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Category: Legal Eagle

Water Rates – new law to ‘rain in’ excessive charges?

Several water and sewerage companies have moved to ‘site area charging for surface water drainage’ - a levy for the removal and treatment of rain that falls on roofs, car parks and other non-permeable surfaces and drains into public sewers.

As a result, churches with large roofs or car parks, as well as other faith and community groups have been hit by huge increases in water charges – some being charged four figure sums where nothing had previously been payable.
 
A new Bill announced in the Queen’s Speech, the Flood and Water Management Bill provides for water and sewerage companies in England and Wales to operate concessionary schemes for community premises. On the face of it this is good news. But at present, the scheme as presented in the Bill is discretionary rather than mandatory and gives companies their own discretion as to the scale of reductions in charges, who qualifies as a community group etc.

The Government are however charged with issuing guidance on aspects of the Scheme which the water companies must ‘have regard’. The worry therefore is that they will either choose not to operate concessions or limit the value of the scheme to community groups. We, along with other sector representatives are monitoring the progression of the Bill.

Water charges in Scotland: small charity exemptions

The Scottish Government has announced that registered charities with a small income will continue to be eligible for exemption from water and sewerage charges from 2010 to 2015.
 
Any charity registered with OSCR that moves premises after 1 April 2010 and continues to meet all other criteria will retain its exemption. Any registered charity that has moved premises since 1 April 2006 and lost its exemption as a result, will from 1 April 2010, be able to reapply for exemption.

The maximum income criteria will be increased from 1 April 2010 from £50,000 to £60,000 and will increase by £1,500 per annum thereafter.

Posted by Kevin Russell on January 15, 2010 12:47 AM | Permalink | Comments (1)

Signs of recovery - an end to the tough times?

The next six months could potentially herald an official end to the UK recession and a new Government - with all the initial optimism that new governments often bring to the markets. So, is the immediate future for charities bright?

Most commentators will say that the jury is out on that one. But there are three ‘already known’ reasons for charities to be less cheerful.

From April 2011:

  • Gift Aid transitional relief is scheduled to be abolished. Broadly speaking, under present rules, this will reduce the tax value of charities’ gift aid claims by around 11%;
  • Employers’ National Insurance contributions are to be increased to 13.3%. Broadly, this will increase the cost of this part of the payroll bill by 3.9%. At the same time, employees’ contributions go up to 11.5% with the additional rate for high earners going up from 1.0% to 1.5% - creating further pressure on payroll costs.

Potentially from any point:

The rate of VAT could increase beyond the 17.5% that came into force from 1 January 2010. With rates in the UK being relatively modest compared to the Eurozone as a whole and with VAT being one of the most effective ways for the Government to raise additional revenue, this must be a real possibility.

With pressure on Government finances all round, charities cannot expect any favours in the short term.  Each of these measures will mean adjusting budgets to meet increased costs. For larger charities, the amounts could be significant.

  • Do you think that your charity will be badly hit?
  • Do you have plans to deal with these changes?
  • Or are you simply not concerned?

Share your views here!  

Posted by Kevin Russell on January 8, 2010 12:29 AM | Permalink | Comments (0)

Putting faith in good governance

The Charity Commission have just published a new Guide to help faith based charities comply with charity law and equip them to work even better, whilst recognising that maintenance of their faith identity, core aims and mission is key.

Aimed at smaller and newer charities and written in brief rather than overly technical style, the Guide draws together existing guidance from various sources but also usefully includes case studies of how faith based charities have applied governance principles in their own charity.

The main sections cover:
Charity Registration: clarification over the legal requirements for Registered Places of Worship, registration of previously excepted churches, use (or otherwise) of denominational governing documents and what to do now if your church wishes to register as a charitable incorporated organisation (CIO);
Governance Roles: including ‘who are our trustees?” and a very useful section on “Private benefit to religious leaders”; and


A Summaries section: useful topics including recruitment of new trustees, the question of trustee liability and a brief summary of the public benefit requirement.

Is this a useful document? Tell us what you think by posting a comment to the blog.

“Faith in Good Governance” is available by clicking onto
http://www.charity-commission.gov.uk/Library/tcc/pdfs/faithgov.pdf

 

Posted by Kevin Russell on January 7, 2010 2:47 PM | Permalink | Comments (0)

The VAT Package and 2010

It seems that many charities are not only unaware of major new VAT provisions that came into force on 1 January 2010 but even those that are have not necessarily realised the implications for charities.

Prior to 1 January, where a UK VAT registered charity buys in services from another EU country, then local VAT (at the country of origin) is charged and, to the extent that the charity receiving the services is able to recover input VAT, it can apply for a refund from the country of origin using the refund mechanism. Services bought in from non EU countries such as the United States are not subject to VAT.

However from 1 January, the UK charity will need to apply a ‘reverse charge’ on all services bought overseas regardless of whether or not they are supplied by an EU on non EU supplier. The ‘reverse charge’ entails the UK charity charging itself VAT and paying this over to HMRC as output tax and then, subject to any partial exemption etc. restrictions, recovering that VAT as input tax. What are the implications?

  • For services originating outside of the EU, VAT will now be charged at 17½% where there was no VAT charge in the past. If that supply is attributable to an exempt or non-business supply by the UK charity, their cost base will increase by 17½% overnight. Unless they are able to recover VAT in full because the input VAT is wholly attributable to a taxable supply, there will be a cost to them.
  • For services originating from within the EU, the rate charged will now be 17½% (as a reverse charge) rather than the rate applicable in the jurisdiction of origin. The overseas supplier will zero rate their supply if the UK charity notifies them of the UK VAT number. Whether or not there is additional cost to the UK charity will depend largely on the differential between the current VAT rate charged by the overseas supplier and the UK VAT rate to be charged from 1 January.
  • If the UK charity makes supplies of services overseas, supplies to EU countries will now need to be zero rated. BUT, the value of the supplies made will need to be declared on a quarterly ESL (European Sales List) return.
  • The time of supply of a reverse charge service is not the invoice date but the date of performance of the service or payment date (if sooner). Application of this in practice will be very difficult.

At the very least, this means accounting etc. system changes to identify relevant supplies that the reverse charge needs to be applied to as well as making sure that EU suppliers are notified of the charity’s UK VAT number and ensuring that they no longer charge VAT on their supply.

Further information: http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm

Posted by Kevin Russell on January 7, 2010 2:37 PM | Permalink | Comments (1)

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