church events - the legal requirements

Churches up and down the UK run many thousands of events every year. If you're an event organiser, did you realise that there are legal considerations to take into account?

The Churches Legislation Advisory Service (CLAS) has just produced a very helpful free 9-page checklist,  covering various legal requirements and matters that need to considered when a church plans an event. It includes considerations such as Safeguarding, Health and Safety, Insurance, Food Safety, Alcohol Licenses, and more.

Stewardship works closely with the Churches Legislation Advisory Service. They are an ecumenical membership organisation that seeks to communicate with and influence Government on legislation  and other matters which directly affect churches, and to act as a channel through which Government can consult the churches as a whole. They also comment on the impact of proposed legislation, as well as acting on churches/church ministers’ behalves to seek to cure anomalies and bring about a regime that is as fair as possible. To find out more about membership of CLAS, click here.

To obtain your copy of the Occasional Events checklist, visit the CLAS website and select the ‘Publications’ tab. From there, you can download the document.

Churches: The role of trustees and spiritual leaders

One of the frequent questions that we are asked at Stewardship is about trustees in churches, and how that role interacts with those of the spiritual leaders; ministers, pastors, elders etc. This issue can create confusion and even at times tensions between people. As a result it is an important issue for those involved in church leadership to understand.

The confusion and tension comes out of what the church is; not only a community of Christians working together to evangelise, love and disciple principally governed by the teaching in the Bible but also, very often, a charity governed by UK law. The Charity Commission has guidance for trustees and the Bible has principles for good leadership. These need to work together if the church is to be well governed in both aspects.

It is important in each church setting to work out how these leadership principles are best achieved. This will depend on the type of structure a church has, and who the individuals are in the team. We find that when these are understood and there are good relationships between the people on the team, the different roles work well to support each other and achieve good spiritual direction and good legal governance. Where there is misunderstanding or poor relationships (and one tends to lead to the other), there can be gaps or frictions leading to problems in either or both of the spiritual and legal leadership of the church.

If you want to read more on this area, please refer to our free briefing paper entitled 'Guide to churches on spiritual leadership and trustees'. If you think your own church could improve in this area we do recommend you humbly ask God for help, seek to understand the others in your team and work to see this resolved in line with the teaching of Ephesians chapter 4. If you would think it may help to speak to one of Stewardship’s Consultants, who have practical experience of being involved in both spiritual leadership and trustee roles, please contact enquiries@stewardship.org.uk

Warning on Charity Project Tendering: Beware of TUPE!

As churches and charities increasingly look to seek new opportunities for working in communities, including tendering for new contracts to deliver community benefit, they must do so with their eyes open to the legal realities. One of these ‘realities’ is the TUPE risk. ‘TUPE’ refers to the Transfer of Undertakings (Protection of Employment) Regulations.

In 2011, the 700 Club, a charity in the North East were caught out as they hadn't appreciated that TUPE would apply them. They, along with the Salvation Army, provided hostel accommodation for homeless people in Darlington and both charities were funded by the Local Authority. Due to funding cuts, the Council invited both to tender for one remaining available contract, which 700 Club won. The Salvation Army centre was closed.

According to reports, 700 Club did not change the service that they were providing and were not bidding to take over the Salvation Army contract, but rather to retain their funding. One report quotes Reverend Dr John Ellison, the 700 Club's founder as saying "We made it very clear that in tendering we were tendering for work we already had a contract for - in no sense were we taking over the work of the Salvation Army." However, the Tribunal stated that the charity was expected as a result of the tender to take on the services previously provided by the Salvation Army. As a result, they inherited a reported £250,000 liability in respect of  Salvation Army redundancy payments, on a contract worth only £190,000.

Where a charity takes over the provision of a service from a local authority or other provider, TUPE is likely to apply to transfer the employment of all staff who have spent the majority of their time working on the service.  This will mean the new provider picks up all employment liabilities for those staff.  In a transfer from a local authority this can include an obligation to match the employees existing final salary pension rights – which is a very significant cost by itself. If the church/charity is going to remodel the service they will need to honour any contractual redundancy entitlements and any attempts to "level down" employees’ contractual rights could well be unlawful.  

Matthew Wort, employment lawyer at Anthony Collins, warns that it is crucial that charities carry out a careful analysis of the employment information provided by the outgoing contractor before tendering for work and if they don't have sufficient information to ask more questions. If significant risks are identified it could sink the project. They should consider either not proceeding with the tender or alternatively negotiating with the organisation awarding the contract over a way to manage those risks.  

For the full article click here.

Matthew Wort is a senior associate at Anthony Collins Solicitors. He specialises in Employment Law with a focus on Equality and Diversity matters and has advised a number of charities on TUPE matters. He is Chair of Trustees of Oasis Church Trust, Birmingham.

VAT for churches - an updated guide

Our popular Guide to VAT especially written for churches has been completely re-written and expanded to provide a useful, readable reference guide for various interactions that churches have with the VAT system. There have been a number of major changes to the VAT system which affect churches and this Guide is up to date as at 31 October 2011. Whether the church is VAT registered or not, there are tips on how to avoid paying VAT unnecessarily which, in the case of building projects and property rents, has saved some readers many thousands of pounds.

Whilst this 38 page Guide is detailed, it seeks to distil the complexities of VAT whilst avoiding being overly technical. Rather than cover VAT as a topic, it covers only those areas that will typically be faced by churches (and Christian charities).

Separate sections cover: Introduction and General Principles, VAT Planning, VAT Registration, Property Acquisition, Use and Maintenance, VAT Reliefs for Charities, Churches Registered for VAT and Frequently Asked Questions, plus a useful contacts and addresses section. Six Appendices provide copies of the Pro Forma VAT Certificates that your church may be asked for, or may be required to provide (for example in order to gain VAT Zero rating).

We are grateful to the senior VAT Consultants at Crowe Clark Whitehill for their help in producing this Guide and ensuring that it remains an authoritative text for Churches and Christian charities.Click the link below to order the new guide.

VAT for Churches – a detailed guide

reporting public benefit

Last month the Charity Commission reported that new independent research commissioned by them has found that charities need to do more to describe how people benefit from their work. Many charities are missing out on the opportunity to explain, through their reporting on public benefit, how their work has a positive impact on their beneficiaries.

The research, by Sheffield Hallam University, assessed how well registered charities are getting to grips with the new requirement, introduced in 2008, to report on public benefit in their Trustees' Annual Report (TAR).

Put simply, public benefit reporting is about explaining:

• What a charity's aims are and what it has done to carry them out
• Who it seeks to benefit
• How people have benefitted

The research has shown that trustees are generally able to explain their charity's aims and who benefits from its work. However they are less successful in explaining how they have benefitted in practice.

The Charity Commission published its general guidance on public benefit for charities in January 2008, followed by four sets of supplementary guidance in December 2008. This initially caused some concern amongst churches who thought they needed major social action programs to justify their charitable status. However this is not the case. For an explanation of the ‘Public benefit’ requirements for churches please see Stewardship’s Briefing Paper.

We have created  an example of the sort of matters a church could outline in their annual report to show how they achieve this. Every church and charity will be different and the style of writing is not crucial. In terms of content it should be remembered that the most common readers of charities annual reports are regulators, researchers, local media and those who want to know more about the organisation. The report is therefore not primarily written for the church membership or the charity’s stakeholders. You can find the example report here.

The aim is to explain the work , its vision and values, and how it is has benefitted people in practice. We know that much of the impact of Christian work is like seed; sown and only becoming apparent in time, but it can still be explained.

The Commission has also published a selection of fictitious example trustee reports, which aim to demonstrate how charities can effectively report on their public benefit. All guidance and examples are on the Charity Commission website. 

Gift Aid – the end of transitional relief

When you make a Gift Aid gift into your Stewardship account, we are entitled to claim ‘Transitional Relief’ from the Government. This adds a further 3.2% to the value of the amount given and is added to your account balance. Transitional Relief compensates charities for the reduction in the basic rate of tax from 22% to 20% on 6 April 2008. It does not affect the amount of personal relief that higher and additional rate taxpayers can claim so it really is a bonus whoever the giver is … but only whilst it lasts!

HM Treasury has confirmed, as expected, that the relief will not be extended beyond its original  three year term and so it ends in the next couple of months - on 5th April 2011.  Gifts made into your account after this date will not be entitled to Transitional Relief.

so what actions should you be thinking about now?

• Consider whether regular gifts that you had planned to make after 5^th April can be advanced to before 5^th April.

• If you have plans to make any one-off gifts, consider if these can be made before, rather than after 5th April.

giving for higher rate taxpayers

For some years now, higher rate taxpayers have been able to claim personal tax relief equal to the difference between the higher rate tax that they pay on the top part of their income and the basic rate claimed by the charity. Transitional Relief does not affect this calculation. To illustrate:

•  If you are a higher rate taxpayer, have you considered giving the additional personal tax relief (final line above) as an additional gift into your account?  If you do this, we can claim Gift Aid on it, and if you do this before 5^th April, we will be able to add Transitional Relief as well!

Persons earning over £112,950 are no longer entitled to a personal allowance. If your taxable earnings are in the bracket between £100,000 and £112,950, part or all of your personal allowance against tax will be withdrawn. This means that you are effectively paying tax at 60% on that part of your income between these two limits.

• The gross value of gifts into your Stewardship account reduces the amount of your ‘income’ for these purposes. Therefore if the total value of gifts that you have made to charity (including to Stewardship) in the tax year bring your income below £112,950 relief will be gained at 60% for that part taken out of the above bracket.

giving for additional rate taxpayers

If you are earning over £150,000, so that you are paying the additional rate (50%) of income tax, the relief position is even better:

•  If you are an additional rate taxpayer, have you considered giving the additional personal tax relief (final line above) as an additional gift into your account? If you do this, we can claim Gift Aid on it, and if you do this before 5^th April, we will be able to add Transitional Relief as well!

•  If your taxable income, after other tax planning and reliefs, such as pension contributions, falls just above £150,000, making a special one-off Gift Aid gift for this purpose could reduce your income below £150,000, bringing you out of the additional rate altogether. Aside from the tax relief that the gift brings, this may have other personal benefits, such as reducing the tax rate on any dividend income that you enjoy from 42.5% to 32.5%.

the Stewardship Gold account – ideal for larger gifts

Stewardship’s Gold account is the ideal way to organise charitable giving for those who have large amounts to give.  Starting with a balance of £10,000 or more, tax-effective gifts can be made into the Gold account at any point. And with no requirement for you to ask us to distribute funds immediately, this can be particularly useful for personal tax planning - for end of year bonuses or on an inheritance, for example – secure the tax relief now, choose recipient causes later.

You can request us to transfer part of your balance to our Pooled Investment Fund. The remaining balance will grow with a monthly credit equivalent to interest. So, funds can increase whilst you think about how you wish to distribute them.  You can also set up a Direct Debit from your bank account to organise your regular giving.

For more information on how to keep all your charitable giving, efficiently, under one roof, go to www.stewardship.org.uk/gold

HM Treasury publishes outcome of Gift Aid forum

Justine Greening MP, Economic Secretary to the Treasury, has now published the Coalition Government’s response to the Fanning Report which was produced following the deliberations of the Gift Aid Forum:

 >> View the full response here <<

The Forum was set up with the remit of considering how structural and process improvements to Gift Aid may increase giving to charity. Kevin Russell, Stewardship’s Technical Director, who sat on the Forum said:

“The Forum debated a wide variety of issues and, with such a diverse sector, it was never going to be possible to satisfy everyone’s interests. However, both HMRC and Government are now much better informed as to where improvements can be made to ensure the continued success of Gift Aid in the 21st Century. There is a real openness to working together to see charities succeed in what is a very difficult economic climate.”

The Government have indicated that they wish to take forward the following recommendations:

• Recognition that Gift Aid is a success. As part of this, the Government will look, with the sector, to ways to raise awareness of Gift Aid, particularly among donors and to improve the knowledge and capability of charities. For example, by tax professionals donating skills and time to help charities benefit from Gift Aid.
• HMRC to move quickly on recommendations where Guidance can be improved or clarified. This to include oral declarations, split payments and sponsored events.
• Recognising the potential benefits for both HMRC and for charities, HMRC are to consider the viability of offering online filing of Gift Aid claims.
• Whilst not able to fund a Gift Aid Declarations database, the Government are keen to encourage the sector on such an initiative, including ensuring that any development meets legislative and audit requirements.
• HMRC will launch new ‘intelligent’ gift aid forms for charities in the New Year. These are expected to comprise the R68i claim form, the form ChA1 enabling charities to register with HMRC for the first time and form ChV1 which enables charities to advise HMRC of important changes in personnel.
• HMRC to examine proposals for higher rate taxpayers to be able to redirect their gift aid tax relief to charities.

The Minister confirmed that Transitional Relief will not be extended beyond April 2011. Instead, the £100m Transition Fund announced as part of the Comprehensive Spending Review will provide more targeted support to the charities that need it most.

Proposals that the Government will not be taking forward:

• Application of gift aid to money equivalents, such as donated goods and expenses.
• Bringing payroll giving within Gift Aid.
• Permitting couples to claim Gift Aid, when only one of them donates on behalf of the couple.

A Charity Tax Forum will now be established, with wider membership, to consider charity tax issues, covering not just Gift Aid, but other matters including VAT. The new Forum will play a role in progressing recommendations to be taken forward by the Government.

£100m Transition Fund details announced

Minister for Civil Society, Nick Hurd, announced on 30 November 2010 that the £100million Transition Fund to support charities, voluntary groups and social enterprises affected by public spending reductions was now open for applications.

The fund is available to organisations with a turnover of between £50,000 and £10million, which have derived much of their funding from state sources.

It will provide grants of between £12,500 and £500,000 to enable organisations to make the changes they need to become sustainable in the longer-term.

The Transition Fund is managed by the Big Fund, the non-lottery funding arm of the Big Lottery Fund.

Applications can be made by visiting www.biglotteryfund.org.uk/transitionfund or calling 0330 303 0110.

The application process will close on 21 January 2011.

The Spending Review: Issues for Churches & Charities

by Kevin Russell

I have identified a number of issues and opportunities for the church and charity sector. There is a lot of detail still to come, but here is my analysis of today's announcements.

Public Sector Reform

The way services are delivered will be reformed by moving provision away from central government. Underlying this is the belief that: 

• changes needed to tackle the UK’s social and economic challenges are too numerous and  complex to be solved by a one size fits all approach from central government
• new and innovative ideas are required to address these challenges. These ideas are most likely to come from service users, community groups and employees
• central government micro-management can stifle the innovation needed to instigate real change

To maintain the momentum for reform, and consult further with public sector staff, citizens and communities on how to deliver better services, the Government will publish a reform White Paper early in the New Year. This will set out further detail on the policies announced above.


Opportunities for churches and charities

The Government believes that it should continue to fund important services. But it does not have to be the default provider. This stifles competition and innovation and crowds out civil society. The reforms create new opportunities for non-state providers, including churches. In line with this, the Spending Review announced: 

• that the Government will pay and tender for more services, on the basis of results. The use of simple tariffs and more innovative payment mechanisms will be explored in new areas including community health services, processing services, prisons and probation and children’s centres. This complements measures already announced in relation to welfare to work, mental health and offender rehabilitation services
• the Government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises. This approach will be explored in adult social care, early years, community health services, pathology services, youth services, court and tribunal services, and early interventions for the neediest families

In addition, the Government are committed to:

• giving communities due notice and the right to buy or run public assets and services that might otherwise close or face significant reductions;
• giving parents, teachers or community groups the right to bid to start new schools

Funding

The Government have stated that they will assist new providers by improving access to the resources they need:

• the Government will direct around £470 million over the Spending Review period to support capacity building in the voluntary and community sector, including an endowment fund to assist local voluntary and community organisations. As part of this:
  
  
  • the Government will provide funds to pilot the National Citizen Service. The aim of the NCS is to encourage young people to become engaged and involved in social action within their communities.
  • establish a Transition Fund of £100 million to provide support to voluntary sector organisations delivering frontline services that stand to be affected in the short term by reductions in spending, and are able to demonstrate that the financial impact will affect their ability to deliver services. The fund will be provided for a transition period, enabling these organisations to adapt.
  • The Big Society Bank will bring in private sector funding in addition to receiving all funding available from dormant accounts;
• the Government will undertake a review of ways to increase philanthropic giving. Further details will be announced later this year.

It remains to be seen whether this funding, at an individual level, will be enough to enable cash strapped charities to deliver the services that these reforms are aimed at.

Charity Commission

The Review announced that the budget for the Charity Commission will be reduced from £29m in the current year, to £26m next year and down to £21m by 2014-15. The incoming Chief Executive of the Commission has already speculated on how these cuts could lead to the withdrawal of advice to charities (for which see the previous Legal & Financial bulletin).

Treasury Gift Aid Forum: The Report

By Kevin Russell, Technical Director.

The Treasury’s Gift Aid Forum, on which I was Stewardship’s representative, finally reported today. Well, maybe not. The charity sector is a very diverse one, which is one of its great strengths. But is also means Forum members both agreed and disagreed on a wide range of issues from minor administrative reforms through to major proposals such as calling for the extension of Gift Aid transitional relief, due to end next April, and the introduction of a ‘composite rate’ of relief in place of the current basic rate and higher rate taxpayer reliefs. Neither made it through to the final report for sound, but technical or political, reasons.

In a way, it was inevitable that such a diverse sector would not reach widespread agreement on the content or priorities for such a report. So it was a relief in a way, when late in the process, the Justine Greening, the Treasury Minister, asked Peter Fanning, the Chief Executive of the Chartered Institute of Tax to prepare and present an independent Report on the proceedings of the Forum. He sent his report to the Minister today.

But what were sector representatives able to agree on? Well quite a lot. First off, we are anxious to make it clear that Gift Aid is a valuable relief and the work on reform should not be taken as a sign that it is ‘broken’. It isn’t. But there are ways that it can be improved such as facilitating electronic recording of Declarations, being able to file Gift Aid claims online, and more mundane things like having greater clarity over how Gift Aid applies to donations from couples when only one member of the couple is a taxpayer. The points that we were able to unite around are set out in a three page summary  signed by Stewardship and a coalition of charity partners: NCVO, Charities Tax Group, CAF, IOF, Arts and Business and the Small Charities Coalition.

Do you have thoughts on how take up of Gift Aid can be improved? What do you find most difficult or irksome? Add your comments below.