Charity Group Bullen
November 2014
Overhaul expected on the VAT treatment
of pension schemes and administraon
In our Spring Bulletin we brought readers the news just emanating
from the European Courts that charges for the management of a
“Defined Contribution Pension Scheme” should in fact be VAT
exempt. HM Revenue & Customs (“HMRC”) subsequently
announced they were carrying out a review of the VAT treatment of
pension scheme administration and fund management services as a
result of the recent judgements by the European Court. HMRC stated
that further guidance would be issued this Autumn – anyone who has
taken a walk recently will know that Autumn is now well and truly
here, but still no guidance from HMRC!!
Why is this relevant for charities? Most charities are not VAT registered, and those which are
registered are only entitled to reclaim a very small % of the VAT incurred on expenditure. As a
consequence VAT represents a real and significant cost for almost every charity. Currently VAT at
the 20% standard rate is levied on pension scheme administration services so the opportunity of it
becoming VAT free (or rather VAT exempt) is extremely appealing to charities and also others who
are unable to reclaim VAT. Furthermore, imagine if your charity was able to go back to its scheme
administrator and seek a refund of VAT now considered to have been wrongly charged for the last
(say) four years . . . .
Any charity operating one or more Defined Contribution Pension Schemes (as opposed to Defined
Benefit Schemes) should already be in dialogue with their scheme administrator in order to sow the
seeds for obtaining a refund of VAT wrongly charged in the past and securing VAT exemption on
current charges. At present it is likely that scheme administrators will wait for the (promised)
guidance to be published by HMRC before reacting to the VAT change, but in view of the time limit for
adjusting past VAT return declarations those charities who are yet to have that dialogue will potentially
have lost the ability to reclaim up to a year’s worth of VAT on scheme administration charges.
Any reader wanting to be kept abreast of developments in this area, and in particular to know when
the revised guidance is issued by HMRC (and the implications) should let a member of our VAT team
know. Similarly any person wanting to discuss this in further detail should contact either Mark
Hetherington, VAT Partner (0191 243 6073 / [email protected]) (pictured) or Ian
Coulthard, VAT Manager (0191 243 6017 / [email protected]).
Charity execuve pay – a sensive issue
In April 2014, the National Council for Voluntary Organisations (NCVO) published the results of its inquiry into the
remuneration of charity senior executives, sparking continued public debate on the subject. Subsequently, in July, the new
Charity SORP was published, bringing with it increased disclosure around the remuneration of senior staff for larger
charities (i.e with an income of over £500,000 per annum).
Charities currently enjoy high levels of public trust and the requirements of the new SORP are aimed at ensuring that they
do not lose that. Charities and trustees will have to be prepared to explain how they reach decisions on remuneration,
what benchmarking is undertaken and how much in total their key management team are paid. Sadly, whatever you do, it
is likely that public perception will sometimes remain adrift from the reality.
There is a danger that all charities, regardless of their size or structure, are perceived to be the same. The report says that
of the over 160,000 registered charities in this country, nine out of 10 of them are run solely by volunteers. So that leaves
around 1 in 10 who actually employ people, and less than 2% who have anybody on a salary of more than £60,000.
Part of the NCVO report dealt with people’s views about whether charities should in fact pay their staff at all, and four
distinct viewpoints emerged: First, some thought charities shouldn’t pay people. At the other end, some believe charities
should pay the market rate, consistent with other sectors. Between those two positions, there was the idea that you pay
just a select group of senior staff, or that charity workers should be paid, but not as much as people in other sectors.
It will be up to charities and trustees to make their own decisions on remuneration, in line with their organisation’s values
and ethos, and to ensure that this is communicated effectively to the supporters of the charity and the general public in
order to try to address the gap between perception and reality.
It is generally recommended, however, that your
remunerations committee should:
♦
have a remuneration policy in place;
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be able to talk about how they reached their decisions, and how they believe it will help the charity to reach its
objectives; and
♦
consider the level of detail to publish information, over and above what is required, if it increases transparency and
as a result builds public trust and confidence.
The full NCVO report can be found here:
http://www.honorarytreasurers.org.uk/docs/Executive_Pay_Report.pdf
If you have any questions or would like to discuss this further, please contact Anne Hallowell at UNW by telephone 0191
243 6237 or email [email protected].
OUTSTANDING! Financial Management for Academies
Given the recent press coverage highlighting governance concerns in Academies, it is essential that Academies can demonstrate
strong governance and financial management processes. A key component of this is producing monthly management accounts
(as set out in the Academies Financial Handbook 2014). Management accounts should be prepared on an accruals basis (rather
than cash basis), meaning income and expenditure should be recognised in the period to which it relates, irrespective of the
physical cash receipt or payment. Year end outturns and long-term financial plans should then be reviewed termly, detailing 3
and 5 year financial forecasts to demonstrate the long term financial stability of the Academy.
For best practice, the following reports should be prepared monthly:
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Income & expenditure reports;
Balance Sheet;
Bank Reconciliation;
Cashflow summary & forecast;
Capital spending analysis;
Fixed Asset register; and
Management summary, with key performance indicators.
For more information or help with Academy governance and financial management, please
contact:
Ali Gould
E: [email protected]
T: 0191 243 6232
Click here for enquiries
Trustee Responsibilies
Governance is a very common term when talking about a trustee's roles and responsibilities but
what does it really mean, why is it important and how do you get it right?
Put simply it means the trustees have a legal responsibility to set the right direction for the
charity to ensure that it meets its objects, reports performance and complies with laws. Trustees
will often be reliant on many other people to provide them with information so that they can make
an informed decision - it is vital to be clear about what you need, when and why you need it.
Think about reviewing processes and policies to check they are still appropriate. Are you
confident in the accuracy of anything you receive and are there controls in place to pick up
anything that might go wrong?
We are currently working with a local charity which is reviewing the
responsibilities of the trustee board, strategic objectives, policies, and risks.
With the new charity SORP requiring trustees to report on strategy and key
performance indicators in the accounts, now is a great time to check you are
up to date.
If you want to talk through any aspects of the above, please get in contact
with Jo Powell on 07880 032 699 / 0191 243 6093 / [email protected].
Leading on from the arcle above, you may be interested in the next UNW
Charity Group event on Wednesday 3rd December 2014 where the topic is :
“Trusteeship — in conversaon with Eric Morgan”
The responsibilities of being a charity trustee can be complex and time-consuming albeit
extremely rewarding. Ensuring that a charity complies with its reporting and accounting
obligations, that it uses its funds and assets wisely, and only to further the purposes and
interests of the charity, and considering obtaining external professional advice where the charity
may be at material risk are just some of the responsibilities facing trustees.
Eric Morgan wears several hats as a trustee across a broad range of charitable trusts and
foundations including The William Leech Foundation, Esh Foundation, The Reece Foundation
and Azure Charitable Enterprises. Eric understands what it means to commit time and effort to
become an effective trustee and would like to share this with you in the course of what we hope
will be a wide ranging discussion with Charles Linaker and Anne Hallowell, who lead UNW’s
charities offering.
This event will be held in the UNW Boardroom (Ground Floor), Citygate, St James’ Boulevard,
Newcastle, with registration from 4pm. with an anticipated finish at 5.30 pm.
To reserve a place, contact Ro Duns: [email protected] / 0191 243 6014
PS: Do please pass this invitation on to your colleagues if you are unable to attend!
Voluntary workers expenses
A question we are often asked is whether, if volunteers (including trustees) at a charity/CASC choose not to claim
expenses or to claim expenses and pay them back to the relevant charity/CASC, the charity/CASC can claim Gift
Aid on these amounts.
The first point to note is that Gift Aid only applies to gifts of money. If volunteers decide to support the charity/CASC
by not claiming the expenses to which they are entitled then Gift Aid can’t be claimed on the amounts of money
foregone - as they are not gifts of money.
Nor can an agreement be made whereby expenses will be paid on the condition that the expenses are paid back to
the charity - this would not be a gratuitous donation and therefore not qualify for Gift Aid.
Instead the volunteer
has to be free of his/her own volition either to keep the money or to pay some/all of the money back.
Gift Aid will then potentially apply to the payment made to the charity/CASC, so long as the volunteer donor is
actually a tax payer (which may not always be so).
From a pure taxation point of view, if expenses are to start being paid in the hope that the recipient will pay some/all
of them back to the charity then if, say, for £10 expenses £10 is paid back, the charity will be better off by an
additional £2.50, which will be the amount of income tax claimed from HMRC.
There is also the potential for the volunteer to claim higher rate tax relief personally on the donation via his/her
personal tax return if relevant.
The HMRC manuals are very informative in this area and well worth a look (http://www.hmrc.gov.uk/charities/
gift_aid/rules/vol-expenses.htm)
As ever, if you have any queries in respect of Gift Aid please contact David Ward (0191 243 6081/
[email protected]) or Charles Linaker (091 243 6004/[email protected]).
STOP PRESS! STOP PRESS!
FOCUS ON VOLUNTEERS AND SORP
UNW in partnership with Macmillan Cancer Support and Sintons is holding a seminar on Thursday 27
November 2014, entitled “Focus on Volunteers and SORP”
This will cover various topics including the recruitment and retention of volunteers, employment rights, social
media and the challenges that charities may face as a consequence of the new SORP.
This will be held at Sintons, The Cube, Barrack Road, Newcastle and will start at 4.30 pm. (arrival from 4.00
pm.) and will finish at around 5.30 pm.
To reserve a place contact:
Ro Duns at UNW ([email protected]) or Louise Doyle at Sintons ([email protected]).
Any quesons? Contact our Charity Team
Charles Linaker
Corporate Tax
DD: 0191 243 6004
E: [email protected]
Andrew Wilson
Audit & Assurance
DD: 0191 243 6008
E: [email protected]
Anne Hallowell
Audit & Assurance
DD: 0191 243 6237
E: [email protected]
Mark Hetherington
VAT
DD: 0191 243 6073
E: [email protected]
David Ward
Corporate Tax
DD: 0191 243 6081
E: [email protected]
Lee Muter
Employment Taxes
DD: 0191 243 6089
E: [email protected]
Jo Powell
Corporate Finance
DD: 0191 243 6093
E: [email protected]
Alison Gould
Cloud Accounting
DD: 0191 243 6232
E: [email protected]
Bob Morton
Business Improvement
DD: 0191 243 6252
E: [email protected]