Charity and Not-for-Profit Newsletter, Winter 2015/16 Edition

Interpreting Change Charity and Not-for-Profit Newsletter Winter 2015/16

Will Charities be Affected by the Business Rate Charges?

Key Dates for Your Diary

Is Insurance Needed? A Charity’s Guide

On 5 October 2015, George Osborne revealed his devolution plans, which are hoped to “boost local growth”.

Get up-to-date with the key tax and legislative changes that are set to affect charities this year.

With countless charity insurances on the market, finding a cover that is relevant for your organisation can be a difficult and challenging task.

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Contents

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Welcome and Partners

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Special Feature Will Charities Be Affected by the Business Rate Changes?

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Digital Account Submissions to be Introduced to the Charity Sector

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HMRC Under Fire for Chasing Compassionate Donors for Charity Gift Aid Contributions

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Employee Spotlight

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Events 2016

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Special Feature Key Dates For Your Diary

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Top Ten Tips: Managing Charity Finances

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Educational Charities to Report Their Public Responsibilty

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Is Insurance Needed? A Charity’s Guide

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Partners Perspective Charities and Cyber-Risks: How to Stay Protected Online

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Welcome to our WINTER Newsletter In the last quarter, we have witnessed substantial legislation changes, which will significantly affect the way in which charities will operate in the next 12 months. The Autumn Statement and Etherington Review have impacted the sector massively, leaving the sector in disarray.

As a result, the winter edition of our charity newsletter will discuss the key announcements from the Autumn Statement and the impact it has on charities going forward. We also shed light onto the government’s proposals to introduce Digital Account Submissions and Charities to Report Their Public Responsibility.

In addition, we feature an article on whether Charities will be Affected by the Business Rate Changes and provide Top Tips on How to Manage your Charity Finances.

Furthermore, the last three months have been extremely exciting for the Raffingers team. We are pleased to announce that we have won Most Innovative Large Firm of the Year Award at the 2020 Innovation Group’s 2015 Awards. We would also like to take this opportunity to announce that we will be going forward under our new, rebranded name, Raffingers, along with our newly launched website, www.raffingers.co.uk.

If you would like to be featured in our next edition, or have any suggestions for topics that you would like to see discussed, please get in touch.

Raffingers Partners Gary Inglis Managing Partner gary@raffingers.co.uk

Andrew Coney Partner andrew@raffingers.co.uk

Lee Manning Partner lee@raffingers.co.uk

Adam Moody Partner adam@raffingers.co.uk

Suda Ratnam Partner suda@raffingers.co.uk

Barry Soraff Partner barry@raffingers.co.uk

Wishing you a fantastic New Year.

The Partners at Raffingers

Paul Dell Partner paul@raffingers.co.uk

Charity Risk and Growth Webinar Page 07 Your Business Our Passion

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Will Charities Be Affected by the Business Rate Changes?

SPECIAL FEATURE

It looks like the charity sector could be hit with yet more changes after the chancellor announced plans for local authorities to keep 100% of the money raised by business rates. On 5 October 2015, George Osborne revealed his devolution plans, which are hoped to “boost local growth, help attract business and create jobs”.

In the UK, all businesses and charities have to pay business rates on non-domestic properties, such as shops and offices, with funds contributing to the local government’s finances. However, over the last ten years, The Business Rate Relief has provided smaller businesses and charities with an 80% mandatory tax relief on their non-domestic properties. In special cases, a discretionary relief (of up to 100%) is granted to those who are in need of extra help; although, this is only available to organisations whose work and services directly benefit the local community.

Indeed, the Chancellor’s new proposals do sound promising for poorer constituencies in need of improved services; however, questions have been raised as to whether the changes will have a negative impact on smaller businesses, Community Charity Amateur Sports Clubs (CASC’s) and charities who receive a business/charity rate relief.

So how do the proposals affect charities? The Business Rate Relief is valued at a total of £26billion

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The Business Rate Relief is valued at a total of £26billion and is saving the charity sector £1.69billion a year.

and is saving the charity sector £1.69billion a year.

Therefore, if the local councils collecting the money are to take this rate relief away, many charities are expected to struggle and it is predicted that those charities who just about manage to stay in a surplus could face deficits, in the thousands.

It is possible that local councils will make the 80% Business Rate Relief discretionary. However, the concern here is how willing the council will be to provide the relief for charities and businesses.

According to the Charity Shops Survey 2015, councils rarely give the discretionary top-up of 100% to charities. Therefore, even if the local councils are not stringent on who gets the Business Rate Relief, the likelihood is that the discretionary ‘top up’ will be scarce or even scrapped.

Saying this, the devolution plans will help poorer constitutions to take in more money, and subsequently build up their local communities. However, the biggest concern here is that rich constituencies, will only be getting richer, thus maintaining the inequality of wealth in the UK. The rate relief helps to balance this for charities, especially in those less fortunate areas.

Head of policy at the Charity Finance Group stated, “Business rates relief is our biggest tax relief and critical for many organisations who would struggle to deliver services without it. We must make sure that this doesn’t lead to unintended consequences for the sector.”

Currently, Sir Stuart Etherington, Chief Executive of NCVO and Charity Finance Group contacted Osbourne to “urgently clarify his intentions and safeguard this vital relief that enables charities and volunteers to continue their good work”.

Discussions on the devolution plans will take place in 2016.

Suda Ratnam 020 8418 2681 suda@raffingers.co.uk

Digital Account Submissions to be Introduced to the Charity Sector On 9 October 2015, the Charity Commission launched a consultation into proposals to allow charities and Community Amateur Sports Clubs (CASC’s) the ability to file their accounts digitally.

The Charity Commission and Financial Reporting Council initiated their consultation after seeing the benefit that digital filing is having on UK businesses. According to GOV.uk, 70% of companies in the UK file their reports digitally through the Companies House portal. As a result, this has decreased the amount of time it takes for companies to submit their accounts to Companies House.

Through digital filing, the Charity Commission hope to make it easier and quicker for charities to submit their accounts too, especially for those that have to file their accounts to both the Charity Commission and Companies House. If the proposal is approved, digital submissions will also be extended to charities who file tax returns.

Nigel Davies, Head of Accountancy Services from the Charity Commission said, “This consultation is an early step and one that should be welcomed by the 35,000 charities that file their accounts with us and Companies House. If we can make filing digital accounts possible this will reduce administration for many charities whilst also opening up charity data not just for us but for those with a keen interest in sector trends and data.”

The commission recognises that smaller charities may not be able to benefit from the new system and plans to develop online templates and PDF submissions for those who are unable to benefit.

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HMRC Under Fire for Chasing Compassionate Donors for Charity Gift Aid Contributions In October 2015, HM Revenue and Customs (HMRC) published a ‘one-off’ Gift Aid declaration to be introduced to charities and Community Amateur Sports Clubs (CASC’s). However, HMRC face backlash from the Low Incomes Tax Reform Group (LITRG) who believe they are wrongly pursuing more money from donors.

The current Gift Aid Scheme helps charities and CASC’s save thousands each year in tax relief. A recognised charity or CASC can benefit from Gift Aid, which allows them to claim back up to 25p on every £1 donation received within the last four years.

The new Gift Aid Declaration form, will be mandatory for all charities and CASC’s to use from April 2016 and will only be applicable to single donations made by donors. HMRC’s updated forms have been redesigned and have been made clearer to understand in an attempt to increase Gift Aid on donations.

Claim back up to 25p on every £1 donation received with Gift Aid.

What is New? • References to VAT and Council Tax deleted • Shorter in length and has a clear call to action expressing the value of a Gift Aid claim • The declaration requires donors to pledge that they will pay equal tax (at least) on the gifts that they make The revised wording includes a line, which suggests that if the individual pays less tax in a year than the amount of Gift Aid claimed on all of their donations, they are responsible to pay the difference.

However, concerns have arisen over this choice of wording as many feel that it dupes non-tax payers to pay tax on gifts they make. LITRG believe that HMRC are exploiting low income donors who set up online standing orders when giving online. The new declaration would mean that low income donors who forget to cancel their tax declaration, will still have to pay at least the equal amount of tax, even if they are a non-tax payer in the second year.

LITRG believe this could become even more prevalent in 2016 due to the introduction of the Personal Savings Allowance and the Dividend exemptions set at £5,000.

This combined with the nil per cent rate on savings and yearly increase in personal allowance each year, could mean more and more donors will have to pay tax.

Anthony Thomas, Chairman of the Low Incomes Tax Reform Group, said: “When the widow is generous

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with her mite, the last thing we want is for HMRC to pursue her for tax on the donation… Twice in the past 13 years, when Finance Bill clauses on Gift Aid have been debated in Parliament, a Treasury minister has given an assurance that when a non-taxpayer makes a gift and mistakenly uses Gift Aid, HMRC’s practice is to approach the charity for reimbursement of the tax element of the gift, rather than the donor. The same should apply when a donor erroneously continues with a regular gift under a Gift Aid declaration made when they were a taxpayer.”

Charities are recommended to begin use of the new wording immediately and no later than 5 April 2016.

Andrew Coney 020 8418 2710 andrew@raffingers.co.uk

Employee Spotlight

In this slot we introduce you to a valued member of our team, allowing you to put a face to a name. This quarter we speak to our Cloud Accounting Manager, Amy Townsend.

Name: Amy Townsend DOB: 16 December 1983

Events 2016

Email: amy@raffingers.co.uk Career history: Raffingers is the third accountancy practice that I have worked for. The first practice being a small two partner firm in Goff’s Oak where I worked for eight and a half years and achieved my AAT qualification. Whilst working there I also developed my skills in management accounts, year-end accounts, VAT returns and personal tax.

In order to further my experience and meet new people I made the decision to move on from there to a larger firm in Potters Bar. In September 2015, an exciting opportunity then presented itself to me, which I could not resist: to start a new cloud accounting department at Raffingers.

I have always been involved in cloud accounting after seeing the tremendous benefits it brings to businesses and in my opinion marks the future of the accountancy profession. I now look forward to building the department and promoting the benefits of cloud accounting to Raffingers’ clients.

Interests: I enjoy horse riding, attending concerts and the theatre. However, I especially love spending time with my son, partner and family.

Partners Report: Since Amy has been with us she has definitely made the office a livelier place with her rather cheerful “good mornings”. However, on a more serious note, she has made a huge difference to our cloud accounting service and I can see that this will only grow from strength to strength.

I have been impressed with Amy’s client service, which is excellent and her knowledge of Xero is second to none, I wish we had employed her years ago.

Charity Risk and Growth Webinar February 2016 Fraud and growth management have been heavily discussed topics for the charity sector in 2015.

Raffingers are proud to announce that we will be holding a webinar, which will help provide charities and not-for-profits with the correct tools to implement effective management procedures when looking at risk and growth.

Agenda • Partner at Raffingers and charity specialist, Suda Ratnam, will be discussing the importance of risk management and how not-for-profits can implement effective fraud and risk measures • Motivational and Business Growth Speaker, Asari St Hill, will discuss successful growth tactics that charities can employ The presentations will be followed by a Q&A session.

This free webinar is essential for any charity professional seeking information on how they can better manage risk and grow in a saturated market... make sure you do not miss out.

For further info or to attend, please contact: Miranda Mensah 020 8418 2691 miranda@raffingers.co.uk

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Key Dates For Your Diary A look at all of the key announcements and changes made in 2015 and the impact they will have on individuals and charities going forward.

SPECIAL FEATURE

Office for Civil Society Receive £80million in Social Impact Bonds One of the most significant announcements for the not-for-profit sector is the investment in Social Impact Bonds (SIBs). The Office for Civil Society will see budgets set at £80million; an increase of £25million.

The investment will come from the £105million being used to “uplift funding for locally designed schemes tackling issues such as unemployment”.

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Entrepreneurs Relief (ER) – Potential Saving Grace The March 2015 Budget introduced restrictions on entrepreneur’s relief – the 10% rate of capital gains tax – where a company holds shares in trading joint ventures. The Chancellor acknowledged that the changes may have inadvertently captured some genuine commercial transactions and is promising to bring forward proposals to address the issue. We shall await further guidance on the changes and advise when more detail is available.

Charity Commission Funding Frozen The Chancellor announced that the Charity Commission will face a budget freeze for four years (2019/2020). The current Charity Commission budget is set at £20.3million until the 2019/2020 tax year. However, the watchdog will see an increase in the capital budget by £1millon a year for two years and a rise by £1.2million each year thereafter.

SDLT – Payment Date Changes Consultation will be released in April 2016 to discuss whether the filing and payment date is changed from 30 days to 14 days.

The Office for Civil Society will see budgets set at £80million; an increase of £25million.

Galleries and Museum Tax Relief The Autumn Statement mentioned the introduction of a tax relief for museums and galleries. The tax relief will help promote the creation of new exhibitions.

The government will also be holding a consultation on corporate tax relief being made available for contributions to grassroots sports.

Tax Avoidance A new 60% penalty will be introduced where cases fall within the General Anti Abuse Rules (GAAR).

In addition to this, changes to GAAR will be made to improve its ability to tackle marketed avoidance schemes. The government will be focusing on areas such as income being converted to capital to gain a tax advantage, transactions in securities rules and tax planning around intangible fixed assets. Legislation will be amended around capital allowances and leasing to prevent any forms of avoidance.

A New Tax System The first budget in March 2015 saw the announcement from the government on the transformation of our tax system. The Autumn Statement reinforced that these changes will help taxpayers become more efficient and reduce costs involved from the tax administration. The digital tax accounts will be personalised and secure, removing the need for annual tax returns. Plans on the changes are to be introduced from April 2016.

Tampon Tax It was stated by the chancellor that £15million pounds is raised from VAT charged on women’s sanitary products. Whilst the 5% VAT is being reviewed by the Government, VAT raised will now be used to help charities that support women’s health.

Specific amounts will be distributed to cancer charities, The Haven and Eve Appeal and domestic violence charities including SafeLives and Women’s Aid. The rest of the funds will be distributed, through bids, amongst other good cause charities.

State Pension – Increase From April 2016 the basic state pension will increase by £3.35 per week. This will be the biggest real term increase for state pensions for 15 years and should help a number of pensioners. The pension system is changing and for those that reach the state pensionable age from April 2016 the starting rate will be £155.65.

Apprenticeships – Large Employers It was announced at the summer budget and again at the Autumn Statement that large employers will have to pay a 0.5% levy on their payroll. Employers will receive an allowance of £15,000 which can be offset against their levy payment of 0.5%. Therefore, the levy will only be payable by companies with payrolls exceeding £3 million. These changes will be introduced from April 2017 and consultation will be taking place surrounding the levy. The government are trying to encourage more businesses to take on more apprenticeships and are reviewing further ways to help employers.

Gift Aid Donation Scheme The current Gift Aid Donations Scheme will be reviewed by the government to ensure that it is operating effectively.

Business Rate Review Reports on the review will be announced at the 2016 budget. Find out more about the proposed changes on page 4.

For further information: Neill Staff 020 8418 2671 neill@raffingers.co.uk

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Top Ten Tips: Managing Charity Finances Having reliable financial processes in place is important for any charity trying to survive in the current UK climate. However, many charities overlook this due to their lack of knowledge, inability to access extra finance and time pressures. With charities currently in the spotlight for their spending decisions, our top tips acts as a guide to help even the smallest of charities get their finances back on track.

• Financial Planning - Be sure to always plan; not only does a financial plan allow you to keep track of your progress and ensure you do not dither away from your goals, but it also serves as an action plan to keep you doing exactly what you need to and when.

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• Accurate Annual Accounts - Accurate accounts help to restore trust back into the charity sector and allow reliable forecasts to be produced, for more valid predictions of your charity’s future financial position.

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• Outsource - Many charities outsource their payroll as it can often be time consuming and a burden. Outsourcing certain areas can reduce costs ,especially if the task is less frequently carried out.

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• Monitor Your Cashflow - Monitoring you cashflow should always be a top priority. Find out how you can monitor your cashflow with our top ten tips for a healthy cashflow - which is featured on our new website.

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• Financial Skills - Knowing the basics of your charity finances is paramount to your success as without this, your charity can easily fall into financial difficulties.

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• Stay Protected Online - Charities are particularly susceptible to fraud online, so ensure you have the right procedures in place to keep both your charity finances and donor contributions safe.

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• Claim Gift Aid - Gift aid allows charities and Community Amateur Sports Clubs to claim back up to 25 pence on every £1 donation received within the last four years, so ensure that your charity registers online to benefit from the exemption.

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• Reserves - Keeping a reserve is a good way to manage your finances, helping you to be prepared for any unforeseen circumstances that may occur.

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• Utilise Free Resources - Ensure that the trustees and senior level employees are familiar with these resources, as they can aid your charity’s financial planning. There are many sites to help charities such as ‘The Charity Commission’ and ‘Civil Society’.

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• Seek Financial Advice - Seeking charity specific advice from a professional can help you to save and make more money in the long run.

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Having a basic understanding of your charity finances is paramount to its success as without this, your charity can easily fall into financial difficulties.

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Educational Charities to Report Their Public Responsibilty

On 22 October 2015, the Charity Commission released changes made to the ‘charging for services: benefits for the poor’ guidance. The updates will affect how fee-charging charities report activities and fulfil their public benefit when filing their annual accounts.

The need to update the guidance was highlighted during a debate on the Charities (Protection and Social Investment) Bill which looked at whether or not independent schools were fulfilling their public benefit by making their facilities accessible to those in need. The previous guidance allowed for educational charities and charitable independent schools to share facilities with state schools as a means of fulfilling their public benefit. However, this would only be made available to charity’s who made specific “provision for the poor to benefit” from.

The changes to the guidance will now mean that charities will have to follow a system of best practice. The update proposes that trustees state in their annual accounts their approaches to fulfilling their public responsibility when referring to sports and art related activities.

The Charity Commission has provided an example trustee annual report to guide trustees on how this should be reported when filing their annual returns.

Director of Policy and Communications at the Charity Commission, stated: “This small change to our guidance sends a clear signal to independent school charities: if you have good facilities for sports or the arts, sharing them with local state schools is an excellent way for you to make sure you run your charity for the public benefit. We know that many charitable feecharging schools already open up their facilities to local state schools, and we would encourage trustees of all such charities to consider carefully, and report on, how students in state education benefit from using their school’s facilities”.

Charities are prompted to follow the changes to the guidance with immediate effect.

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Is Insurance Needed? A Charity’s Guide

With countless charity insurances on the market, finding a cover that is relevant for your charity or organisation can be a difficult and challenging task.

any assets and stock you own. Where property is involved, charities should seek a surveyor to determine the correct insurance sum.

Insurance is a form of risk management, which is intended to protect an organisation or an individual from a possible eventuality. With charities being a high risk sector, taking out cover to protect your charity should always be considered. By law, there are covers that are mandatory to protect both your charity and employees in case of risks that may arise. These include:

• Trustee Indemnity: There are cases where a trustee may make a mistake or something goes wrong. Trustee indemnity insurance protects both the charity and the trustee against any liability they have from any wrongdoing committed by a trustee. This insurance acts as a reassurance to any potential risk that may arise involving a trustee.

• Employers Liability: Employers Liability Insurance is mandatory for any UK charity, notfor-profit organisation or CASC with employees.

Under the Employers Liability Act 1969, employers must take out a minimum of £5million in insurance cover for protection against injury or disease that may occur during an employee’s duration at the workplace.

• Public Liability Insurance: Public Liability Insurance offers charities legal and liable protection if an individual/s were to suffer a loss or injury due to the charity’s actions or activities, which may lead to the individual taking out compensation. This insurance often covers two areas of risk: Liability at your property and Liability away from your property.

• Motor Insurance: If your not-for-profit organisation uses, operates or owns any vehicles, under the Road Traffic Act 1988, it is mandatory that insurance against third party injury or damage to cars is taken out. If employees have their own vehicles, which they will be using for the benefit of the charity, it is the charity’s duty to ensure that they are insured before work is carried out.

• Professional Indemnity / Professional Liability: If your charity offers advice, handles data or provides a professional service, professional insurance may be an ideal cover to take out. This protects charities from being held liable for any losses and damages that could have arose from the service provided.

Although not mandatory, there are a range of covers to protect charities further from risk. These come highly recommended by the commission and should be considered by all charities where necessary: • Assets, Contents and Property Damage: If your charity owns or rents property, it may be worth exploring the option of cover against theft and damages made to your property and

Charities should refer to the Charity Commission CC49 guide for more information.

Adam Moody 020 8418 2683 adam@raffingers.co.uk

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Partner’s Perspective

Charities and Cyber-Risks: How to stay protected online According to the Office for National Statistics, there were an estimated 5.1 million cyber-crimes and frauds in the UK in 2014 and 2.5 million offences under the Computer Misuse Act, including hacking and malware. With over 24 million donors online and charities being no stranger to the digital era, it is important to take extensive measures to keep both parties protected.

The growth in cyber-risk has increase immensely.

Research shows that cyber criminals often target groups and sectors that are compassionate and unlikely to have sophisticated technological defences in place.

However, cyber-crimes can also be accidental and occur purely because of ignorance of the law, making charities particularly susceptible to cyber-risks, such as: • Data Loss: Donor data is fundamental to any

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charity. With many charities and organisations storing data on portable devices, the risk of loss or data corruption is extremely common. Data loss can be accidental and result to private and confidential information being sent out.

• System Glitches: All technology has a lifeline.

Physical systems can have a sudden malfunction or internal systems can fail, which can be of huge detriment to any charity that relies heavily on the use of computers and devices. Although usually a technical fault system glitches can occur due to out of date software.

• Malicious and Criminal Attacks: The internet has bought along an influx of hackers penetrating organisation’s records daily. Malware, such as, Trojan horses, spyware and phishing, make it

however experience data loss, it is always important to notify those whose data has been compromised. If the case is serious and a large number of clients’ data has been compromised, the Information Commissioners Office (ICO) should be made aware.

Software Backing up data using firewalls, encrypting data and using up-to-date software is necessary to ensure that you are protected from malware and fraudulent activity.

Upgrades and Testing Out of date software makes all software more vulnerable to online hacking, viruses and attacks. Ensuring that your software is regularly updated reduces the chance of charities being exposed to cyber risks. Furthermore, regularly carrying out tests on your software will assure that you are always safe when using computers and devices.

Planning Ahead Using technology to tackle technology should not be the only measure your charity adopts. It is important

easy for hackers to gain access to confidential charity information, financial data, and donor records. Online attacks also make it easier for cyber extortion and theft.

Staying Protected With charities regularly collecting donor information online, it is extremely important to stay protected. With countless laws surrounding online privacy and data protection, charities need to ensure that they are as careful as possible, especially online. There are a range of measures that can be taken to ensure that both charity and donor information remain protected.

Data Loss Prevention All charities should have controls, which prevent data from being lost. Data loss prevention reduces the chances of confidential and important information from being lost or sent around. A way to stay protected from data loss is by using software such as Symantec which are cloud based and allow for protection on all high risk information. Using the cloud based software for your data means that if you do lose information you will always have a secure backup online. If you do

UK based charities are estimated to lose ÂŁ1.65 billion a year to cybercrime as fraudsters and criminals see the sector as an easy target. that you plan ahead for effective prevention. Ensuring that you have an effective risk procedure should be made mandatory for all types of risks that your charity could be exposed to. Regularly testing for potential risks and keeping up to date with potential threats reduces the risk of attacks. Training employees is also a great way to reduce the chances of cyber-attacks and data loss. Ensuring that all employees understand risk procedures and the effects of data loss reduces the chances of risks significantly.

For further information: Paul Dell 020 8418 2688 paul@raffingers.co.uk

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