OSCR’s gone Wilde! Interesting developments with the Scottish Charity Regulator

I’ve always been a fan of Oscar Wilde, the enigmatic poet, playwright, polemic and prisoner.  How can you not love his caustic wit and winsome charm:

Some cause happiness wherever they go; others whenever they go.”

“Always forgive your enemies – nothing annoys them so much.”

The only way to get rid of temptation is to yield to it…

But my favourite Victorian writer is not the only Oscar causing a stir from time to time: OSCR, the Office of the Scottish Charity Regulator, is finally considering publishing some charity accounts on its online Register of Charities.

Interestingly, there are some key differences between the English/Welsh and Scottish charity regulators.

In England and Wales, the Charity Commission only registers charities when they have a regular annual income of more than £5,000, before which they are unregistered charities, but charities nevertheless; whereas in Scotland, if you aren’t registered with OSCR you ain’t a charity full stop.

In England and Wales, the definition of a charity is contained in the Charities Act 2006; whereas in Scotland, the definition  of a charity is contained in the Charities and Trustee Investment (Scotland) Act 2005; both quite riveting reads.

But a much more practical difference is that the Charity Commission does include a charity’s accounts on their site, while OSCR provides much less financial information on its register.

However, OSCR is now considering a consultation with the sector about publishing some charity accounts on its website. The reason given is the improving quality of Scottish charities’ accounts since 2006.

This is surely a good thing.

It is vital for the public trust in the third sector for charities to be as transparent, open and honest as possible, and to be seen as fully accountable for the sums they have received.

Checking how a charity has spent its money is a key part of this process.

And this is even more critical in light of the recent media furores about the extent of charity overheads, the level of charity’s chief executive pay and remuneration, and the salary paid to William Shawcross, the Charity Commission Chair.

So I would generally welcome this development.

The publication of charity accounts on OSCR’s website is needed. In an era of increasingly savvy donors, interested trusts and foundations, and attentive media, it is time for Scotland to follow best practice from England and Wales.

And as the great man so helpfully put it:

We are all in the gutter, but only some of us are looking up at the accounts…

To read more visit the OSCR website, or view a helpful Civil Society article.


When is a volunteer not a volunteer?

(Legal bit: the following is not formal legal advice, and should not be relied on as such.  Legal bit over.]

Riddle me this: when is a volunteer not a volunteer?

The answer is of course simple. When they’re not volunteering.

But of course, life is never quite that simple.

So brace yourself, here’s some law to chew over…

Volunteer or Worker

There is no standard legal definition of volunteer, but the Criminal Records Bureaux defined a volunteer as “a person engaged in an activity which involves spending time, unpaid (except for travel and other out of pocket expenses), doing something which aims to benefit some third party other than or in addition to a close relative.”

An employee is defined as “an individual who has entered into or works under… a contract of employment”, where a contract of employment means “a contract of service… express or implied… oral or in writing.” (section 230(1) and (2), Employment Rights Act 1996).

A worker is defined more widely, as an individual who works under either a contract of employment (as above) or any other contract, express or implied, oral or in writing, where the individual performs personally any work or services for another party but is not a client or customer.

There are a number of important factors that need to be present for an individual to be a worker, being that there is personal service; that the “employer” is not a customer; and that there is a mutuality of obligations.

Volunteer Legal Status Ambiguous

BWB Solicitors, leading charity advisors has published guidance about this.

They note that “the legal status of volunteers and interns is not clear cut, as there is a vast range of different types of relationships, from the purely voluntary to those that are clearly contractual and those in between, which are difficult to define. This ambiguity makes it difficult for organisations taking on volunteers and interns to appreciate any legal obligations that they may owe to them.”

 The Practical Law Company have also provided style volunteer agreements, noting that “where the volunteer is not otherwise entitled to the national minimum wage, organisations should limit payment to volunteers to out-of-pocket expenses only, incurred as part of the volunteer role and evidenced by receipts.”

 The National Council for Voluntary Organisations (“NCVO”) also states in its guidance to charities that “paying ‘expenses’ automatically, without justification, can be seen in tribunals as the equivalent of paying a salary. The safest course is to reimburse only actual expenses, preferably against receipts.

A example from a recent Employment Appeal Tribunal case might also help.  Mrs Chaudri did administrative work with the Migrant Advisory Service for two years and claimed unfair dismissal and sex discrimination when her role was terminated.

She worked four mornings a week and was paid volunteer’s “expenses” of £25 (increased to £40) a week, even though she incurred no expenses. She was also paid when on holiday or sick. The Employment Appeal Tribunal found that the payment was clearly for work and not reimbursement.

National Minimum Wage

Employees and workers are entitled to a number of rights which volunteers are not, including the national minimum wage (“NMW”)and annual leave.  Specifically, the National Minimum Wage Act 1998 requires employers to pay the NMW to all ‘workers’.

Volunteers will only be entitled to be paid the NMW if they are workers. Volunteers will not fall within the definition of ‘worker’ only where they have no form of contract of employment or contract to perform work and provide services and where they receive no financial remuneration or benefits in kind for providing their services.

Volunteer workers are a category of worker who work for charities, voluntary organisations, associated fund-raising bodies and statutory bodies. Voluntary workers (as opposed to volunteers) are not entitled to the NMW only if the following conditions are met (S.44(1)(a)&(b) of the National Minimum Wage Act 1998):

  1. They receive no monetary payment other than reimbursement of expenses actually incurred or reasonably estimated as likely to have been incurred in the performance of their duties; and
  2. They receive no benefit in kind other than reasonable subsistence or accommodation.

The consequences for an organisation of failing to pay the NMW to volunteers or interns who are in fact workers and therefore entitled to the NMW are potentially serious. Not only could the organisation be required to pay up to six years of backdated NMW to the workers, but it may be liable for a criminal penalty if it has wilfully neglected to pay the NMW.

Implications for Charities

A volunteer can be seen as a ‘worker’ only where there are a number of factors present, being: personal service, that the “employer” is not a customer, and that there is a mutuality of obligation.

There are a number of practical suggestions given by BWB Solicitors to reduce the risk of volunteers being a classified as ‘workers’.

Firstly, get a volunteer agreement in place confirming that the relationship is based on mutual understanding and is not a contract of services or employment.

Secondly, avoid making payments to volunteers that could be construed as wages, with payments to cover actual expenses being clearly identified as such and ideally reimbursed against receipts.


If you have any questions let me know: bettercharityblog[at]gmail.com or @BetterCharity.

And if you got this far without falling asleep, well done!..


GAAR! Anti tax-avoidance rules almost here…


No, not the sound of tax lawyers dropping textbooks on their toes.

Rather, it is the new General Anti-Abuse Rule (GAAR).

The Government has now published a draft Finance Bill 2013 for consultation. The Bill will include a general measure to counteract abusive tax avoidance arrangements.

The GAAR will apply to income tax, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty land tax and annual residential property tax with effect from 1 April 2013.

These schemes have been suggested for a while.

The problem is that accountants and tax lawyers spend their professional lives picking out the loop holes for their wealthy clients to take advantage off. Currently this ‘tax avoidance’ is legal and above-board

However, if the avoidance is taken too far, using artificial and abusive tax avoidance schemes, it can tip into ‘tax evasion’ which is a criminal offence.

The Government announced in its Budget 2012 that it had accepted the recommendation of the independent study by Graham Aaronson QC which had suggested the introduction of the GAAR.

So perhaps it will also be the sound tax avoiders make when caught.

On reflection, that’s not such a bad sound after all.


Happy New Year? The 2013 charity hangover…

hangoverWe getting closer to that most fabled of Scottish festivals, Hogmanay.

New Year’s Eve.

A night of celebration, reflection, and anticipation.

But this New Year might not be quite as happy for charities as we would like.  A recent survey for the Charities Aid Foundation (CAF), out this week, discovered some difficult truths as 2013 approaches.  Among the findings:

  • one in six charities fear closure in the 2013;
  • nearly half of charities may need to dip into reserves;
  • one in three fear being forced to cut services or jobs;
  • nine out of 10 believe raising funding will be the greatest challenge;
  • nearly half believe their charity may have to scale back its work.

Sobering reading.

But what can your charity do to prepare for another challenging year?

Firstly, make sure that you know your financial position clearly.

Review your management accounts, and check whether there are any downward trends in individual giving, any trust funding that might not be renewed, any major donor relationships that may be cooling.

Consider what are the main risks for the year ahead and think about what you can do to counteract them. Have a look at my recent article on Banking Help for Charities as a useful starting point.

Forewarned is forearmed, as the cliché goes.

Secondly, make sure that you have fundraising calendar in place for 2013. Think about how to get the balance between maximizing the opportunities to fundraise without risking donor fatigue.

Consider whether your fundraising activities are as varied as they could be.  Visit the Institute of Fundraising for some ideas and guidance, or think about ways to engage your online donors.

Thirdly, hope for the best but plan for the worst. Make sure you have a positive, stretching budget to help deal with any successful fundraising, but don’t forget to also have austerity options.  How would your charity cope with a 20% fall in income?  Or 30%?

The more you plan at this stage, the better you will be prepared to deal with the coming year, whatever it brings.

So remember to enjoy your Hogmanay, but watch out for the nasty 2013 hangover round the corner.

A little planning can save a lot of grief…

Charity tax: a cheat sheet…

Charity taxation proving too taxing? Fear not, help is at hand.

The Charity Tax Group has just published its 2nd edition of their ‘Charity Tax Map‘, which a foreword by Treasury Minister for Charities, Sajid Javid MP calls “a detailed and comprehensive review of taxes, exemptions and reliefs applicable to charities“.

The CTM is a full and detailed exploration of the tax system for the charity sector, and has so far proved to be a very useful reference document for this oft-confusing area.

The 2nd edition of the CTG covers VAT, import duties, corporation tax, capital gains tax, includes sections on stamp duty, business rates, council tax, PAYE and income tax, and overseas taxes.  It identifies the various tax reliefs available to charities, and helps trustees know what they need to know, and when to take professional advice.

It also includes new sections on recent changes such as the cost-sharing group exemption, the Gift Aid Small Donations Scheme, VAT on protected buildings and bulk postal mailing, and other updates on direct and indirect taxes.

The Updated Charity Tax Map Matrix, remains a useful addition. The matrix provides an indication of the taxes and reliefs that might be relevant for particular types of activities, and is a useful signposting tool to help charities assess their potential tax position.

Download your copy, or visit the Charity Tax Group website.

For more information, do contact me: andrewkmackay[at]gmail.com or @BetterCharity.

You might also be interested in posts on Charity Banking and Gift Aid reclaim.

Banking Help for Charities

Do you manage the finances of your charity? Struggling?

The British Bankers’ Association have published some helpful guidance for charities. The guide is intended to help you with your responsibilities and help you ask the right questions. It’s mostly aimed at smaller charities but it contains useful principles for everyone.

As a taster, here are some questions to get you started:

You should consider your charity’s overall financial position and what you are looking for from a bank before deciding which bank/s to approach. You might just need somewhere to keep your charity’s cash: a straightforward current account with instant access. Or you may want a range of different accounts and services, for example a current account, savings account, credit facilities and longer term investment options.
The following questions will help you establish the type of bank you wish to bank with, the type of account you need, and the services you require.

  • What does the cash flow of your charity look like over the next 12 months (or longer)? Things to consider regarding cash flow include the likelihood of you having excess cash for part of the year (therefore you might need to know about short term investment opportunities) or needing borrowing facilities – or perhaps both. Keep in mind any requirements laid out in your charity’s reserves policy.
  • How do you receive your income? In cash, cheque or electronic payments?
  • How will you authorise payments – will you require dual authorisation?
  • Do you need a company credit card(s)?
  • Do banks’ ethical policies matter to your charity?
  • Do you need the services of a bank with local branches (e.g. for banking funds)? Do the local bank branches need to be easily accessible (e.g. cater for wheelchairs)?
  • Does your charity operate abroad? Will it need to make foreign currency transactions?
  • Will you need a number of bank accounts or just one?

You can find a copy of the Guide on the Charity Finance Group website. If you need any more information, get in touch: andrewkmackay[at]gmail.com.

And don’t forget about Gift Aid too!

Can my charity claim Gift Aid?

Can your charity claim Gift Aid? Well, that depends…

General Thoughts

A charity with income under £5,000 still has charitable status, so long as it meets the criteria for a charity (see www.charitycommission.gov.uk/).

In order to benefit from charitable status and tax breaks, a charity can approach HMRC directly.  Like a registered charity number, you can use a HMRC charity number as evidence of your charitable status. http://www.hmrc.gov.uk/charities/guidance-notes/chapter2/chapter_2.htm You are also entitled to claim Gift Aid from HMRC on any appropriate donations.  Detailed step-by-step information can be found on the HMRC website: www.hmrc.gov.uk/charities/gift_aid/basics.htm#5

If a charity has an income of £5,000 or more, it must register with the Charity Commission, which will provide your charity with its own charity number.

The law does not permit a charity to use another charity’s number because each local charity is a legally separate entity. Nevertheless, you can ask a larger charity to hold funds restricted for use by your charity but you would need to get an agreement from that charity to do so.

In order to benefit from charitable status and tax breaks, a local charity can approach HMRC directly. Detailed step-by-step information can be found on the HMRC website: www.hmrc.gov.uk/charities/gift_aid/basics.htm#5

This covers the general position on how Gift Aid works, donations that qualify, claiming tax back and keeping records. You can also find the contact details for the HMRC Charities Helpline at: http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=XqbRdlnT_mo.

Back dated Gift Aid?

The general position is that charities can claim gift aid back from their exemption date, which is either the time the charity registers with HMRC or the Charities Commission.  This means that usually you can claim Gift Aid from the time you have registered but not before.

However, what if you have donations from before you were registered?

HMRC has confirmed that it is open to charities to appeal the decision about the gift aid exemption date, and the further information is sent with the letter from HMRC.

Sending in a letter of appeal might be helpful, if you have been operating as a charity for a number of years previously. There is not guarantee of success, and the final decision rests with HMRC. Feel free to contact me for further information if this is something you would like to explore: andrewkmackay@gmail.com