Legal Update 2011-2012

Wednesday 16th May 2012

Giselle Davies, Partner &Gemma Lewis, Senior Associate

Legal update

• Regulation• Risk• Public benefit• The future

Regulation• Charities Act 2011• Changes to Charity registration• HMRC – What’s new?• Charity Commission – What’s new?

Charities Act 2011 • Consolidating Act• Replaces:

• Recreational Charities Act 1958• Charities Act 1992• Charities Act 1993• Charities Act 2006

• Royal Assent 14/12/11• In force 14th March 2012• Runs into 358 sections and 11 schedules

Charities Act 2011

In a nutshell….• Nothing changes except section / Act references• If not yet in force from Charities Act 2006 – still

not in force

Charities Act 2011

So what……..?A few timely reminders:• “Registered Charity” statement• Land transactions• Authority to execute

Charities Act 2011 “Registered Charity” Statement requirement• Was s.5 Charities Act 1993 - now s.39 Charities

Act 2011• Charities with income over £10,000• Applies to:

• Notices, adverts, documents if soliciting money• Cheques, purchase orders etc• Bills, invoices, receipts, credit notes

• Fine for person authorising issue without statement

Charities Act 2011

Land Transactions • Was s.36-39 1993 Act - Now s.117-126 2011 Act• Restrictions on dispositions – may require

consent or if not Charity Trustees MUST take advice

• Special documentation requirements• Who signs what – “charity” is different from

“charity trustees”

Charities Act 2011

Land transactions – document requirements• Acquisition by charity

• Statement• Disposal by charity & mortgage / charge by

charity• Statement & Certificate of Charity Trustees

of “interest in land” freehold or leasehold or other”

Charities Act 2011

Statutory Authority for execution on behalf of charity trustees• Was s.82 1993 Act• Now s.333 2011 Act• May delegate to at least two of their number

Changes to Charity Registration

• Requirement to register (previously exempt / excepted)

• Registration process:• Online• All documentation to be provided at outset

HM Revenue & Customs What’s new?• Implementation of F.A. 2010 definition of

“charity” for all taxes purposes 1/4/12• Changes to wording of Gift Aid declarations• Other Gift Aid changes

Definition of Charity for tax purposes• Jurisdiction condition• Registration condition• Management condition (“fit and proper persons

test”)

Requirement to register with HMRC• Complete ChA1• Changes to charity or managers – complete ChV1• Declaration – sign and retain

www.hmrc.gov.uk/charities/tax/recognition.htmHelpline: 0845 3020203

Gift Aid declarations• New model declarations published 24/2/12• Claims based on “old” wording accepted until

31/12/12• Must say donor will pay income / capital gains tax

at least equal to the amount of tax that all charities / CASCs they donated to will reclaim that year

Other Gift Aid changes• £50,000 donation cap• Small donations bill

Charity Commission

What’s new?• Risk Framework• Strategic Review• New / updated Guidance

Risk

• Greatest Risk – Loss of income• A False Economy Study• Acevo• London Voluntary Service Council• NCVO• Charity Commission

Risk

Greatest Risk – Loss of income• Charity Commission• The National Association of Voluntary and

Community Action• A NCVYS Survey• Decline in family foundation funding• The Charity Market Monitor 2011• Increase in the challenging of legacies

Risk – loss of income

Find new funds – Oxfam Charity shops success Incorporate/collaborate/merge Survive

Other risk issues

The pensions time bomb – £800 million charity pension deficit Charity Finance Magazine May 2012 Wedgwood Museum Trust

The Great Rate Escape debate

Rates - Why worry about them? • Not new tax • No change in law But… Charity Commission alert December 2011

Rates – Why controversial now?

Credit Crunch• Vacant properties• Landlords don’t want to pay rates• Charity relief makes Charity occupation

attractive• Charity commission investigation into 700

cases

Rates – the financial dilemma • “non domestic rates” • Commercial not domestic tax • Administered by local authority • Rateable value x multiplier £10,000 x 42p = £4,200 per annum

Rates - Can you escape?

• Charitable relief • 80% mandatory relief • 20% discretionary relief

Hardship relief

Rates - What relief will be awarded?

Not automatic, must apply Need to show:

established for charitable purposes used wholly or mainly for “Charitable purposes” registered charity number good evidence charitable purposes can be problematic

Other issues such as mixed use

Issues to consider

• Mixed use properties Use of trading subsidiary Charity Shops – specific relief• Trading by beneficiaries

• Sale of goods by beneficiaries• Sale of goods made by beneficiaries

Rates relief - Too good to be true? After 3 months vacant property rated Expensive for landlords Landlord “inducements”

Willing Charity can relieve liability Good business or tax evasion?

Rates - Risk to Charity Loss of relief Can the Charity afford rates and rent? Reputation Risk What to do if offered a deal

Rates - Protect yourself• Genuine need to occupy• Charity Commission recommendations• Break Clause• Take advice – rating surveyor• Full trustee minutes

Public benefitThe “Independent Schools” case The Charities Act 2006 Guidance published by the Charity Commission

after the Charities Act 2006 Challenged by the Independent Schools Council 14 October 2011 – Decision of the Upper Tribunal

(Tax and Chancery Chamber) Wider Implications of the Tribunal’s decision Charity Commissions’ Current Position

Public benefit

The “relief of Poverty/restricted class of beneficiaries” case

• Charities Act 2006• Prevention or relief of poverty

• AG’s second charity law reference• Outcome – restricted class is acceptable

The future• Review of the Charities Act 2006• Public benefit consultations• Implementation of further parts of Charities Act

2006 (now in Charities Act 2011)

Cardiff Derby Nottingham

Thank You

Contact Details

Giselle DaviesDD : 029 2039 1797 giselle.davies@geldards.com

Gemma LewisDD : 029 2039 1877 gemma.lewis@geldards.com