About the CFDG
Current Issues
Page last updated 03.07.09
For all the latest news and advice on the recession (including the forthcoming Government action plan for the Third Sector), see our Recession Watch page.
For news the latest vat cases, please see here.
FRS 30: Heritage Assets
On 19th June 2009 the Accounting Standards Board issued FRS30 Heritage Assets. It comes into force for accounting periods beginning on or after 1st April 2010 although early implementation is encouraged.
The main change is the requirement of additional disclosures for heritage assets otherwise the accounting treatment is as per FRS15 and SORP 2005. There have, however been some minor relaxations
- • internal valuations are now allowed
- • revaluation frequency need not be every 5 years
- • a lighter touch on impairment
- • a donation will be treated as a gain in the SOFA within donations
The Charity SORP committee will be issuing an information sheet in due course.
Surveys
Charges for surface-water drainage
CTG are also running a survey on the new charging regime for water. Ofwat (the water regulator) have changed the rules for how organisations are charged for water use, but have taken no account of the nature and position of charities and other voluntary groups, and the properties they operate.
CTG's survey, and more background information, can be accessed here. Surveys should be completed by 26th June.
Personal Liability for Senior Accounting Officers
Budget 2009 announced proposals to introduce a personal liability for the senior accounting officers of large companies (SAOs). SAOs will now be required to provide personal certification that their accounting systems are capable of ensuring accuracy in their tax reporting, under the penalty of £15,000 fines. For more information see the briefing from BDO Stoy Hayward, or Deloitte's dedicated website.
Update 15th May: An Opposition Amendment which would have deferred the SAO measure implementation date by 12 months was defeated at Second Reading in Parliament. The Financial Secretary to the Treasury announced various changes to the measure during the debate on Clause 92:
• Schedule 46 and the definition of large company will be changed in Committee so that it only applies to ‘companies with a large business relationship with HMRC and a customer relationship manager reflecting that.’ The details are not yet clear. The Minister referred to reducing the number of companies affected to around 2,000, which might suggest it will cover businesses within HMRC’s Large Business Service (LBS) with a customer relationship manager (CRM) and also those in local Large & Complex with a CRM. We understand though that this may not be the case.
• It is intended to reduce the number of certificates required from two (A or B) to one. There is no indication as yet whether this would be A or B. Type A is for companies that have appropriate accounting systems. In type B, an explanation needs to be given of circumstances where there were not appropriate tax accounting arrangements. There should be more detail at the Public Bill Committee debate on Schedule 46 (probably some time in mid-June).
• The requirement for company auditors to be notified as well as HMRC will be dropped; the Government now accepts this may cause 'operational difficulties'.
• Senior Accounting Officers will not be held responsible for retrospective accounting system flaws (ie before the legislation is passed).
• When asked about the level of materiality to be applied, the Financial Secretary referred to a return being 'correct and complete'. This may be revisited at Public Bill Committee.
• Regarding regulations to be made under Schedule 46, the Financial Secretary said that regulations on penalties will be available in draft in time for the Public Bill Committee. No regulations under Schedule 46 will be introduced for the changes to the large company definition; these will be dealt with through amendments in Committee.
We understand that draft guidance on the measure should be available before the Public Bill Committee.
Update 22nd June: Government amendments to the Senior Accounting Officer provisions in Finance Bill Schedule 46 have now been published. Detailed comment will be issued shortly when the promised draft regulations and guidance appear. The Schedule will be debated on Tuesday 23 June. The Financial Secretary Stephen Timms has told the Commons that a number of changes will be made to these provisions, and in particular that the amendments refer to ‘qualifying companies’, which, subject to possible further exclusions made by Regulation is a company which meets either or both of the following requirements:
• Relevant turnover More than £200 million
• Relevant balance sheet total More than £2 billion.
The turnover and assets of members of the same group (broadly defined) are aggregated for this purpose.
As drafted, branches of foreign companies and UK resident non UK incorporated companies will not fall within the definition of a qualifying company. The requirement for companies to provide certification to their auditors is still expected to be dropped and there is now only one type of certificate that needs to be provided to HMRC. A welcome change means that the accounting arrangements are now required to enable the company’s ‘relevant liabilities’ to be calculated accurately in all material respects.
Update 26th June: An amendment to the definition of ‘Senior Accounting Officer’ has also been agreed, which now reads ‘the director or officer who, in the company’s reasonable opinion, has overall responsibility for the company’s financial accounting arrangements’.
Withholding tax – reclaims
EU member states will be in breach of the EU Treaty if they tax the income of foreign investors operating in their state at a higher rate than they tax domestic investors, solely on the grounds of non-residence. Charities with significant income from EU investments held either by the charity or its pension fund are being advised to consider submitting protective claims in the relevant states for all years that are within local time limits.
More details
Cross-border Giving
Update: Austrians to change regulations in line with ECJ decision
(From LMSC) Under Austrian tax law, donations to certain institutions established in Austria such as universities, art colleges and the Academy of Science, may be recognised and deducted as operating expenses by any person making such donations, while donations to comparable institutions in other countries may not be so deducted. Moreover, the donations are only recognised as deductible expenses if the related activities are carried out for the benefit of Austrian science or the Austrian economy.
In the light of the ECJ’s conclusions in Persche, the European Commission has formally requested that Austria change its tax provisions to end this discrimination, citing free movement of capital and freedom to provide services as justification for its action.
Update: 27th January 2009
The Grand Chamber of the ECJ has now given its judegment in Persche, on whether or not a gift (either in cash or in kind) to a charity in another EU member state is tax-deductible by the donor in respect of domestic tax liability. The Charity Tax Group reports that, ‘The Court has decided that such gifts come within the provisions of the EC Treaty relating to the free movement of capital and that Article 56 EC prevents any blanket ban on tax-deductions for donations to non-domestic charities. However, the onus is on the taxpayer to show that, in such circumstances, the gift is made to a body that would satisfy the domestic law on charitable purposes: for example, a gift to a foreign political party (even if it was established as a charitable foundation) should not be tax-deductible in the United Kingdom because, under English and Scots charity law, a political party may not register as a charity.
‘Whether this judgment has much impact on charities in the UK will depend on various factors: Will it encourage donations to UK charities from people resident in other EU countries? Will it encourage those living in the UK to give to overseas charities rather than domestic ones? How will the system operate given that basic rate tax relief on donations to UK charities goes to the charity rather than the donor? Will there be any subsequent pressure from the European Commission to harmonise the system of tax relief which could result in all the tax relief being shifted to the donor? We will be following developments closely and will keep you updated.’
More background on cross-border giving can be found on the Tax and VAT page.
Icelandic banking crisis
23rd April
On 4th April the Treasury Select Committee released a report, Banking Crisis: The impact of the failure of the Icelandic banks, which recommended that charities should be compensated in full for their losses in the Icelandic banks. So far the Government has not given a formal response to the report, and there was little to give any indicator of their likely action in the Budget on 22nd April.
Alongside Save Our Savings, NCVO, CAF and Acevo, CFDG wrote to the Chancellor on 20th April to welcome the report and urge the Government to adopt its recommendations.
Letter to the Chancellor (20th April 09)
3rd November
Over the last four weeks CFDG in collaboration with other sector bodies has been campaigning for charities to get full compensation for their losses in the Icelandic banking crisis. Research by CFDG, NCVO, Acevo, the Charities Aid Foundation and the Charity Commission has revealed that 48 charities are affected and they have lost £86.6m. However, there still may be more charities that have not come forward and we would urge those charities to do so we can understand the full loss to the sector. We believe from the KSF website that it may be as much as to £230m (the KSF indicated on 30th June 2008 that they had 99 charity clients investing £230 million - but we cannot be sure these are all british charities.)
We are currently in discussions with the government to set up a loan gurantee scheme that would be provided on an interest free basis until charities could recover their lost funds from the administrators. We will continue to lobby on your behalf on this issue and will keep you informed of any progress.
Further information:
Letter to the Chancellor
Call for members to contact CFDG if they are exposed to the Icelandic bank freeze
Joint statement from the Office of the Third Sector and sector leaders on the Icelandic banking crisis
Latest new story: Charities lost up to £200m in Icelandic banks
Pyramid selling schemes
CFDG has become aware of a spate of pyramid selling schemes in the South West and Wales from which part of the funds generated are donated to charities. The schemes work in something close to the following way: Each entrant pays a fee of £3,000 and recruits 2 other members. These two repeat the exercise and so on until a total of £24,000 has been raised (the “game” continues for all but the first member). The original entrant then claims their prize of £23,000 at a ceremony where they have to answer 3 questions, £600 goes to their nominated charity, £300 is used for miscellaneous prizes at the ceremony and £100 is for the buffet. Presumably the organiser also gets a return as well.
These schemes ultimately always fail leaving a number of participants out of pocket. They are also possibly in contravention of the gaming act and the charities act. Whilst it is perfectly reasonable to accept the donation, charities should be aware of the reputational risk to the charity, and of course to the sector, should the scheme become public.
The Charity Commission has provided us with the following advice:
'Charity trustees have a duty to act in the best interests of their charities. This will include on occasions refusing or returning a donation which has come from a source that could create reputational risk for the charity if it was accepted. Recently some charities have been offered or received donations from pyramid gifting schemes, schemes that the Office of Fair Trading describes as offering "false promises about quick and easy money". Such schemes always collapse leaving many members out of pocket and creating ill will towards those that have benefited. Trustees may consider that the negative publicity that will be associated with such a scheme would damage their charity and so refuse or return any donation from such a source.
In very extreme or complex cases, where trustees consider that their decision to refuse or return a donation may be challenged as not being in the interests of the charity, they can ask the Charity Commission for advice.'
Please be on the lookout for donations of this type and consider seriously whether you should accept them or return them to the donor. Also please advise the Charity Commission and give them as much detail as you can should you receive such a donation - you can do this by calling 0845 3000 218 or emailing enquiries@charitycommission.gsi.gov.uk