Guidance on a couple of potentially challenging questions in the new Charity Commission annual return from 2023

The Charity Commission’s new annual return (effective for year-ends from 1 January 2023 onwards) has now been in place for just over a year.

The new return followed a consultation process and tries to capture information useful to the Charity Commission in their role as regulator and enabler of the sector.

However, as charities need to file annual returns by 10 months after their year-end, this means most charities have likely only started to complete those returns in the latter half of 2023 at the earliest, with returns for March, June, August and December year-ends (the most common), only coming due in 2024. As can be expected, some of these more detailed questions give rise to questions of interpretation, and we’ve clarified some of those with the Charity Commission directly.

Question 1.4 Largest single donation from an individual

The first query we’ve received was around how to answer question 1.4 on “the value of your charity’s single highest value donation received from a corporate donor/individual/related party during the financial period of this return?” Is that intended to be the single highest donation (as it seems!) or could it be interpreted as the single highest total given by a donor during the period? For example, consider the scenario where one donor gave £3,000 in a single donation, but your largest individual donor for the year gave a total of £6,000 in 12 x £500 payments. We’ve confirmed with the Charity Commission that the answer of £3,000 is correct, i.e. the single largest donation (not the donations from the single largest donor).

Incidentally, if your charity receives grants from Stewardship, this is not a donation from an individual, even if the grants we made are funded from gifts we originally received from individuals. This is because those donors make a gift to Stewardship as a charity, and we in turn make a charitable grant. Individuals do not make gifts through or via Stewardship in an agency relationship.

Question 2.2 Trustee payments

The question on trustee payments (question 2.2) doesn’t seem to clearly allow for the situation where a trustee is paid for another employed role within the charity itself (option b only refers to trading subsidiaries or connected organisations):

2.2 Excluding out of pocket expenses, for what were any of the trustees paid during the financial period of this return?

a.    paid for being a trustee

b.    paid for a role within any of the charity's trading subsidiaries or connected organisations

c.    paid for providing goods and/or services to the charity or any of its trading subsidiaries or connected organisations

d.   None of the above

e.   Trustees have not been paid

This is quite a common situation in churches, where a pastor or minister might be a trustee, but is paid for his/her other role.

The Charity Commission has confirmed that, in this scenario, the answer should be (d).  They will work to get the guidance notes updated as soon as possible.

Question 3.1 Source of income

A further question relates to the issue of the geographical source of income. The question asks whether charities have received any income from outside the United Kingdom and specifies that the income should be classified based on the “transactional source” of the income, not the residence of the donor. This can be complex to discern, and raised some queries, for example in the case of a charity that receives international donations from PayPal from US donors. Specifically, as the donations were received in GBP, not USD, having come through PayPal UK, the question posed to us was “should this be counted as gifts from the US, or the UK?”

We posed this question to the Charity Commission to clarify what is meant by “transactional source”. That is, is a US resident giving from UK-earned income through a UK payment processor like PayPal UK (say, with a Visa card, which is issued by his bank in the US) considered to be giving from the US, or from the UK? Or does a US-based giver, who gives from a French account (as that is where they earn their income), through that same UK payment processor get reported as giving from France, or the UK? You can see how this could become very complicated!

The Commission helpfully responded that the intention of the question is really about where the money is actually from. So, if a UK citizen living in the US donates to a UK charity, this would count as income from overseas. On the flip side, if a US national donated to a charity via a payment made in the UK (for example, from a UK bank account or income source), this would not count as income from overseas. What the question is effectively asking for is the location the donation (funds) was made from, rather than the person/bank etc involved, when deciding if the income is from overseas.

Clearly, it might not always be possible to pinpoint this, and some judgement might have to be applied, but the principle to apply seems to be “where does the money come from”, using your best understanding of your donor. In some cases, this might be an informed guess. We do not, at this stage, understand that the Commission is expecting charities to perform excessive research or due diligence for the sole purpose of answering this question!

For large donations, charities should generally perform some due diligence on the donations that they receive, but the basic principle is always that donations should be accepted, unless there is good reason. This due diligence may at least help to inform the answer to this question. More information on this can be found in our blogs: How to deal with tricky or challenging donations? (stewardship.org.uk) and Considerations when Receiving Money from Abroad or Unusual Sources (stewardship.org.uk)

 

Charity Commission guidance

Prepare a charity annual return - GOV.UK (www.gov.uk)

Charity Annual Return 2023: question guide - GOV.UK (www.gov.uk)