Not for Profit eNews | January 2019

Not for ProfiteNews

NEWSLETTER

January 2019 Edition

www.macintyrehudson.co.uk Chartered Accountants, Tax & Business Advisers

Not for Profit eNews | January 2019

Welcome to the Januaryedition of our NfP eNews

Welcome to the latest edition of eNews from MHA MacIntyre Hudson, and the first edition of 2019!

This month’s edition of eNews focuses on the results of the Charities Commission’s annual review of Charity accounts and the future of audit.

Our not for profit specialists from member firms of the MHA network have come together this month to produce a comprehensive report, titled Using Conflict as a Catalyst for Change, which is a guide to help you embrace, manage and mitigate conflict within your charity.

From everyone here at MHA MacIntyre Hudson, we would like to wish you all a Happy New Year and hope that 2019 is a rewarding and successful year for you all.

Chris HarrisAdvisory Partner E: chris.harris@mhllp.co.ukT: +44 (0)207 429 4100

Not for Profit eNews | January 2019

The Charities Commission’s annual review of Charity accounts – public benefit reportingThe Charities Commission released its annual review of Charity accounts and public benefit reporting on 20 December 2018. The purpose of the Commission’s annual review is to ensure that Charities’ accounts and trustees’ reports are meeting public expectations and are compliant with public benefit reporting requirements.

The scope of the review was a randomly selected sample of 105 Charity accounts for the period ending 31 December 2016, all with income over £25,000. The key findings of the review were as follows:

• Only 70% of trustees’ reports and accounts met the Commission’s basic benchmark of user requirements, down from 74% in the last review. The main reasons for failing to meet the Commission’s benchmark were a failure to evidence that accounts had been subject to an audit or independent examination, and not providing sufficient information on the Charity’s charitable purpose.

• Just 52% of trustees’ reports met the public benefit reporting requirements. Although this is 1% better than the previous review, the Commission warns that too many charities do not explain the activities they undertake to improve the lives of their beneficiaries.

This is the third consecutive fall in the quality of accounts being reviewed but this year the Commission has stated “this year is the first time we have found a significant deterioration since we began assessing accounts quality.”

Nigel Davies, head of accountancy services at the Commission, has stated “The public want and deserve to know how charities spend their money, so this deterioration in the quality of accounts is of serious concern.”

The Commission has produced guidance which explains how and why Charities must report on their public benefit.

Guide: Essential Charity Finance for Trustees

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Not for Profit eNews | January 2019

The future of audit The eagerly anticipated Kingman Review has been published and the report recommends that the Financial Reporting Council (FRC) is disbanded and replaced with a new oversight authority with regulatory powers set in statute.

The report notes the “surprisingly informal” way that the FRC makes board appointments, sometimes using the alumni networks of the Big Four. It suggests that a new independent regulator should have a chair and chief executive subject to a pre-approval hearing with the Business, Energy and Industrial Strategy (BEIS) select committee and who appear annually before the select committee.

The government has given its backing to Sir John Kingman’s recommendations with the business secretary, Greg Clark, stating that he had asked for a root and branch review of the FRC and that “Sir John has duly delivered.”

The Competitions and Markets Authority (CMA) has published an update paper which sets out “serious competition concerns” within the UK audit market.

One of the suggestions to counteract this is a “joint audit regime”, which would mean that firms outside the Big Four could have a role in auditing the biggest companies in the UK.

Finally, Donald Brydon - the outgoing chair of the London Stock Exchange – has been appointed to lead a new independent review of the quality and effectiveness of the UK audit market. Initial details can be found here.

Insight: Making VAT Digital Top tips for businesses

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Not for Profit eNews | January 2019

Using Conflict as a Catalyst for ChangeMHA’s latest publication on Using Conflict as a Catalyst for Change has been released.

Conflict affect all charities, large or small, simple or complex. Trustees have a legal duty to act in their charity’s best interests. They are expected to recognise what conflict is, how it affects their organisation and to deal with any issue appropriately. Therefore, it is fundamental that charities follow the guidance issued by the Charity Commission.

This document recognises that conflict takes many forms over and above the guidance issued by the Charity Commission and other Charity Regulators. It seeks to cover the various types of conflict that you could come across and recognises that some conflict can actually be a positive for the charity.

This month we are focusing on conflict with your trading subsidiary, because the best interests of a charity are not always the same as its trading subsidiary.

The guide includes a useful checklist to help evaluate your progress and implement achievable steps to manage internal and external conflicts.

Featured article:Conflict with your trading subsidiary

The best interests of a charity are not always the same as its’ trading subsidiary.

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Using Conflict as a Catalyst for Change

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Not for Profit eNews | January 2019

Regulatory alert issued to charitable think tanksThe Charities’ Commission has issued an alert to charitable think tanks to remind trustees of their legal obligations and duties and to ensure that charitable think tanks are acting for the public benefit.

The alert highlights that think tanks have an important role in society, but that charitable status holds a significance which comes with additional regularity requirements. The alert details how think tanks should achieve their charitable purpose and offers advice on protecting the charities’ reputations, stressing the importance of remaining politically neutral.

Whilst the alert is specifically aimed at charitable think tanks, the article is of interest to any Charities which engage in campaigning and political activity or which release publications as part of their charitable purpose.

Funding boost for the OSCR and a threat to charities without Scottish servicesThe Scottish Government has announced a 10% increase in the budget for The Office of the Scottish Charity Regulator (OSCR) from April 2019.

The OSCR regulates more than 24,000 charities and has warned of significantly increasing costs in the aftermath of the 1 percent public sector pay cap being lifted. The funding increase has only been guaranteed for one year.

OSCR has also considered deregistering charities that have little activity in Scotland. This would mean that charities with services only in England would not be able to fundraise in Scotland.

Insight: Tech Trends 2019: IT is everywhere, but can it be trusted?

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Not for Profit eNews | January 2019

New VAT refund opportunity for hospices HMRC are set to announce a major reversal of their existing policy on the VAT treatment of Continuing Care funding received by hospices and other palliative care charities. The anticipated change comes after significant lobbying and pressure from those within the sector and should result in significant VAT savings, both current and also retrospectively in relation to periods where HMRC’s current policy has been followed.

Hospices have enjoyed a significantly enhanced VAT recovery position since earlier changes were introduced from 1 April 2015, which effectively granted palliative care charities special status to recover VAT on their non-business activities. However, a point of contention has always been HMRC’s insistence that the provision of care to a named patient under a Continuing Care funding arrangement was an exempt supply for VAT purposes.

The impact of this has been that hospices were required to carry out often complex calculations to work out the exact amount of VAT that could be recovered, which in turn placed restrictions on the VAT that could be recovered on both capital expenditure and ongoing running costs.

However, we now understand that HMRC have conceded this point and will shortly be revising their published guidance in this area to confirm that Continuing Care funding should now be treated as non-business income, which will open the door to increased recovery.

Commenting on the forthcoming change David McDonnell, VAT Director in our London office, said “This is extremely welcome news for the sector and represents a very real opportunity for hospices to recover significant sums of VAT from HMRC. We are expecting the policy change to have retrospective effect, which will open up the ability to revisit not just the recovery of VAT on general overheads, but also potentially on any significant capital expenditure undertaken within the past ten years. We strongly recommend that anyone who may be affected by the policy change reviews their position as soon as possible with a view to submitting a claim to HMRC where appropriate”.

Good Governance Charity Forum5 February 2019, KentUnderstand how to effectively use the new Charity Governance Code.

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Not for Profit eNews | January 2019

Local excellence

MHA MacIntyre Hudson identifies with your goals and your needs, because we have been there ourselves. We have navigated the complexities, we have taken advantage of the opportunities and we are here to help you do the same.• We are a top 20 independent UK accountancy firm• Established in 1880• 12 offices• 89 partners and over 700 staff• Offices in London, the South East, across East Anglia and the Midlands, as well as the Cayman Islands• We are members of national accounting association MHA, and global accountancy network Baker

Tilly International.

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About MHA

MHA is an association of some of the best independent regional UK accountancy firms• 9 member firms• Over 50 offices nationwide• 179 partners and 2,200 staff• Combined turnover £140 million• UK member of Baker Tilly International.

Global expertise

About Baker Tilly International

Baker Tilly International is a network of independent accountancy and business advisory firms; our firm is an independent member of the network.• 147 countries• 126 member firms with 796 offices worldwide• 33,600 members of staff and partners• Combined turnover of $3.2 billion.

MHA MacIntyre Hudson is the trading name of MacIntyre Hudson LLP, a limited liability partnership, registered in England with registered number OC312313. A list of partners’ names is open for inspection at its registered office, 201 Silbury Boulevard, Milton Keynes MK9 1LZ. Registered to carry on audit work in the United Kingdom and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. An independent member of MHA, a national association of UK accountancy firms. The term ‘partner’ or ‘partners’ indicates that the person (or persons) in question is (or are) a member(s) of MacIntyre Hudson LLP or an employee or consultant of its affiliated businesses with equivalent standing and qualifications. Partners and directors acting as administrators or administrative receivers contract as agents and without personal liability. Further information and links to the respective regulators and appointed individuals’ qualifications can be found via our website www.macintyrehudson.co.uk/legal-disclaimer.

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Get in touchSudhir SinghPartner and Head of Not for ProfitE: sudhir.singh@mhllp.co.ukT: +44 (0)207 429 4100

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