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Legal Update 2011-2012

Giselle Davies, Partner &
Gemma Lewis, Senior Associate

Wednesday 16th May 2012
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.htm
Helpline: 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 benefit
The “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)
Thank You




Cardiff     Derby   Nottingham
Contact Details

                  Giselle Davies
                  DD : 029 2039 1797
                  giselle.davies@geldards.com



                  Gemma Lewis
                  DD : 029 2039 1877
                  gemma.lewis@geldards.com

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Legal update 2011 2012

  • 1. Legal Update 2011-2012 Giselle Davies, Partner & Gemma Lewis, Senior Associate Wednesday 16th May 2012
  • 2. Legal update • Regulation • Risk • Public benefit • The future
  • 3. Regulation • Charities Act 2011 • Changes to Charity registration • HMRC – What’s new? • Charity Commission – What’s new?
  • 4. 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
  • 5. 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
  • 6. Charities Act 2011 So what……..? A few timely reminders: • “Registered Charity” statement • Land transactions • Authority to execute
  • 7. 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
  • 8. 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”
  • 9. 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”
  • 10. 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
  • 11. Changes to Charity Registration • Requirement to register (previously exempt / excepted) • Registration process: • Online • All documentation to be provided at outset
  • 12. 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
  • 13. Definition of Charity for tax purposes • Jurisdiction condition • Registration condition • Management condition (“fit and proper persons test”)
  • 14. 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.htm Helpline: 0845 3020203
  • 15. 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
  • 16. Other Gift Aid changes • £50,000 donation cap • Small donations bill
  • 17. Charity Commission What’s new? • Risk Framework • Strategic Review • New / updated Guidance
  • 18. Risk • Greatest Risk – Loss of income • A False Economy Study • Acevo • London Voluntary Service Council • NCVO • Charity Commission
  • 19. 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
  • 20. Risk – loss of income • Find new funds – Oxfam Charity shops success • Incorporate/collaborate/merge • Survive
  • 21. 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
  • 22. Rates - Why worry about them? • Not new tax • No change in law But… • Charity Commission alert December 2011
  • 23. 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
  • 24. 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
  • 25. Rates - Can you escape? • Charitable relief • 80% mandatory relief • 20% discretionary relief • Hardship relief
  • 26. 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
  • 27. 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
  • 28. 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?
  • 29. Rates - Risk to Charity • Loss of relief • Can the Charity afford rates and rent? • Reputation Risk • What to do if offered a deal
  • 30. Rates - Protect yourself • Genuine need to occupy • Charity Commission recommendations • Break Clause • Take advice – rating surveyor • Full trustee minutes
  • 31. Public benefit The “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
  • 32. 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
  • 33. The future • Review of the Charities Act 2006 • Public benefit consultations • Implementation of further parts of Charities Act 2006 (now in Charities Act 2011)
  • 34. Thank You Cardiff Derby Nottingham
  • 35. Contact Details Giselle Davies DD : 029 2039 1797 giselle.davies@geldards.com Gemma Lewis DD : 029 2039 1877 gemma.lewis@geldards.com