Charity Bulletin - UNW...Charity SORP – Update Bulletin 2 Enterprise Grants April 2019 // What’s...

Charity Group BulletinApril 2019

UNW’s regular update about topics of financial interest to charities and not-for-profit organisations

UNW’s Charity Group

Charity Bulletin

Charity Client Focus:

Michelle CooperChief Executive at County Durham Community Foundation

Sleep ins and the Minimum Wage

Event recap: ‘Communicating impact – What good impact reporting looks like’

Charity SORP – Update Bulletin 2

Enterprise Grants

April 2019 // What’s inside?

UNW Charity Group Bulletin April 2019

Welcome to our first Charity Bulletin of 2019Earlier this month, Baroness Stowell, the Chair of the Charity Commission, addressed the Annual General Meeting of the Commission at the end of her first year in post. In these times of ongoing uncertainty, it seems relevant to make reference to a couple of quotes from her speech.

As Baroness Stowell addressed the Commission, she stated that in these times of division and uncertainty, “charity has a unique potential to bring individuals and communities together.” The potential of charity to bring people together is not through having a similar world perspective, but as she says, a similarity of qualities that enjoy universal admiration and respect – “selflessness, commitment to a cause greater than ourselves, a sense of public spirit, and of hard graft.”

I am in agreement with the Baroness that we need charities to live up to public expectations so that the sector, together, “can be a much-needed source of hope,

identity, and pride.” She went on to outline that the Commission must be the voice of the public and the public interest of Charity. They launch a new strategy in April with 5 priorities which are to:

• hold charities to account

• deal with wrongdoing and harm

• give charities the tools they need to succeed

• inform public choice, and

• keep charity relevant to today’s world.

Her aim is that you will see a more confident Commission, but she recognises no matter how driven, focused, or well-resourced the Commission is, they can’t alone ensure that charity inspires trust, and thrives, and makes the biggest difference possible. “Achieving that will involve charities – all charities.”

I’ll leave you with that thought as you peruse the rest of the bulletin.

Anne Hallowell

Sleep ins and the Minimum Wage


BACKGROUND HISTORY

Prior to recent activity in the employment Law courts, it had been generally accepted within the social care sector that where a care worker was required to sleep in the home of an individual who needed their support (so they would be available to care for that individual if they required any assistance during the night) that any time spent asleep, would not count as working time for Minimum Wage purposes. As a result, most organisations continued to pay their employees a flat-rate “on call” allowance, which pre-dated the Minimum Wage legislation, for any sleep-in shifts performed.

Following the decisions of an employment tribunal in 2016 and a 2017 employment tribunal appeal,

it was held that every hour of a sleep-in shift – even when the carer is sleeping – should be counted as working time for Minimum Wage purposes. These cases set a precedent, and left employers in the social care sector facing significant additional payments on the basis that they had effectively underpaid their workers the correct wage for sleep-in shifts, as the flat rate allowance paid was lower than the Minimum Wage thresholds.

THE TAX POSITION

Following the rulings, employers who paid the flat allowance rate for sleep-ins were then deemed to be non-compliant not only with Minimum Wage legislation, but also with PAYE and NIC regulations for failing to add the correct amount

of wages to payroll. This situation left employers subject to potential additional penalties, and also meant that there was a likelihood that they would have to pay back pay to individuals who had performed sleep-in shifts for the past six years. Based on a conservative estimate of the costs involved in putting things right for the past, the social care sector faced a bill of over £400m.

FURTHER APPEAL

Mencap, a charity for those with learning disabilities that sometimes requires workers to perform sleep-in shifts, originally appealed against the Employment Tribunal’s decision on how such shifts should be treated for Minimum Wage purposes, due to the potentially severe impact it could have on the social care sector. They were successful in being able to overturn the decisions in July 2018.

In this case, the Court of Appeal found that it was only time required to be spent awake for the purposes of working during a sleep-in that counted as working time for Minimum Wage purposes.

There has been a great deal of uncertainty regarding payment to carers of the National Minimum Wage and the National Living Wage (the “Minimum Wage”) in the social care sector recently, specifically regarding working time for those employees who are required to sleep in the home of patients as part of their shift.


REVISED GUIDANCE

Their revised guidance following the Court of Appeal, produced by the Department for Business, Energy & Industrial Strategy (BEIS), is line with the successful Mencap Appeal and so reflects the current situation, as follows:

• If an employer provides suitable facilities for sleeping, Minimum Wage must be paid for time when the worker is required to be awake for the purpose of working, but not for time the worker is permitted to sleep;

• If suitable sleeping facilities are not provided, then Minimum Wage must be paid for the entire shift;

• Where workers are working and not expected to sleep for all, or most, of a shift, even if there are occasions when they are permitted to sleep (such as when not busy), Minimum Wage must be paid for the whole of the shift.

LATEST APPEAL

Although the certainty generated by the successful appeal was positive for the social care sector, the issue has now been thrown back into further doubt as Unison (who represented Mrs Tomlinson-Blake in the Mencap Case) has now been granted permission to Appeal this ruling by the Supreme Court. The case is not expected to be heard until later in 2019 or possibly into 2020.

If the Supreme Court rules against Mencap, it could lead to many employers in the social care sector and other employers who have staff that perform sleep-in shifts having to pay employees for previous years. In addition, HMRC would expect employers to settle any associated tax and NIC liabilities associated with the pay. As the decision on the latest appeal is expected from the Supreme Court in late 2019 early 2020, there will

be many employers in the social care sector eagerly awaiting this outcome, to understand what this means for their organisation.

While employers in the social care sector are awaiting the results of the case, they have two options to consider in regards of payment. These are:

1. Pay carers for sleep-ins shifts according to current BEIS guidance; or

2. Pay those carers the Minimum Wage outside of the BEIS guidance.

Due to the uncertainty around the case and the decision which will be made, it is difficult to advise employers on the rates employees who perform sleep-in shifts should be paid. On the worst-case scenario, if employers followed the current BEIS guidance, they may inadvertently open themselves up to future penalties if the Supreme Court decides that workers should be paid for every hour at work, regardless of sleeping. These penalties can be up to 200% of the amount owed and employers can be publicly named.

Some employers may want to take a more conservative approach

and pay their carers the Minimum Wage when performing sleep-in shifts. This approach would prevent HMRC for levying penalties for

the period in which employers pay the Minimum Wage. However, HMRC could still seek to recover any back payments and levy penalties for the period in which they paid employees

lower than the Minimum Wage. For any underpayment for previous years (from not paying the Minimum Wage), employers could potentially carry out a “self-correction” process (i.e. putting things right themselves), and there would be no penalties or public naming if this was managed correctly.

For more information on any employment tax related matters please contact either: Lee Muter, Employment Taxes Partner at [email protected]; or Rebecca Kemp, Employment Taxes Consultant, at [email protected]

If the Supreme Court rules against Mencap, it

could lead to many employers in the social care sector and other employers who have staff that perform sleep-in shifts having to pay employees for previous years.

Rebecca Kemp

This update reflects the amendments made to the Financial Reporting Standard (FRS 102) applicable to the UK and the Republic of Ireland, which were brought in by the Triennial review in 2017. The significant revisions to the SORP in this update will take effect for accounting periods beginning on, or after, 1 January 2019, although some clarifying amendments will take effect from publication (October 2018).

The full bulletin can be found on the SORP microsite. http://www.charitysorp.org/media/646440/update-bulletin-2.pdf

The Commission stated that the purpose of the SORP update is to keep it in line with changes UK Accounting Standards, and provide guidance on how to apply the new FRS 102 regulations to charity accounts. SORPs issued by the Charity Commission apply to charities that prepare accounts under UK Generally Accepted Accounting Practice and are intended to give a ‘true and fair view.’

The most significant of the clarifying amendments is around the recognition of gift aid paid from a wholly owned trading subsidiary to the parent charity. Previous changes to the standards have seen the

gift aid payment recognised in the trading company as a distribution and accounted for when paid, unless a legal obligation existed at the year end. However, the income was still being recognised in parent charities in the year in which the profits were generated, as the charity had a reasonable expectation that it would receive the payment. For accounting periods beginning on or after 5 Oct 2018, the treatment must now be consistent across the group, and so the charity should only recognise the income when paid.

Other clarifying amendments are:

MODULE 3: Accounting standards, policies, concepts and principles, including adjustment of estimates and errors: clarifying the existing requirement to provide comparative information.

MODULE 10: Balance Sheet: removing the undue cost or effort exemption for depreciating assets comprising of two or more major components which have substantially different useful economic lives.

MODULE 13: Events after the end of the reporting period: clarifying when payments by subsidiaries to their charitable parents that qualify for gift aid are adjusting events occurring after the end of the reporting period.

Significant amendments (which come into force for accounting periods beginning on or after 1 Jan 2019) cover:

MODULE 10: Balance Sheet:

• permitting charities that rent investment property to another group entity to measure the investment property either at cost (less depreciation and impairment) or at fair value;

• removing the undue cost or effort exemption for the investment property component of mixed use property to require measurement at fair value;

• removing the disclosure of stocks recognised as an expense;

MODULE 14: Statement of cash flows: requiring charities to prepare a reconciliation of net debt as a note to the statement of cash flows;

MODULE 27: Charity mergers: including the transfer of activities to a subsidiary undertaking as an example of a charity reconstruction that should be accounted for as a merger;

Appendix 1: Glossary: inserting a definition of the term service potential.

It is possible to early adopt the provisions of the Update bulletin. Should you have any queries on the implementation of the changes then please contact Anne Hallowell.


Charity SORPUpdate Bulletin 2

In October 2018, the Charity Commission published ‘Update Bulletin 2’ to the Statement of Recommended Practice (SORP).

We recently spoke to Michelle Cooper, who joined the Foundation as Chief Executive last year, following a long career in business development and investment management. We discussed her motivations behind moving into the not-for-profit sector from a corporate world, the benefits of embedding a culture of giving into a business, and her future vision for the Foundation.

Could you tell us a little bit about your corporate background?

I spent many years at Northstar Ventures as an Investment Director, having joined them in 2004, and the role initially revolved around early stage technology investment. I started off by working on the

‘proof of concept’ fund, which was investing small amounts of funding into very early stage ideas.

I then progressed to working on larger scale deals. The role entailed meeting with people, teasing out their ideas, and helping to develop their approach, before finally making the investment and undertaking portfolio management.

What was your first experience of working within the social sector?

My first foray into the social sector came from a partnership with the Northern Rock Foundation. Northstar Ventures collaborated with them on a fund known as the Fresh Ideas programme, and it was based around working with charitable groups. The fund

allowed charities to receive grants from Northern Rock Foundation to develop ideas for income streams and services that could help their long-term sustainability, and the groups received mentoring support from myself at Northstar.

Was there much of a culture change between the corporate world and the social sector?

I think the most striking thing for me was that in the social sector, understandably the heart often rules the head. I noticed a lot of charities were continuing loss-making activities for this reason, things which you are discouraged from doing in the business world. There was also a shift in language used; you weren’t allowed to use the word ‘profit,’ it had to be ‘surplus.’

What were your motivations behind taking on the role of Chief Executive at the County Durham Community Foundation?

A lot of things had lined up for me personally. It felt like the right


Michelle CooperChief Executive at County Durham Community Foundation

Charity Client Focus:

Founded in 1995, the County Durham Community Foundation is an independent grant-making foundation that acts as a critical conduit for donors who are looking to give to local charity and community groups across County Durham and Darlington.

Brendan Hoar, Case Study

time of life, as I’d been able to see the amazing difference that relatively small amounts of money can make in the not-for-profit sector. I’d worked in a commercial environment for 15 years, so it was a new challenge in a space that was really rewarding. I was also aware that opportunities don’t often come up like this in the North East, so it felt like a “once-in-a-lifetime” chance.

On top of this, there was a lot of uncertainty in the region at the time. No-one knew when the next set of European funding was going to come through, which was frustrating and highlighted to me that I didn’t want to just sit around and wait. When the opportunity at the Foundation came along, I was a bit apprehensive about applying because I didn’t think I could do it. After some encouragement from people who had worked with me across the charity sector, it was then I decided to go for it.

Many people may not know what a ‘grant-making foundation’ actually does. Can you talk me through the work that the Foundation carries out?

We simply enable donors to connect their gifts with local community groups, who are delivering services where they are most needed.

I think one of the difficulties community foundations have is properly defining ourselves; we don’t have one distinct charitable purpose, such as a cancer charity. We act as a critical conduit between

donors – including businesses,

individuals, or charitable trusts –

and local charitable groups. This

helps to support groups throughout

County Durham and Darlington,

who can be operating in anything

from working with young people

and the elderly, to working with

substance abuse groups.

The average grant

that we award

is £4,500, and

seeing how these

groups multiply

every pound that

you give them with

their time, their

passion, and their

creativity, is just

phenomenal. The

progression you see in the people

that the charities use the funding to

help is very inspirational. For us to

be able to work with them to pass

on donations is incredibly humbling.


I think that there is an increasing passion

for donors being able to see where their money is going locally, and the effect it is having.


The Foundation works with a wide variety of businesses. What do you think has motivated them to get involved with giving?

First and foremost, it’s because it matters to them what is happening in their local community. They work with us because they know the money given will be maximised and passed onto a local group, dealing with local issues. A lot of the businesses we work with are keen to factor charity into their daily business planning.

A great example of this is the Darlington Building Society. They operate a profit-sharing scheme, where they retain 5% of their net profits after tax specifically for philanthropic giving. The beauty for them is that, as a building society, they effectively work in partnership with their members. They have a proven track record of supporting the communities and supporting projects their members are passionate about, which is fantastic. By working with us, they’re able to reach local groups that they

wouldn’t be able to in-house. They absolutely understand how important embedding the culture of giving into a business is.

What benefits do your donors get by conducting charitable giving through the Foundation?

I think that there is an increasing passion for donors being able to see where their money is going locally, and the effect it is having. If you want to give locally, there really is no better organisation than a community foundation to know what groups are operating in the area that need support at any given time.

Donors who engage with us are also able to fully utilise the knowledge of the Foundation. It is a system of structured giving, and we do all the leg work. We know who can deliver, and we make sure that the due diligence and good governance is in place. We work with people like the Banks Group, who actively engage in supporting community groups, to manage their funds and

structure their giving. This means we can make it targeted, relevant, and appropriate, to really maximise the effect a donation can have.

What is your vision for the future of the County Durham Community Foundation?

People matter to us, and charitable objectives matter to us, so we would love to be known as the go-to and trusted partner for anyone who wishes to make a donation to benefit the communities of County Durham and Darlington. We effectively become the fundraising arm for these community groups, so we care about ensuring that the money goes to the charity in the most efficient and smartest way, to make sure the needs of the group are being met.

We’re a community foundation, but we’re also a business. My background in the corporate world means that we can do this well, and we can do it in an effective way, like any good business.

Durham Otters


Event recap:‘Communicating impact – What good impact reporting looks like’

On 13 March 2019, UNW and Northstar Ventures held an interactive morning session aimed at charities and not-for-profit organisations that were keen to develop their understanding and use of impact measurement.

Representatives from over 40 charities, not-for-profit organisations, and social enterprises attended the event at UNW’s offices in Citygate. The morning began with a networking session before the presentations, and concluded with a Q&A panel session, where attendees were offered the chance to have one-to-one meetings with the speakers.

Peter Deans, an independent consultant working with charities and social enterprises, spoke about his expertise on social impact reporting. Following the event,

we sat down with Peter to discuss the main themes that were covered, and to get further information about best practice approaches. He detailed that a lot of organisations tend to get overwhelmed when it comes to reporting impact, due to the various different audiences they have to communicate to.

Peter commented: “This creates a temptation for some organisations to report their social impact without doing anything

meaningful, and I try to encourage people against that for three reasons:

1. Organisations are getting better at impact reporting, and if you don’t, you’re going to get left behind.

2. Grant-makers are more willing to offer funds to organisations that communicate their impact effectively.

3. It’s the right thing to do. People want credibility and authenticity, and impact reporting at its’ best showcases that you’re trying to improve things, trying to learn, and trying to get things right.”

Charities and other not-for-profit organisations are under more pressure than ever before to show that they are trustworthy, accountable and contribute to society.

As the presentation continued, Peter started to demonstrate the pitfalls that organisations can fall into when trying to communicate their impact. He stated: “What a lot of not-for-profits do is lose sight of their mission and end up describing what they do in really jargonistic ways without emotional appeal. When communicating impact, you have to go back to the absolute core. You need to consider:

• What do you believe you’re doing?

• What do you think the benefit of your business is?

When you provide that information, instead of solely a scientific figure used to measure impact, you’re appealing to an emotional and rational sense. You blend these factors together into something that says, ‘These are the reasons we exist, this is our impact statement, this is what we’re trying to do.’ It makes what you’re saying all the more credible.”

He added: “You need to reflect – are you doing this to sell, or are you doing this to learn? It is much more authentic to report and learn from what you’re communicating, and then to think about how you can sell that information. Consider what you know is working, why people use your service, and what could be developed. Then you can put forward a well-reasoned case with a transparent analysis of the evidence available, which is what everyone should be aiming at.”

Peter then went on to provide an example of an organisation that communicates impact well: “Street League are an organisation that do impact reporting well. They pledge

to never overclaim what they do, include sample sizes in all percentages listed, and have evidence to prove what it is that they’re communicating. They

even report on the disengagement rate from their service, which is transparent and indicates that they take measuring seriously. A model like this is something to strive to.”

In conclusion, Peter suggested that a straightforward model which offers a simple snapshot of organisations and their impact is an effective way to approach impact reporting. The model he suggested is known as the ‘Golden Triangle’ and was developed by Martin Brookes.

The morning session also included presentations from several other people involved with social impact

reporting. This includes Simon Gerry, Chief Executive and Raff Marioni, President of Newcastle University Students’ Union, who spoke about their organisation’s

approach to reporting; Dan Ellis, Founder and Managing Director of Jam Jar Cinema CIC, who provided insight into how social impact measurement underpins the ambition of the venue; and Alison Collins of

Northstar Ventures who discussed the importance of impact reporting from the point of view of a social impact investor.

Maxine Johnston, Events and Partnerships Manager at UNW, said: “The UNW Events Programme is about us organising seminars and workshops for our clients based on topics they want to know more about. This could be learning more about professional networking, communication and building relationships, or raising finance.”

If you would like to share your ideas for future workshops and seminars, please email us at [email protected]


What a lot of not-for-profits do is lose sight

of their mission and end up describing what they do in really jargonistic ways without emotional appeal.

Any questions?Contact the UNW Charity Group

Charles LinakerCorporate Tax

0191 243 [email protected]

Anne HallowellAudit & Assurance


Andrew WilsonAudit & Assurance


Hazel SmithOutsourced Accounting


Mark HetheringtonVAT


David WardCorporate Tax


Lee MuterEmployment Taxes


Peter NealStrategic Talent


Maxine JohnstonCorporate Finance


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The Enterprise Grants fund is a £1.8m pilot programme for organisations that work within the youth services and/or homelessness sectors. It is available through the Enterprise Development Programme, which is a five year, £40m programme. There are two different types of grants available:

• Feasibility grants: £5,000-£10,000 for early stage work to investigate and develop an enterprise proposition from early stage to proposed delivery plan. Grants can be used for internal & external costs, with the applicant determining the split and any external providers they wish to engage.

• Development grants: Up to £50,000 for organisations that have an enterprise proposition that requires further development or scaling such that at the end of the grant trading can begin. Grants can be used for internal & external costs, as well as the initial costs of getting going (staff or equipment).

If you would like to find out more about the programme, please visit the Social Investment Business website for all the latest information.

https://www.sibgroup.org.uk/enterprise-development-programme

Enterprise Grants

Star Command would like to invite you to UNW’s annual Employment Tax and Law update at Tyneside Cinema on Wednesday 1st May 2019.

After their spaceship crash-landed, UNW space rangers Lee Muter and Rebecca Kemp are on a mission to share their intergalactic Employment Tax knowledge with you. They will discuss a range of topics that include National Minimum Wage, employment status and IR35, as well as benefits in kind and salary sacrifice schemes.

Guest speaker Chris Maddock, Head of the Employment Team at Muckle LLP, will then go to infinity and beyond to inform you about how UK employment and business immigration laws may be affected by Brexit, the continuing uncertainties around the calculation and payment of holiday pay, and looking to the future.

For more information about this event, or to reserve your place, please email Star Command at [email protected] or call 0191 243 6000.

Employment Taxes and Law Update 2019When the road looks rough ahead, you’ve got a friend in Lee…

Wednesday 1st May 20198:00am arrival for 8.45am start / presentations conclude 10.00am (approx.)

At Tyneside Cinema, 10 Pilgrim St, Newcastle upon Tyne, NE1 6QG

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