The big news for charities this month has been the implementation of further provisions of the Charities Act 2022. However, this important news should not overshadow or distract from several other significant developments in the sector.
The Government has issued its response to the Independent Investigation into Child Sexual Abuse, which should serve as a wake-up call for all charities. Separately, the Government are consulting on changes to EU employment law, while charities can explore new ways to attract and retain staff. There has also been significant legislative change in the rental sector, with the Renters (Reform) Bill being published.
There have also been some important tax updates, including some significant case law, as well as some new case law on charity governance. Looking at the sector more generally, there are significant changes to the regulation of charities in Scotland and there are general reports on new trends in the sector.
Charities Act 2022 – Further updates
Further to our February update about the timetable for implementation of the Charities Act 2022 and the Charity Commission has now provided further information, another wave of Charities Act 2022 provisions came into force on 14 June 2023.
On 6 July Laura Mynott from our Charities Property Team and Edwina Turner from our Charities Governance Team, will be hosting an hour-long webinar on the Charities Act 2022, (focussing primarily on the changes to the requirements on the disposal of land by charities) which you can sign up for here. Please also see our recent blog post for further information.
The changes involve:
- changes to the disposal of charity land (on which, see further our May newsletter)
- extending charities’ powers to spend, borrow and invest in relation to permanent endowment property;
- extending the Commission’s powers to regulate charities’ names (including charities exempt from registration); and
- changes to the definition of ‘connected person’.
These impact several pieces of Charity Commission guidance. The Charity Commission has updated its guidance on:
- How to choose a charity name
- Sales, leases, transfers or mortgages: what trustees need to know about disposing of charity land (CC28)
- Acquiring land (CC33)
- Permanent endowment: rules for charities
- How to make changes to your charity’s governing document
- How to merge or link charities
- How to transfer charity assets
- Change your charity structure
- Charity mergers: helping you succeed
- It’s your decision: charity trustees and decision making (CC27)
- Charity reporting and accounting: the essentials March 2015 (CC15c)
- Charity reporting and accounting: the essentials November 2016 (CC15d)
- Charity reserves: building resilience (CC19)
- Managing a charity’s finances (CC12)
- Charity reporting and accounting: the essentials (CC15b)
- Collaborative working and mergers: an introduction (CC34)
- Dissatisfied with one of the Charity Commission’s decisions: how can we help you?
- Exempt charities (CC23)
- Charities and investment matters: a guide for trustees (CC14)
- Total return investment for permanently endowed charities
- Charity Commission regulations: charities total return
The final changes introduced by the Charities Act 2022 are due to be implemented by the end of 2023.
In the meantime, for further information about the changes, please see the Charity Commission’s press release and feel free to contact our charities team.
Government response to Independent Investigation into Child Sexual Abuse
The Government has responded to the report and recommendations of the Independent Investigation into Child Sexual Abuse. In its response to recommendation nine (extending the barred list of people unsuitable for work with children) and recommendation eleven (extending the disclosure regime to those working with children overseas), the Government refers to the April 2023 Bailey Review on the Disclosure and Barring Regime, which also made recommendations relevant for safeguarding. The Welsh Government has also issued a response to six of the recommendations.
The importance of safeguarding procedures has been emphasised by recent reports on abuse claims against the Scouts in both the sector and national press.
For further information about the Government’s response and strengthening your safeguarding processes, please contact our charities or regulatory team.
Employment update: EU law, zero-hours contracts, flexibility and staff retention
The Government has opened a consultation on retained EU employment law. The consultation is particularly concerned with the working time regulations, holiday pay and so-called TUPE transfers. The consultation closes at 23:59 on 7 July 2023. For further information about the discussions surrounding retained EU law, please see our series of blogs:
- Is the Government doing an E-U-Turn? – Controversial Bill to revoke EU law appears to have been kicked into the long grass
- See EU Later – government announces post-Brexit changes
- Brexit update – government announces EUge list of retained EU laws for the bin
Charities that use zero-hours contracts should consider the Workers (Predictable Terms and Conditions) Bill 2022-23, which is making its way through parliament. As explained in our blog, the Bill would introduce a right for workers to request a change to their hours to make them more ‘predictable’ and legislation will set out grounds on which employers can refuse. Our blog suggests that the Bill offers an opportunity to reconsider the appropriateness of zero-hours contracts despite the flexibility they offer. Alternative ways to offer flexibility are term-time contracts for parents and grandparents and four-day weeks. These discussions are particularly important given new legislation bolstering the employment rights of parents and carers.
The importance of retaining good staff is emphasised by Third Sector reporting that charity shops are having difficulty finding staff, despite an increase in charity shop income. However, there has been some good news with reports of a volunteering bounce-back since the pandemic. One proposed solution for staffing concerns has been reducing barriers for volunteers changing organisation.
For further advice about EU law, employee rights or different ways of structuring employment contracts, feel free to contact Anna Dabek, Libby Hubbard, Hannah Bollard or our specialised employment teams for the charities, education, health and social care, and housing sectors.
Rental reforms
The much-anticipated Renters (Reform) Bill was published on 18 May. The Bill will have a significant impact on the social housing sector. As explained in our blog, the Bill introduces changes to the assured shorthold tenancy regime, rent reviews, the grounds for possession, the regulation of the private sector and local authorities’ enforcement powers. Please find our four-part ebriefing series for information about the effects of the Bill on tenure and implied terms about pets, assured/assured shorthold tenancies, the grounds for possession (with a related blog) and a new landlord redress scheme and database of private landlords and tenants.
Separately, the Department for Levelling Up, Housing and Communities, the regulator of social housing, and the Ministry of Housing, Communities and Local Government have published information to help social housing providers calculate rent increases in line with inflation.
For more information on the Renters (Reform) Bill, please feel free to contact Helen Tucker, Emma Hardman, Penny Bournes or Jabir Dar.
Tax and financial news
HMRC have updated their information about certificates for reduced rates of VAT payable by certain charities (namely those whose fuel or power supplies are for ‘mixed use’) and provided examples of ‘minor impurities’ that will not affect entitlement to the reduced rate. They have also updated their general information about VAT in relation to late submission and late payment penalties, and a new approach to interest.
There has also been some tax case law. In April, the tax chamber of the first-tier tribunal delivered its judgment in Yorkshire Agricultural Society v Revenue and Customs which concerns (in part) how fundraising events are dealt with under the Value Added Tax Act 1994. Readers may remember that the Yorkshire Agricultural Society has previously brought a challenge concerning the tax payable on events, as reported by the Charity Tax Group in 2018.
Another significant tax case has been the Supreme Court’s decision this month in favour of Nuffield Health, reported on by Third Sector. The decision concerned Merton Council’s decision that Nuffield Health was not entitled to mandatory business rates relief because its membership fees were too high. The judgment sets out a two-step test for whether a charity is entitled to relief, summarised in the Supreme Court’s press release. See also the Charity Tax Group’s report on the case.
Sticking with tax reliefs, the consultation on tax reliefs mentioned in our May newsletter is still open, with responses due by 20 July 2023. The consultation is directed at both charities and Community Amateur Sports Clubs (CASCs) and covers the rules on ‘tainted charity donations’ (which readers may recall from our blog about internal financial controls on donations), the rules on investments by charities, tax payable on non-charitable spending by charities and the consequences of late filing of tax returns and late payment of tax. HMRC also have another consultation open, which also closes on 20 July 2023, about its information and data-gathering powers.
On the financial side, there have been amendments to the Economic Crime and Corporate Transparency Bill currently making its way through Parliament. The Bill is intended to introduce various reforms including stricter ID requirements at Companies House for those involved with companies, increasing the regulatory powers of Companies House, and an offence of failure to prevent fraud (on which see further the Government’s update and our blog). The Finance (No 2) Bill 2023 is also making its way through Parliament and contains provisions amending the definitions of ‘charity’ (in the Finance Act 2010) and ‘community amateur sports club’ (in the Corporation Tax Act 2010) to restrict them to those based in the UK, provisions affecting the tax-interest expense amounts and ability to carry forward a deficit for charitable companies, and provisions on the tax liabilities of trustees and beneficiaries.
Case law update
Aside from the tax cases discussed above, the High Court has delivered its judgment in Haque and Anor v Faradhi and Ors. The case concerned the suspension and termination of members from an unincorporated body on the grounds of unacceptable conduct, who were alleging that this was retaliation for raising concerns about the organisation’s electoral process.
The High Court has also delivered its judgment in Attorney General v Zedra Fiduciary Services (UK) Ltd, concerning whether an appeal is in the interests of a charity. The judgment includes a discussion on what constitutes the best interests of a charitable trust and indicates that the question is what serves the charity’s purposes rather than the trust/organisation itself.
For further information about these judgments, feel free to contact our charity governance team.
Changes to Scottish regulation
The Charities (Regulation and Administration) (Scotland) Bill is currently making its way through the Scottish Parliament. The Bill will make several changes to the regulation of charities in Scotland, including increasing the powers of the office of the Scottish charities regulator, amending the rules around trustee remuneration, requiring that new charities registered in Scotland have a sufficient link with Scotland, changing the rules on disqualification of trustees and managers and creating a register of charity mergers. The Office of the Scottish Charities Regulator has also published a new policy on inquiries. This is made more interesting by reports of recent regulatory action by the regulator to prevent trustees taking action while the regulator investigates.
Mergers and changes to the way we ‘do’ charity
Third Sector has reported on several shifts in the sector including the need to talk about food policy and generally the importance of gathering ideas. Third Sector also reports on the importance of working together, with the Charity Finance Group also providing advice for a good merger.
If you have any general questions about trends in the sector, feel free to contact our charities team.
For more information
For more information or advice on the topics raised in this month’s newsletter, please contact Esther Campsall.
Esther is a senior associate in the governance, funding and corporate team. With over 13 years of experience advising charities, she has advised on all aspects of charity law, including governance matters, restructuring, mergers, formations, trustee roles and responsibilities, property trusts, contracts, trustee payments and regulatory compliance. In addition, she advises multi-academy trusts on a range of governance matters, including academy conversions and transfers of single-academy trusts into multi-academy trusts.
