The £515m announced in the Pre Budget Report (PBR) is no more than a repeat of the recommendations laid out in the third sector report published in July this year. This additional funding will be used to promote the voluntary sector’s role in building strong communities and delivering public services. How the recommendations concerning this additional funding are implemented will be crucial to ensure those who most need support can access it.

 

The PBR confirmed that the year ahead would be played out within a tighter fiscal environment with the economic forecast predicting a slow down to between 2-2.5 per cent in 2008. This made John Low’s call on finance directors at our recent annual dinner ‘to squeeze value out of every last penny, maximise efficiencies and shrink overheads so that charities can continue to deliver the social benefit they strive for’ particularly pertinent.

 

The Charity Commission in the short term has been allocated £500,000 to cover its new responsibilities under the Charities Act in 2007/08 and £1m to implement a counter terrorism strategy in the same period. However, the Commission’s baseline budget will face a 5 per cent funding cut each year until 2011. Andrew Hind, Chief Executive of the Charity Commission admitted that it would be a tough challenge to carry out new responsibilities under the Charities Act but said he was confident the Charity Commission would be able to deliver its core responsibilities.

 

 

Post-Lyons, the government is bringing forward proposals to simplify the current set of business rate reliefs in order to provide clarity for rate payers and certainty for those who administer the business rate system. Subject to the results of this consultation the government intends to introduce a simpler set of reliefs by 2010. Reform is not intended to increase funding of reliefs from the central business rates pool above the current level, but will protect those enjoying existing reliefs. Crucially, reform will not involve a change to the support offered to charities.

 

The Gift Aid consultation by the Treasury was mentioned in the PBR but no clues given on initial thoughts. CFDG, in collaboration with the Association of Chief Executives of Voluntary Organisations, the Charity Tax Group, the Church of England, the Institute of Fundraising and the National Council of Voluntary Organisations suggested a simpler Gift Aid system and process that would remove the administrative burden. The proposal is that an appropriate tax reclaim rate be agreed by consultation between the government and the sector to determine the amount of Gift Aid a charity can claim, based on its level of voluntary income as reported in its accounts. Such a tax reclaim rate would take into account the tax paying status of the cross section of the general public who give to charity.

 

We were delighted that we were able to work with other umbrella bodies and together bring such a strong and unified proposal from the groups within the sector that we represent. Over the last week or so there has been coverage given to the difference of opinion expressed by the Charities Aid Foundation (CAF). However, we do not see this as an issue. The consultation asked for varied solutions to making Gift Aid more accessible and it is for the Treasury to now review all the recommendations put forward. We do however hope that the Treasury in asking for innovative solutions has the vision to implement the ideas that we, as umbrella bodies in the sector are suggesting to shake off the bureaucracy.

 

 

Away from the PBR, it has come to our attention via membership feedback that the substantial donor legislation contained in s.54 Finance Act 2006 is giving many in the sector considerable concern.  Whilst at the time that the legislation was enacted government ministers were saying that if charities complied with charity law and were acting within their objects then all transactions should comply with s.54, it is becoming clear that there are many examples of circumstances where this may not be the case.  Legitimate transactions not motivated by tax avoidance will be caught by this legislation and the charity will be left facing the tax consequences.  In addition, the administrative burden of maintaining compliance is going to affect many charities.  CFDG will be pressing for this legislation to be amended to make it clear that only transactions with an intent to effect tax avoidance are covered by s. 54.

 

Finally, the Charity Commission launched a consultation last August on draft directions for the independent examination of charity accounts with a closing date for responses in November. Early reviews of the consultation would seem to indicate that the responsibilities of independent examiners with regards to money laundering require developing further. CFDG is liaising with the Association of Charity Independent Examiners (ACIE) on this matter.

Author: Ernese Skinner

Ernese Skinner is policy and campaings manager at CFDG. She has moved into the charity sector from the Office of Government Commerce, an independent office of HM Treasury.

www.cfdg.org.uk

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