Time for small charities to worry about charity registration?

Time for small charities to worry about charity registration?

One of the proposals in Lord Hodgson’s Review of the Charities Act 2006, to increase the annual income threshold for compulsory charity registration to £25,000, came in for some criticism when published. It seems the proposal reflects views expressed during the Review itself about the need to reduce the regulatory burden on small charities. Criticism revolved around fears that small charities will suffer if those proposals replace the current provisions in the (now) 2011 Charities Act which require charity registration when annual income reaches £5,000.  Subsequent reassurances from Lord Hodgson himself may go some way to allay those fears. 

Charity registration and small charities – fears so far?

One concern raised on behalf of small charities was the potential impact for them of not being registered as a charity. It is true to say that charity registration is important for many smaller charities who view charity registration as something which confers credibility. Whether that is right or wrong in terms of the process itself - given that charity registration recognises rather than confers charitable status  - many smaller charities look to charity registration to provide comfort in dealings with the public. 

  

Charity registration with all that that involves (including a registered number and presence on the Register of Charities) can be particularly important for those small charities who are not able to rely upon legitimacy bestowed through membership of umbrella bodies or federation structures. Small charities are perhaps less likely to be able to point to membership of other bodies, such as the Fundraising Standards Board say, to provide reassurance to the public and potential donors.

    

The second concern was about the loss of tax relief. It would plainly be bad news for small charities if the proposals for raising the threshold for charity registration meant small charities missed out on tax relief from HMRC.   If tax relief depends upon charity registration and the threshold for charity registration exceeds your income as a charity you are bound to lose out.

Charity registration and small charities – fears allayed at this stage?

But the latest assurances from Lord Hodgson seek to allay those concerns.

It seems that any changes to the threshold for compulsory charity registration would be combined with other measures, measures designed to enable small charities to weigh for themselves the benefits of charity registration against any disadvantages they perceive from the accompanying regulation. So the income threshold for charity registration would only go up to £25,000 provided that any charity with income below that (and not exempt or excepted) could choose to voluntarily register (online). And whilst there would be a link between charity registration and gift aid, gift aid would not depend upon charity registration based on the increased threshold.   Gift aid claims would themselves trigger, regardless of annual income, compulsory charity registration.

What now?

It is too early to know which if any of these proposals regarding charity registration will come to fruition. The recent follow up comments from Lord Hodgson, appear to put the proposals in a different light, moving them closer to striking a balance between recognising the value of the charity ‘brand’ to small charities and the need for them to recognise and weigh the regulation that goes with that. Whether the Charity Commission will have the resources to implement these proposals, if they go ahead, is another matter. For now we will have to watch and wait.

  

What price payment of charity trustees?

What price payment of charity trustees?

Much has been said so far about the recommendations contained in the report of Lord Hodgson into the Charities Act 2006 published on 16 July 2012. Views have been expressed about the potential impact of the recommendations for charities generally, and for small charities in particular.

One recommendation has attracted lots of attention so far and has been criticised as potentially damaging to all and small charities. That is, the proposal that charities with an annual income in excess of £1 million be allowed to pay trustees without the need for Charity Commission consent. Many commentators have suggested that this proposal is misplaced risking undermining the ‘voluntary’ ethos nature of trusteeship and public trust and confidence in the sector.   

I share those misgivings.  In particular, my questions are:    

• ·       Will those proposals be bound to improve good governance amongst charities?   

• ·       Why make income level the trigger? 

• ·         And what of the impact on public trust and confidence in charities?

I wonder about what evidence there is to show that paying an individual to be a trustee actually makes them a better trustee: whether that translates into improved or more effective governance for charities?

Perhaps there is anecdotal evidence to draw upon? Having worked with charities over many years and seeing governance both good and bad, I have yet to be convinced that any benefits gained from payment of trustees (on a case by case basis) justifies ousting ‘voluntary’ trusteeship as the norm.

The proposals also beg the question – why confine this option only to charities based on a £1 million annual income level? Whilst income might be an indicator of the ability of a charity to make a payment to trustee, in my experience, income in itself does not point to the need to do so. Income levels are not bound to equate with the complexity or challenges facing trustees. Other factors such as the structure of the charity, the context in which it operates, or how it operates all impact upon the demands placed on trustees  and the ability of a charity to recruit trustees. Those sorts of factors are not income dependent. Compare, for instance, the demands placed upon trustees of a grant making trust with annual income in excess of £1 million with those facing trustees of an unincorporated association providing a community facility whilst hard pressed for funds.

Only this month, the Ipsos MORI survey reported ongoing positive levels of public trust and confidence in the charitable sector. That same report made clear however that that trust continues to revolve around use of funds. And that there are levels of concern amongst the public (well founded or otherwise) around the amounts charities spend on salaries. Calls for greater transparency about the application of funds reflects the public appetite to know. But knowing more about salary spend could cut both ways for charities – will the figures be more or less than the public expects?    In that context, justifying payment to trustees will likely present its own challenges. If the proposals do become law, time will tell whether this particular application of funds brings its own cost to charities, whether individually or as a sector.