefitted

The research has shown that trustees are generally able to explain their charity’s aims and who benefits from its work. However they are less successful in explaining how they have benefitted in practice.

In its analysis of the research the Charity Commission notes that overall charity trustees have made progress with the new requirement. Charities with incomes over £500K were particularly successful, with 94% partially or fully addressing public benefit in their Annual Reports.

However, the research shows there is room for improvement and many smaller charities are still not meeting the reporting regulations.

Key findings from the research, which involved a review of 1402 TARs and discussions with 30 charities, showed:

• For charities with an income over £500K, 26% had prepared TARs which were awarded the highest scores of four or five, out of a maximum of five. This meant the TAR fully and clearly met the requirement, with no ambiguity whatsoever. This fell to 10% of charities with an income between £100K and £500K, 2% of those under £100K and 2% of those under £25K.
• A higher number of charity TARs were awarded a score of three or more, which meant they had at least met the basic legal requirements but lacked clarity in some areas. This accounted for 67% of charities over £500K, 36% of those in the £100K to £500K band, 15% of those between £25K and £100K and 13% of those under £25K.
• The number of charities that stated in their TARs that they had ‘had regard’ to the Charity Commission’s guidance on the public benefit requirement was 72% for those over £500K, 42% between £100K and £500K, 22% between £25K and £100K and 11% of those under £25K.

The Charity Commission is concerned that some trustees involved in the research had not familiarised themselves with its guidance. They had instead relied on staff or external advisors to deal with the public benefit reporting requirement on their behalf. The research has also highlighted confusion amongst charities about the purpose and importance of their TAR. Submitting a TAR is a statutory requirement, and for charities over £25K these are made available for public scrutiny on the online Register of Charities.

Sam Younger, Chief Executive of the Charity Commission said:

“It is encouraging to find that overall progress has been made in relation to public benefit reporting. However, many trustees are still not fully explaining how their charity’s activities have contributed to their aims or how people have benefitted in practice.

“This is not surprising given that this is a new requirement and we are aware it may take charities some time to adapt. That said, some charity trustees that participated in the research found the reporting process to be a valuable exercise in helping them to re-focus on their core aims. It also provides an opportunity for charities to show grant makers and funding bodies the impact of their work.

“I would urge all trustees to look at the range of guidance we have produced to help them give a clear account of their charity’s public benefit.”

The Charity Commission will continue to raise awareness of the public benefit reporting requirements and encourage trustees to use the range of guidance, including sample TARS, available to them. The report of the study undertaken by Sheffield Hallam University and the Commission’s initial analysis of the research are available on the Charity Commission website.

The new pages provide 10 useful questions that small charities should ask themselves to avoid problems. These cover areas such as making sure your charity is working in line with its governing document, ensuring that all trustees are properly appointed, how to assess risk and the importance of preparing accounts and trustee reports.

The pages also cover simplified risk management for small charities as well as how small charities can avoid typical risks.

The new pages are part of the Commission’s web-based resource area for small charities, whether they are above or below the £5,000 registration threshold. The resource area includes guidance on setting up small charities and running them, including a copy of the small charities constitution.

Sam Younger, Chief Executive of the Charity Commission said;

“Half of the charities on our Register have an income of £10,000 of less, not to mention the thousands of charities below the registration threshold, so we do recognise that there is a real need for information for small charities and their specific needs. That’s why we have been gradually adding to the web-based resources we provide for them with this latest helpful addition on risk. “

The information can be found in the small charities section of the Commission’s website.

This alert has been issued as part of an initiative by the Charity Commission to inform trustees and members of the public of scams or fraudulent activity carried out within the charitable sector.

Many charities, particularly those using suppliers of significant services, could be vulnerable to this type of fraud. The Commission is advising such charities to be alert to this fraud risk and to:

• ensure they have appropriate controls over proposed changes to supplier details, such as independently verifying with the supplier the change to supplier details before it is actioned, e.g. by speaking to the supplier’s credit control department (or equivalent) and/or writing to confirm the change of account details with the supplier

• scrutinise the documentation which purports to make these changes; e.g. check if the contact details, and the customer or contract numbers are correct

• ensure that making changes to supplier details cannot be carried out by one individual unchecked, particularly where large ongoing contracts are concerned; and that such changes are properly authorised by an individual at an appropriate and agreed level in the charity and the supplier

• review their existing controls

If a charity suspects or becomes aware of a fraud they should report this to Action Fraud, using their online fraud reporting tool, or by telephoning 0300 123 2040. Charities should also contact the Charity Commission.

Higher education institutions that are exempt charities should report suspected frauds to HEFCE as the principal regulator, not the Commission.

Sound financial controls and financial management are an essential defence for charities against fraud and financial crime. They should be a core part of a charity’s culture, and practised to the same degree of excellence as a charity’s activities.

Further guidance for trustees and other charity managers on tackling Fraud and financial crime can be found in the Commission’s online toolkit (Protecting charities from harm).

• 21 year olds and above: up by 15p from £5.93 to £6.08 /hour
• 18-20 year olds: up by 6p from £4.92 to £4.98 /hour
• 16-17 year olds: up by 4p from £3.64 to £3.68 /hour

For further information about the minimum wage visit the HMRC website at:

http://www.hmrc.gov.uk/paye/payroll/day-to-day/nmw.htm