Charities monthly round-up June 2024

Battle or ballot? Charities prepare to navigate campaigning season

With the exception of those of us living under the proverbial rock, it has been hard to miss the news that a general election will take place on Thursday 4 July. The much-anticipated election, briefly discussed in the January edition of this newsletter, has ushered in the usual (and expected) increase in political discourse. Against a backdrop of some politically-charged controversies taking place over the last year (see the RSPB matter discussed in the October edition of our newsletter, for example), this shift has been felt keenly in the charity sector, with many organisations feeling unsure about how they can engage with the political discourse.

The Charity Commission (the Commission) has published helpful guidance on charity campaigning in a general election period, providing links to several resources which should be considered essential reading for any trustees or charities intending to engage in political activity or campaigning during the election period. The Commission has also published a particularly helpful resource entitled campaigning and political activity: general election lessons learned, setting out practical insights from their own casework.

Readers should be reminded that guidance from the Commission is not intended to prohibit organisations from engaging in any political activity or campaigning. On the contrary, where trustees believe it would be in the interests of the organisation’s beneficiaries, they may decide to do so. Provided your political activity is supplementary to your organisation’s activities and does not jeopardise your independence in favour of one party or candidate over another, it can be a valid method of supporting your beneficiaries. Readers are encouraged to remain abreast of the Commission guidance throughout the election period to ensure that any political activity they engage in is done within the confines of charity law.

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

Consultation on VAT relief for charities

The Government has announced that it will launch a consultation regarding proposals for VAT relief on charitable donations. Due to be launched before 23 July 2024, the consultation is expected to run for 12 weeks. The new proposals centre around what some have called ‘unequal tax treatment of goods for onward sale’.

Currently, where a business donates ‘everyday items’, such as hygiene or cleaning products, they are not expected to pay VAT if these items are to be sold by the charity. However, where the items are expected to be distributed directly to beneficiaries free of charge, VAT must be accounted for. The new proposals will remove this discrepancy for low-value household goods, ensuring that VAT does not have to be accounted for in either circumstance. It is thought that this change will incentivise donations and see an increase in businesses donating surplus stock to charities supporting those in need. It is currently unclear what impact the 2024 general election will have on these proposals, or indeed on the consultation itself. Watch this space!

Increased fees confirmed by the Fundraising Regulator

The eagle-eyed among you might recall our update on expected changes at the Fundraising Regulator in the January edition of this newsletter, where we noted the regulator’s consultation on its proposal to increase the levy it charges charities. The consultation closed in February 2024 and the regulator has now confirmed the increases to both its levy and registration fees.

It is understood that the changes to the fees payable to the regulator will continue to be based on a gradual scale, with organisations that spend more on fundraising seeing the biggest increases. The changes will also introduce a further two bands to the regulator’s scale, ensuring that growing organisations who begin to spend more on their fundraising will have a more gradual increase in fees, as opposed to a large jump when moving from one band to another. Further details about the increases, including how much the charges are due to increase and when the changes will come into effect, can be found here.

The additional fees are expected to add further financial strain to organisations already facing increased financial pressures. However, the regulator has noted that this increase is the first of its kind since its inception eight years ago. Nevertheless, the regulator has also announced that the levy will now increase with consideration given to the consumer price index each year, meaning that as of September 2026, the fees payable by organisations are expected to increase annually.

If you have any questions regarding the Fundraising Regulator, please contact Natalie Barbosa.

Consultation on the need to review charity law in Scotland

The Scottish Government has opened a consultation to gather opinions on the need to review charity regulations in Scotland. The Government has confirmed that they wish to establish whether a review is required and, if so, what it should cover. The consultation comes hot on the trail of the Charities (Regulation and Administration) (Scotland) Act 2023, which had been criticised by some for addressing a limited scope of issues in place of a more comprehensive review.

Readers who feel they have only just gotten to grips with the changes introduced by the Charities (Regulation and Administration) (Scotland) Act 2023 (or even the Charities Act 2022!) may be dismayed to hear that further changes could be made to the regulatory framework. However, others feel that a comprehensive review of charity law in Scotland is long overdue. The consultation will close on 22 July 2024 and all interested parties are encouraged to contribute. It is understood that the Scottish Government will be running webinars during the consultation period which might assist those who intend to make contributions. 

If you have any questions regarding charity governance in Scotland, contact Esther Campsall or Edwina Turner.

Charity Commission enquiry highlights the importance of reporting

Following a number of issues relating to meeting accounting requirements, including receipt of an official warning from the Commission, a statutory inquiry was launched into the Kogan Academy in June 2023. The inquiry was reported to focus on concerns regarding the trustees’ administration, governance and management of the charity, particularly relating to accounting and reporting responsibilities. On 14 May 2024, the Commission published its decision.

As is often the case, the published decision highlighted a number of issues to be considered by the wider sector. In particular, the decision reminds the sector that trustees of charities with an income over £25,000 are under a legal duty to submit annual returns, reports and accounting documents. However, it also highlights that charities with a lower annual income are still under a legal duty to prepare those accounts and reports and be able to provide these to the Commission upon request. The decision further emphasised the importance of trustees ensuring that the required financial and administrative controls are established and maintained and that the charity’s funds are utilised for the organisation’s charitable purposes.

If you have any concerns or questions about your organisation’s financial, administrative or governance controls, contact Catherine Gibbons.

Charity targeted by ‘scammers’

A community charity based in Cumbria lost £47,000 when its chief executive officer was targeted by cybercriminals. Posing over the phone as representatives from the charity’s bank, the hackers informed the CEO that there had been suspicious activity on the organisation’s account. The hackers were able to provide information which made them appear genuine, convincing the CEO to share the organisation’s banking details under the guise of checking the ‘suspicious’ transactions. The CEO was advised by the hackers to avoid accessing the organisation’s online banking account while the investigation was carried out.

The charity had reported that the devastating loss had left them ‘destitute’, with concerns as to how they would be able to fund their current commitments. However, in good news for the charity, it has now been reported that the bank has agreed to refund the money.

The story serves as a reminder for organisations, trustees and staff members to be vigilant, particularly when receiving unsolicited calls from banks.

Charitable legacies hit an all-time high

Smee & Ford, a company based in the UK specialising in legacy notification services, has reported that the number of charitable legacies included in wills in England and Wales reached its highest level recorded to date. The organisation began tracking legacy data in 2012 and has compiled its legacy trends report for a number of years since. The most recent report, published on 25 April 2024, indicates that more than 38,000 wills included charitable gifts in 2023 with an estimated income from these gifts totalling more than £3.9bn.

Despite the significant income associated with these legacies, the number of wills that include a charitable gift remains comparatively low at 13.7%. However, the report indicates that the increase in legacies is a trend which is expected to continue growing in the coming years. This news may be of particular interest to charities who are searching for insights into donor behaviour to inform their engagement and fundraising strategies. 

If you have any questions regarding fundraising or charitable legacies, contact Natalie Barbosa or Edwina Turner.

Charity fined for data breach

A charity based in London has been fined £7,500 by the ICO for a data breach arising from their HIV support programme. The organisation sent an email to 260 email addresses using the CC function, as opposed to the BCC function. The result of this error meant that at least 166 of the individuals included in the email trail were potentially identifiable by the other recipients. The ICO originally recommended that the charity be fined £300,000 for the data breach, but later revised this figure to £7,500 as a result of the ‘public sector approach‘ currently being trialled by the ICO. A formal reprimand was also issued to the charity. 

The ICO has published information about this matter in a recent blog post, noting that repeated data breaches throughout the health sector have deprived people living with HIV of ‘basic dignity and privacy’, with their HIV status being disclosed and has called for ‘urgent improvements’ to be made.

Notwithstanding the reduced fine imposed as a result of the ICO’s public sector approach, the final figure paid by the charity represents a significant penalty. A key takeaway from this matter is that organisations that employ mass-emailing as part of their communication strategy with beneficiaries and stakeholders should ensure that they are ‘blind copying’ recipients into correspondence and take care to confirm that no recipients could be identified using information contained within the communication.

If you have any questions regarding data protection, contact Emma Watt.

The Charities Act 2022 and disposing of charity land

Readers who deal with disposing of charity land might be interested in the recent blog post published by Mohamed Karim, a solicitor in our third-sector property team. In this blog post, Mohamed explores some of the changes which have been made by the Charities Act 2022 regarding how charities dispose of land and the requirements they must follow to do so.

Employment update

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

• Anna Dabek, has recently drafted a blog post setting out what the general election might have in store for HR. In this article, Anna sets out the employment policies pitched by the two main political parties and what organisations might expect to see during the next government.
• Doug Mullen, has published a blog post about pension scheme surpluses. In this piece, Doug discusses a recent decision handed down by the Pensions Ombudsman and what trustees should consider when exercising discretionary powers to pay out surpluses.
• Of particular interest to charities who regularly use volunteers to deliver their services, a blog post co-authored by Katherine Sinclair and Esther Campsall, discusses a recent Employment Appeal Tribunal decision. Said to have ‘muddied the waters’ between volunteer status and employee status, Esther and Katherine discuss this decision and set out the key learning points for charities to consider when using volunteers.

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

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 and advises a wide range of charities on all aspects of charity law, including governance matters, restructuring, mergers, regulatory matters and property trusts. She also advises multi-academy trusts on a range of governance matters.