Charities

As prices rise across the UK, individuals are feeling the pinch on the amount of disposable income in their pockets, which is set to have a rippling effect throughout the economy.

Due to this, it may not come as a massive shock that the cost-of-living crisis is already having a dampening effect on the number of donations that charities are receiving.

According to Charities Aid Foundation (CAF), last month around 2 million fewer people made donations to charity, with 12 per cent of respondents stating that they plan to scale back on charity donations.

How can charities survive with fewer donations?

With charity leaders expecting an increase in the demand for their services, as mentioned in one of our previous blogs, bosses may be apprehensive about the future for the sector.

Despite this, individuals may be looking to support charities in different ways, such as devoting their time through volunteering and including Gift Aid on any donations that they do make (if they are a UK taxpayer).

Furthermore, charities may be able to raise finance from other avenues – including fundraising through trading or collaborating with brands to receive a proportion of income from the sale of certain items.

Of course, there is also the opportunity to obtain funding from the Government.

In fact, the Government recently announced that it would provide over £500,000 in grants to charities in order to further both research and training to support ex-armed forces individuals.

For help and advice with related matters, please get in touch with our charity finance team.

Ransomware cyberattacks are potentially one of the biggest threats to charities in 2022, a major study has revealed.

The report, published by the Foundation for Social Improvement (FSI) in collaboration with the National Cyber Security Centre (NCSC), outlines how not-for-profits can protect themselves from cybercrime.

According to Remi Bridgeman-Williams, programme manager at the FSI, a ransomware attack “has the power to inflict the most damage on your charity”, with breaches costing the average organisation thousands of pounds.

Ransomware is a type of malware (malicious-software) that prevents you from accessing your computer and the data stored on it. The hacker will usually contact you via an anonymous email and ask you to make payment in return for access to your computer and files.

The NCSC does not encourage, endorse or condone the payment of ransom demands, as there is no guarantee that you will get access to your data and you will be more likely to be targeted by cybercriminals in the future.

According to the latest data, a quarter of charities experienced a cyberattack – such as a ransomware attack – in the last 12 months, resulting in an average loss of £8,000 per organisation.

To prevent attacks, charities should ensure that they are regularly backing up data on the cloud, do not use Remote Desktop Protocol (RDP) tools to access your workstation remotely, download the latest security updates, and educate your team on the importance of cybersecurity.

For help and advice on protecting your charity’s assets, please get in touch with us.

By 1 September 2022, a significant majority of trusts in the UK need to be signed up for and ready to use HM Revenue & Customs’ (HMRC) Trust Registration Service (TRS), including non-taxable trusts.

Not sure what steps you need to take? Or how this change affects you and your trust? We have answered some of the common queries below.

What is the Trust Registration Service?

The TRS is part of the UK’s implementation of the Fourth Money Laundering Directive and was launched in 2017 by HMRC.

When it was initially launched, only certain taxable trusts were required to register where they incurred a specific UK tax liability in the tax year.

This included those with a tax liability under self-assessment, as well as those not under self-assessment, which incurred one-off taxes like SDLT and inheritance tax (IHT).

Under the TRS, these are known as “Registerable Taxable Trusts” and their obligations to keep details updated and make annual declarations by 31 January continues for as long as they are taxable.

However, under the Fifth Money Laundering Directive, the TRS is being extended to all express trusts save for a limited number of exempt categories.

These are known as “Registerable Express Trusts” and they are not required to submit quite as much information but must be registered by the deadline later this year.

As a result of this change, the majority of non-taxpaying trusts will now need to register and provide specified information, including the details of trustees, beneficiaries and any UK land or property held by the trust.

This registration process has been open since 1 September 2021 and includes:

• All UK express trusts unless they are specifically excluded;
• Non-UK express trusts that acquire land or property in the UK; or
• Have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.

Are any trusts exempt from registration?

Certain trusts do not need to register unless they are liable to pay UK tax. These include:

• Trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme;
• Trusts used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured;
• Trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within two years of the death;
• Charitable trusts which are registered as a charity in the UK, or which are not required to register as a charity;
• Pilot trusts that were set up before 6 October 2020, and which hold no more than £100;
• Co-ownership trusts set up to hold shares of property or other assets that are jointly owned by two or more people for themselves as tenants in common;
• Will trusts that are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to two years after the person’s death;
• Trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme; or
• Financial trusts created in the course of professional services or business transactions for holding client money or other assets.

Some other less common types of express trusts that are set up for particular purposes are also excluded from registration unless they are liable for tax.

Do I need to register for the Trust Registration Service?

Many trusts will now need to be registered on TRS by 1 September 2022 and this includes trusts set up many years ago, which may have been forgotten about or lay dormant but still exist.

It should also be remembered that trusts may switch between the different sets of rules, and this will depend on whether they are liable to pay one of the specific taxes that causes them to be a Registerable Taxable Trust. The information required and deadlines differ, further adding to the complexities for Trustees to consider.

If the trust needs a Unique Taxpayer Reference (UTR) for Self-Assessment purposes, it must still register to get this, even if it is included in the exclusion list for Registerable Express Trusts.

The changes are due to the mix of tackling money laundering and also trust tax relationships with HMRC.

The distinction has been hard to draw, and this leads to some trusts being caught which may come as a surprise.

Trusts caught in this way, and that need disclosing include:

• Bare trusts (unless they fall within one of the exclusions);
• Trusts holding investment bonds;
• Discounted gift trusts;
• Pilot trusts set up to receive pension death benefits and life assurance;
• All-new pilot trusts set up since 6 October 2020;
• Child ISAs (child trust funds are not caught, and it seems child bank or building society accounts are to be excluded but this will not cover Child ISAs or other accounts holding shares for example);

Co-ownership trusts (such as declarations of trust over property) where the trustees and beneficiaries are not identical.

• Situations caught include scenarios where the number of trustees differs from the number of beneficiaries. Situations with minors as beneficiaries would be impacted as they cannot be trustees;
• Employee benefit trusts (EBTs) and Employee Ownership Trusts (EOTs) are not exempt and so those in existence on or after 6 October 2020 must be registered by 1 September 2022, including those that have already been distributed; and
• Trusts would up in the period between 6 October 2020 and 1 September 2022 also seem to be caught (unless they fall within one of the exclusions).

Any non-taxable trusts created after 1 September 2022 must be registered within 90 days, plus any trusts which start to have a duty to register like will trusts continuing beyond two years after death. Any changes to the trust details or circumstances must also be registered within 90 days.

Registering a trust

Trustees are being encouraged to register their trust online by following HMRC’s guidance here.

Some trusts may have already completed a 41G form, however, HMRC has confirmed that this did not collect sufficient information to meet the requirements of this new legislation, therefore, those trusts which registered separately with HMRC before must now use this service to provide the information that is required.

Trustees now have less than eight months left to register these details. HMRC recommends that trustees and their agents familiarise themselves with the TRS system and gather the information required to register in advance of the final deadline this September.

Failure to register on time could lead to action being taken against a trustee, including potential penalties. Do you need help preparing your trust for registration? Get in touch.

The voluntary sector will be expected to plug the gaps in meeting public services demands over the next five years, according to new data.

Research from the Charities Aid Foundation (CAF), which polled more than 1,000 sector leaders, found that 90 per cent believe charities will have to step in as the cost-of-living crisis worsens over the coming months and people are increasingly concerned over household finances.

Three-quarters of those questioned (75 per cent) said demand had increased during the pandemic, and against the backdrop of strained household finances, nine in 10 (86 per cent) anticipated that demand is likely to increase.

Technology key to the future

Although most (80 per cent) are confident that their organisation could meet demand, only half (50 per cent) are optimistic about the future of the charity sector overall.

Almost all agreed that technology will allow charities to open up new and innovative ways of conducting their mission (88 per cent), and that technology will change the nature of the workplace for charities (90 per cent).

The wide-ranging survey also found that three quarters (71 per cent) of charity leaders believe the public is more aware of their contribution to society because of the pandemic, and nearly two-thirds (64 per cent) think that the Government sees charities as vital connections to local communities.

Conversely, fewer than a third (31 per cent) think the Government values their contribution to public policy, and fewer than one in three (29 per cent) believe that charities are seen as a source of insight to help plan for future crises.

Finance the main challenge

The research also found that financial sustainability is the main challenge for the majority (58 per cent) of charity leaders, but almost two-thirds (64 per cent) of them are pessimistic about Government support for the sector.

Neil Heslop OBE, Chief Executive of the Charities Aid Foundation, said: “The last two years have reminded all of us that charities form the backbone of our society and the contribution they make to our communities and wider society is undeniable.

“It’s clear that charity leaders feel unsettled and now is time for charities to take stock of what they need to do to rebuild their finances and reset their relationships with volunteers, donors and the Government.

“With their in-depth local knowledge and on-the-ground networks, charities are in an ideal position to help the Government achieve the 12 missions announced last week to level up the nation.”

For help and advice on related charity matters, get in touch with us.

The Government’s Levelling Up white paper, published this month, has provoked a mixed reaction from regional leaders. However, charities and social enterprises see opportunities in the levelling up agenda.

The UK Shared Prosperity Fund, worth £2.6 billion over two years, will focus on domestic priorities and “be used to restore local pride”, according to the Government paper. It says local leaders will be empowered to direct funding towards their own, locally identified priorities.

That could include supporting local businesses, tackling anti-social behaviour, targeting litter and graffiti, promoting new outdoor markets, reviving high streets and supporting those furthest from the labour market.

However, the proposed measures also include recommendations for charities, including:

Volunteering and community

The COVID-19 pandemic saw rising levels of volunteering and community services as people rallied around to support others.

Government statistics show over 12.4 million people across the country volunteered, including 4.6 million first time volunteers. Therefore, the white paper says it will build on the Volunteering Futures Fund.

The Government will also launch a strategy for community spaces and relationships, which will:

• Reach out to disconnected communities
• Empower community groups to come together
• Gather evidence of what works in communities
• Engage with communities, local Government and civil society to identify priorities, the assets that matter to local places, and the policies and actions needed to strengthen community infrastructure.

The Government says it will collaborate with partners and the Office for National Statistics to gain a “better understanding of the facts and figures behind community activity and develop a civil society satellite account.

These are accounts that cover activities linked to the economy but not part of the core UK national accounts, including environmental accounts, tourism satellite accounts, and household satellite accounts.

This will mean estimates more fully reflect the scope of the sector and fill a longstanding gap in official statistics.

Empowering communities

The Government says this will be new agreements between councils, public bodies and communities themselves to empower communities to shape the regeneration of their areas and improve public services.

Supporting social enterprises and procurement

The paper says: “The UK Government will consider how the existing Community Asset Transfer and Asset of Community Value Schemes can be enhanced and consult on options to go further to support community ownership.” Elsewhere, it will look at how to better support social enterprises in disadvantaged areas.

Youth and young people

By 2025 the Government wants all young people to have access to regular out of school activities and volunteering and 300 new or refurbished youth facilities will mean there are 45,000 extra youth activities each year. A “reformed” National Citizen Service will be funded for three years.

Other key points for charities:

Lottery: The paper says the Government will “explore further collaboration between lottery funders for arts, heritage, sport and community projects within the UK to ensure that £1.7 billion in National Lottery funding every year reaches the people and places that need it most”.

Parks: A new £30 million parks fund will deliver up to £1 million to at least 30 local parks in England for refurbishment with an emphasis on facilities for young families.

Culture, heritage and sport: The document sets out a commitment to funding cultural initiatives, particularly outside of London. It also focuses on funding to improve community football pitches.

The levelling up white paper contains many measures that seek to assist and aid worthy causes in the coming years. To find out how you could access and make the best use of new funding, please contact us.

Charities and other noble causes are set to benefit to the tune of £44 million with donations from the Dormant Assets Scheme.

The Government says that the funding will help tackle youth unemployment, support communities in deprived areas and give people in need access to finance and will take the total donated by the scheme to almost £850 million over the past decade.

Dormant assets are funds held within financial services products that have been idle for 15 years or more, and despite attempts to trace their owners, they have not been reunited with their money.

Now a Government Bill, set to become law in Parliament, will cast the net wider to include dormant assets from the insurance and pensions, investment, wealth management and securities sectors.

The National Lottery Community Fund will distribute the latest £44 million grant, as following:

• £20 million will go to Access – The Foundation for Social Investment, to provide urgently-needed finance for up to 1,000 charities and social enterprises, particularly in more deprived areas.
• £20 million will enable Youth Futures Foundation to evaluate and evidence the best approaches to breaking down barriers and improving access to employment for disadvantaged young people.
• £4 million will allow Fair4All Finance to accelerate its work on affordable consolidation loans for people in financially vulnerable circumstances.

The Department for Digital, Culture, Media & Sport (DCMS) says there are 30 participating firms in the scheme, which will continue to have consumer protection at its heart, with participants’ priority remaining reuniting people with their assets where possible.

More businesses will soon be able to voluntarily transfer dormant assets into the scheme, unlocking funding for social and environmental causes across the UK that are additional to central or devolved Government funding.

David Knott, Chief Executive of The National Lottery Community Fund, said: “The money unlocked through the Dormant Assets Scheme will be widely welcomed and comes at a challenging time for communities.

“We’re delighted to be distributing this £44 million, to support charities and social enterprises working to help people in some of the most deprived areas of England. This vital funding will have an impact on people’s lives and support them towards a more prosperous and thriving future.”

For help and advice on matters related to funding please contact our experienced charity finance team today.

A new study has found that charitable donations in Wills increased significantly throughout the Covid-19 pandemic.

According Co-op Legal Services which authored the report, more people than ever are using charitable bequests within their Wills – in part to benefit from Inheritance Tax (IHT) relief.

The study revealed that charitable donations left in Wills increased by 61 per cent in the year to December 2020, compared to the previous 12 months. The data also shows that around a third of all Wills now include a gift to charity.

The report suggested that by raising awareness of the tax benefits of leaving money to charity could lead to a further increase in annual legacy revenue.

Under current Treasury rules, all gifts left to charity are tax-free and are not counted as part of the overall value of your estate.

Additionally, if more than 10 per cent of an estate is left to charity, the IHT rate on the portion of an estate above the IHT threshold is reduced from 40 to 36 per cent.

Rob Cope, Director of Remember A Charity, said: “Family and friends will usually be people’s first consideration in a Will. But leaving a charitable bequest is something that many people find incredibly empowering – a statement about who they are and what they believe in – and a wonderful way to shape the world they leave behind. It’s great to see how much appetite there is for giving in this way.

“Legacy income has been vital for charities, particularly over the past year when events and retail were so badly hit.”

For help and advice on IHT rules and charitable giving, please get in touch with our team.

The Charities Aid Foundation (CAF) has reported a “£300 million increase” in donations throughout the coronavirus pandemic.

More than £958 million was paid to “tens of thousands” of charities and social enterprises in over 100 countries, including the UK.

The third sector organisation helps charities access funds “as quickly and safely as possible” through international grant-making and fundraising programmes.

According to The Trustees’ Report for 2020/21, donations to the organisation increased by 43 per cent (or around £300 million) during the coronavirus pandemic, topping £1 billion “for the first time”.

Of this, more than £100 million was generated in partnership with the UK’s insurance and long-term savings industry’s ‘Covid-19 Support Fund’ and the Department for Digital, Culture, Media and Sport’s ‘Community Match Challenge’, the report reveals.

The CAF Bank also increased its financial support to not-for-profits in 2020/21, providing £164.7 million in loans and other finance facilities.

Commenting on the figures, Neil Heslop, OBE, Chief Executive of CAF, said: “The Charities Aid Foundation exists to accelerate progress in society towards a fair and sustainable future for all. This remarkable year of generosity, with more than £1 billion donated into our care, demonstrates that the philanthropists and businesses that we partner with share this ambition.

“Together, we enable charities to do more life-changing work with lasting benefits and true impact where it matters most. We collaborate across sectors and borders, with governments and fellow funders seeking innovation so civil society may thrive.”

People working for the not-for-profit sector are less likely to be paid the Real Living Wage than those in other industries, a major study has revealed.

The Living Wage Foundation said charities should think about how they can “improve pay to attract new people to the sector” amidst a reported jobs crisis.

Not to be confused with the National Living Wage (NLW) or National Minimum Wage (NMW), the Real Living Wage is based on living costs and is set by an independent organisation.

The wage is currently paid by more than 7,000 UK businesses and is enjoyed by over 250,000 employees.

The Real Living Wage is voluntary, however, and businesses are under no obligation to pay it.

But with third sector job vacancies exceeding pre-pandemic levels, the foundation is urging charities to consider adopting the Real Living Wage to attract more and higher-quality candidates.

“Around a fifth (17 per cent) of all third sector workers earn less than the real Living Wage. This compares with 26 per cent in the private sector and six per cent in the public sector,” said Joe Richardson, of the Living Wage Foundation.

“It is these workers – particularly those in the private and third sectors – who are more likely to have lost work or income due to being furloughed throughout the pandemic, while those on better pay have typically fared better.”

Third sector jobs site, Charity Job, also found that there are currently more than 40,000 paid charity jobs on its platform, suggesting that charities are “struggling to fill roles”.

“The UK charity jobs market has experienced enormous changes during the time of the pandemic, from the low point of the first lockdown to the current high. Whether or not the pandemic will bring about long-term change remains to be seen, but it is likely that the impact will be felt for some time yet,” said the recruiter.

“The shortage of candidates is a concern, as charities that can’t fill their vacancies might be unable to do vital work.”

According to a recent study, almost nine in 10 (86 per cent) employers who pay the Real Living Wage say it has improved the reputation of the business, while three in four (75 per cent) say it has increased motivation and retention rates.

A further 64 per cent of businesses say it has helped them differentiate themselves from others in their industry, while over half (58 per cent) say it has improved relations between managers and staff.

For help and advice with payroll support for your charity, please get in touch with our team.

Fraud and cybercrime have cost the charity sector almost £9 million in the last 12 months, a new study has revealed.

The data, published by the Charity Commission, shows that there were 1,059 separate incidents of fraud reported by organisations between April 2020 and March 2021.

However, the “true scale” of fraud against charities is “believed to be much higher”, as fraud often goes unreported.

The report also suggests that the coronavirus pandemic has increased the risk of fraud, with 65 per cent of not-for-profits stating that remote working and virtual sign-off processes have exposed their organisation to criminals.

The Charity Commission is now urging trustees to sign up to a new “Stop Fraud Pledge”. Developed in collaboration with the Fraud Advisory Panel, the initiative encourages charities to take six “practical” steps to reduce the chances of falling victim to fraud. This includes:

• Appointing a suitable person (staff member, volunteer or trustee) to champion counter fraud work throughout our organisation.
• Ensuring that all our trustees are aware of their legal duty to protect the charity’s assets.
• Consulting with staff, volunteers and trustees to identify the types of fraud that threaten us and the ways we can prevent them.
• Creating a written fraud policy and sharing it regularly – with staff, volunteers and trustees – so that everyone understands what fraud is and how they can help prevent it.
• Performing checks on the individuals and organisations with whom we have a financial relationship.
• Assessing each year how well our fraud controls are working, taking into account new risks and making improvements as needed.

Commenting on the report, Helen Stephenson CBE, Chief Executive of the Charity Commission, said: “Sadly, as these figures we have released today show, there remain criminal individuals who would take advantage of organisations that seek to do good and of those that generously donate.

“That is why I am calling on all charities to take the risk of fraud seriously by signing up to our new Stop Fraud Pledge and taking six simple steps to protect their charity. Combatting fraud gives the public confidence that their money is safe, protects vital funds for charities and more widely helps maintains trust in the charities we all care so passionately about.”

David Clarke, Chair of the Fraud Advisory Panel, added: “With fraud and cybercrime at record levels it has never been more important for charities to be aware of the risks and how they might be affected.

“As we emerge from the pandemic, charities need to recover and flourish without fear of fraud. Taking relatively simple measures can go a long way to protecting your charity and keeping it safe from harm.”

Charities can sign up to the Stop Fraud Pledge here.

For help and advice on all third sector financial matters, please get in touch with our charity team.