Charities monthly round-up August 2024

While some of us were off enjoying some well-deserved fun in the sun (whilst it lasted), it seems that there has been no rest for the Charity Commission (the Commission) who have published a number of open letters, statements and new guidance documents over the past month. So, before you swap the beach for the board room, why not take some time to brush up on the essential developments in the charity governance sector this month? 

Regulatory statements following the Southport attack and ‘civil unrest’

Readers will undoubtedly be aware of the tragic incident that unfolded in Southport on 29 July. The attack, which took place at a dance studio and led to the death of three children and numerous other victims being injured has triggered shockwaves throughout the country. On 31 July, the Commission and the Fundraising Regulator issued a joint statement on how the public could show support for those affected by the attack, emphasising the importance of donations being directed to legitimate causes so that funds are not misdirected away from true charitable beneficiaries.

The attack has also been attributed by many as the catalyst to the mass ‘civil unrest’ which saw protesters, rioters and counter-protesters taking to the streets in several towns and cities across the country. In response, on 7 August, the Commission published a statement on ‘charities responding to the public disorder’. In this statement, the Commission empathised with charities facing incredibly challenging circumstances and recognised that many charitable organisations had also become victims of targeted attacks. The statement urges trustees to ensure they continue to make decisions in good faith and in the best interests of their organisations. The statement encourages charities to revisit the Regulator’s existing safeguarding guidance which sets out how charities should handle incidents or allegations of abuse and prioritise the safety and wellbeing of staff, visitors and beneficiaries.

If you are concerned about civil unrest affecting your organisation, or you would like to get support with your safeguarding policies, please contact Edwina Turner or Sarah Tomlinson.

The appointment of the new Treasury Minister sees a change in the VAT regime for private school charities

Readers may be aware that James Murray, who previously served as former shadow Financial Secretary and former deputy mayor of London, was appointed as the Exchequer Secretary to the Treasury on 9 July 2024. With the charity tax regime falling under his remit, Murray’s appointment was welcomed by many within the sector who called on him to modernise the tax system and remove financial barriers faced by many charitable organisations.

Just 20 days after his appointment, the Treasury announced that the Government would be ‘ending tax breaks for private schools, helping to raise revenue to fund state education priorities’. The new proposals, which have been a mainstay in Labour’s manifesto since at least 2017, would see the VAT exemptions for private school fees removed. This would mean that both private school and ‘closely related’ boarding and lodging fees would be subject to the standard 20% VAT rate. The proposals would also remove the business rates and charitable rate relief for private schools.

The potential increase in income resulting from this policy change has been linked to the Government’s plans to open 3,000 new nurseries and recruit 6,500 new teachers. It is also understood that the additional income could help fund the Government’s pledge to roll out breakfast clubs to all primary schools in a bid to tackle child food insecurity. However, the proposals have been controversial and many groups have been vocal about the potential implications of the changes. For example, it is feared that the changes could disproportionately affect children and young people receiving SEN support through independent private schools. Additionally, the proposed changes to charitable rates relief for business properties would be the first time that eligibility has been removed from a particular type of charitable organisation on this scale. Many people within the sector have feared that this could split charities into a two-tier system, where some charities are deemed as being ‘deserving’ of tax relief while others are not. The Government has opened a technical consultation on the proposed tax changes which can be accessed through the technical note published on their website. The consultation will close on 15 September 2024, with the changes to the tax regime slated to come into effect from 1 January 2025. All stakeholders are encouraged to consider the technical note and feed into the consultation.

If you would like to discuss the potential changes and the impact they might have on your organisation, please contact Phil Watts or Esther Campsall.

New guidance on banking published by the Charity Commission

It will come as no surprise to readers that insufficient access to suitable banking services has long been considered somewhat of an epidemic throughout the charity sector. Indeed, the eagle-eyed among you might recall our commentary on charity banking in the March 2024 edition of this newsletter, where we reported on a Charity Commission survey that showed 42% of charities experienced poor service from their banks in the last year.  

Likely in response to this survey, the Commission has published new guidance on charity banking, offering essential advice for trustees navigating the challenges of securing adequate banking services. The guidance serves as a reminder of the importance of ensuring that your banking arrangements align with your operational needs and regulatory obligations.

Acknowledging the challenges faced by many organisations in accessing satisfactory services, the guidance provides helpful links to access further support and information on how charities can address complaints with their banks. Trustees should familiarise themselves with this guidance to safeguard their charity’s financial integrity and ensure they are receiving the support and services they need to maintain their operational continuity. 

In related news, the launch of a new website aimed at supporting charitable organisations with their banking facilities has been welcomed by many within the sector, including the Commission. UK Finance, a trade association in the banking and financial services sector, has reportedly worked with charitable organisations and representatives to address the issues faced in accessing banking facilities and the website is intended to help them through the process.

If you would like to discuss the contents of this guidance, please contact Catherine Gibbons or Sarah Tomlinson. Our funding team can also help with any banking queries you have.

Trust in charities at a ten-year high, says the Commission

The latest research from the Commission reveals that public trust in charities has reached its highest level in a decade, marking a significant milestone for the sector. According to the press release published by the Commission, the research suggests that ‘how money is spent by a charity’ is the single most important factor for the public.

Whilst this news will be heartening for many organisations operating in the sector under increasingly challenging circumstances, the research underscores the critical importance of charities committing to transparency, good governance and effective communication to maintain public support. The research into ‘trustee attitudes’, which was published alongside the research in public trust, suggests that while most charity trustees are confident in fulfilling their responsibilities, they may be less confident when dealing with conflicts of interest or overseeing charity finances.  

This may be a good time for trustees and charitable organisations by extension, to reinforce their commitment to the principles of good governance. If this news has inspired you to conduct a governance review on your charity, please contact Edwina Turner. 

Charity Commission publishes open letter for local authorities

On 8 August 2024, the Commission published an open letter to local authorities, highlighting its concerns regarding non-compliance with legal responsibilities when acting in their capacity as charity trustees. The letter highlights common problems the Commission has seen, as to how local authorities deal with charitable land and assets. The open letter has acknowledged the challenging circumstances faced by many local authorities who are operating during a time when increasing demand is coupled with shrinking budgets. However, the letter aims to pre-empt and prevent common issues which can cause ‘significant administrative headaches’ for local authorities who fail to comply with their duties.

In conjunction with the open letter, the Commission has also published updates to both their guidance for local authorities as trustees of charities and their guidance on recreation ground charities. All relevant local authorities are encouraged to consider the letter and guidance documents to ensure that they are not inadvertently failing to meet those responsibilities.

Any local authorities who are concerned about understanding their charitable assets and their legal duties should contact Catherine Gibbons. Our local government team are also on hand to provide the external legal support you might need.  

Anthony Collins responds to the Charity Governance Code consultation

A consultation on the Charity Governance Code was launched by its steering group on 21 May 2024. Running until 11 August 2024, the consultation sought feedback from stakeholders and those who regularly use the code to test its effectiveness and ensure it reflects the latest standards and practices.  

We submitted a response to the consultation which highlighted key areas of importance, including accessibility and awareness of the code, as well as the need for robust governance practices that align with the evolving challenges facing the charity sector. We remain committed to advocating for our clients and contributing to the development of a governance framework that supports the long-term sustainability and effectiveness of charitable organisations.

Finally… the Charity Commission publishes its General Election casework summary

In what has turned out to be a Charity Commission ‘bumper edition’ of our newsletter, our final piece centres around the casework summary published by the Regulator on 14 August 2024. The research and analysis report provides a rundown of the compliance cases opened by the Regulator during the 2024 General Election period and highlights the common pitfalls faced by charitable organisations. The report acknowledges that charities can engage in political activity or campaigning provided this is done in a party-neutral way and is in support of their charitable purposes. However, the case studies highlighted in the report add helpful context to the legal principles and illustrate how political activity can ‘cross the line’.

The Commission’s commentary on charity activity during the election period has generally been positive, with the report noting that there were fewer instances of ‘high-risk’ cases. Both the report and the statement published by the Commission following its publication included praise for the ‘constructive campaigning’ and an uptick in organisations who proactively sought to engage with the Regulator during the election period.

The report should be regarded as ‘required reading’ for any charity trustees or employees who consider political activity or campaigning an important means of achieving their charitable objectives. Indeed, the report also serves as an important reminder that the Commission is a proactive regulator who, rather than merely responding to complaints or reports, will actively monitor the sector and act on intelligence it might become aware of, including, for example, the appearance of a charity in the media.

If you have any queries regarding charities engaging in political activity, please contact our charities team.

Employment update

Our employment team have recently published several insightful articles which might be of interest to readers:

• Douglas Mullen and Lauren Broderick have recently co-authored an article on a perceived shift in the approach taken by the First Tier Tribunal. Noting that the tribunal has previously been reticent to allow appeals from employers who claim they had not received compliance or penalty notices from the Pensions Regulator, the article highlights a number of recent cases that have diverted from this approach. Although this news is relevant for all charitable organisations with employees, the article may be of particular interest to smaller employers who have picked up penalties from the Pensions Regulator in the past.  
• Hannah Bollard has authored an interesting article on employer-led saving schemes, focusing on the legal and regulatory risks involved when deductions are made from staff wages.  
• In other news, Katherine Sinclair and Libby Hubbard have published an article on sexual harassment in the workplace. The article focuses on the Working Protection (Amendment of Equality Act 2010) Act 2023, which is due to come into force on 26 October 2024, as well as the draft guidance on sexual harassment at work published by the Equalities and Human Rights Commission (EHRC). The article discusses the new mandatory duty for employers to take reasonable steps to prevent sexual harassment in the workplace and highlights what steps employers should take to prepare for the changes and finalised guidance.

For any advice on employment matters related to your organisation, please contact our employment team.

Regulatory update

Our regulatory team have also recently published an interesting article which might be relevant to readers:

• Precious Melia, a solicitor in our regulatory team has published an article reporting on a recent case where a charitable trust has been fined following the tragic death of a volunteer. The article reminds readers of their health and safety obligations and the duty of care owed to volunteers.

For any advice on regulatory matters related to your organisation, please feel free to contact our regulatory team.

For more information or advice on the topics raised in this month’s newsletter, please contact Sarah Patrice. Sarah is a partner in the governance, funding and corporate team and advises on a range of concerns for community-based organisations including charities, housing associations and housing co-operatives. She specialises in providing governance, regulatory, contractual, charity, board and company secretarial support and has extensive experience advising on constitutional matters, board disputes, group structures and joint ventures.