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Legal update for voluntary organisations
  • Employment & volunteering
  • Equality
  • Legal structures, charitable status & governance
  • Contracts, risk, funding, finance & property
  • Activities & services (everything else)
  • Archived items

    Items are in order of chapters in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3). Dates in red below have been updated in the past six months.


    VSLH3 Ch.20
    Assets and agency

  • Archived items for this chapter

  • VSLH3 Ch.21
    Contracts and contract law

  • Consumer Rights Act 2015 (added 13/11/15)
  • Archived items for this chapter

  • VSLH3 Ch.22
    Risk and liability

  • Archived items for this chapter

  • VSLH3 Ch.23

  • Insurance Act 2015 (added 11/10/16)
  • Insurance resources (added 11/10/16)
  • Archived items for this chapter

  • VSLH3 Ch.24
    Financial difficulties and winding up

  • Archived items for this chapter

    VSLH3 Ch.48
    Funding & fundraising: General rules

  • Archived items for this chapter

  • VSLH3 Ch.49
    Fundraising activities

  • Public charitable, benevolent & philanthropic collections (updated 26/5/15)
  • Archived items for this chapter

  • VSLH3 Ch.50
    Tax-effective giving

  • Gift aid (updated 14/4/13)
  • Gift aid small donations scheme (updated 14/4/13)
  • Consultation on payroll giving (updated 11/2/13)
  • Archived items for this chapter

  • VSLH3 Ch.51
    Trading & social enterprise

  • Getting towards a definition of social enterprise (added 21/11/10)
  • Guidance on setting up a social enterprise (updated 14/4/13)
  • Archived items for this chapter

  • VSLH3 Ch.52
    Contracts & service agreements

  • Guidance on public sector contracts (updated 20/11/10)
  • Archived items for this chapter

    VSLH3 Ch.53
    Financial procedures & security

  • Guarding against theft and fraud (added 11/6/15)
  • Archived items for this chapter

  • VSLH3 Ch.54
    Annual accounts, reports & returns

  • Finding volunteers with finance skills (added 15/12/13)
  • Charities SORPs (updated 27/1/16)
  • Changes in audit threshold (updated 27/1/16)
  • Changes to charity annual returns (updated 27/1/16)
  • Filing charity accounts, reports and returns (updated 27/1/16)
  • Filing jointly with Charity Commission and Companies House (added 17/11/14)
  • New reporting standards for company accounts (updated 4/8/14)
  • Simpler financial reporting for micro-entities (updated 4/8/14)
  • Company annual reports (updated 4/8/14 )
  • The end of company annual returns? (added 17/11/14 )
  • Archived items for this chapter

  • VSLH3 Ch.55
    Auditors and independent examiners

  • Archived items for this chapter

  • VSLH3 Ch.56
    Corporation tax, income tax & capital gains tax

  • Archived items for this chapter

  • VSLH3 Ch.58
    Investment & reserves

  • Archived items for this chapter

  • VSLH3 Ch.59

  • Archived items for this chapter

  • VAT
    VSLH3 Ch.57
    Value added tax

  • VAT thresholds (updated 20/10/17)
  • Withdrawal of zero rate VAT on alterations to protected buildings (updated 21/10/12)
  • Withdrawal of reduced rate VAT on energy saving materials (added 1/4/12)
  • Archived items for this chapter

    VSLH3 Ch.60
    Land ownership & tenure

  • Meanwhile leases & licences (update 11/2/13)
  • Archived items for this chapter

  • VSLH3 Ch.61
    Acquiring & disposing of property

  • Archived items for this chapter

  • VSLH3 Ch.62
    Business leases

  • Commercial rent arrears recovery (updated 4/3/12)
  • Archived items for this chapter

  • VSLH3 Ch.63
    Property management & the environment

  • Challenging threats to discretionary rate relief (added 19/7/10)
  • Business rates & small business rate relief (updated 4/3/12)
  • Rate relief for empty property (updated 4/3/12)
  • Concessions for water & sewerage charges (updated 4/3/12)
  • Community infrastructure levy (update 4/3/12)
  • Archived items for this chapter

    For information about the legal update website for voluntary organisations, disclaimers and other sources of updates, see the legal update website home page.

    The five pages that make up the legal update website are Employment & volunteering, Equality & human rights, Legal structures, charitable status & governance, Contracts, risk, funding, finance & property, and Activities & services (everything else: health & safety, safeguarding, data protection, intellectual property, marketing, campaigning, events and more).

    Items about changes which took place from 2009 until those on this page are archived at

    WARNING: This page is not currently maintained and articles should not be relied upon.

    To receive current legal updates by email, click to send an email, asking to receive legal updates. Please give your name, organisation, email and postal addresses and telephone number. Your postal address and phone number are used to contact you if emails bounce. To avoid spamming, an email address is not given on screen.
    If you can't see the word 'Weblegalupdate' after 'click' in the first line, or have trouble sending an email by clicking on it, the address is weblegalupdate at, with the spaces and 'at' replaced by the @ symbol.



    Added 13/11/15. This information updates s.21.2.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    From 1 October 2015 the Consumer Rights Act 2015 (CRA) significantly updates and consolidates consumer law, making it clear what should happen when goods or digital content are faulty, or when services are not provided with reasonable care and skill. The CRA brings together 10 pieces of longstanding and sometimes contradictory pieces of legislation, repealing all or most of the Sale of Goods Act 1979, Supply of Goods and Services Act 1982 and other legislation.

    Charities and other not for profit organisations
    The Consumer Rights Act relates only to transactions between a trader and a consumer. These are often referred to as business-to-consumer transactions, but the statutory definition of "trader" in the CRA is wider than what might usually be thought of as a business.

    Under s.2 of the CRA, a trader is a person acting for purposes relating to that person's trade, business (including the activities of any government department or local or public authority), craft or profession. A trader may be acting personally, or through another person acting in the trader's name or on the trader's behalf.

    In this context, "person" includes not only individuals, but also bodies whether incorporated or unincorporated (Interpretation Act 1978, sch.1).

    Charities and other not for profit organisations are not explicitly mentioned, but neither are they excluded. Guidance on the Business Companion website produced by the Chartered Trading Standards Institute and the Department for Business, Innovation & Skills (for example, in the "What is a trader?" section at makes clear that the CRA applies to charities and other not for profit organisations. So if such organisations charge for goods, services or digital content, they are traders as defined by the act.
    Do not be misled by the 99.9% of information about the CRA which gives the impression it applies only to businesses. It applies to charities and other not for profit organisations as well.

    A consumer is defined as an an individual acting for purposes that are wholly or mainly outside that individual's trade, business, craft or profession. So the provision of goods, services or digital content to an organisation would not be covered, because even though the organisation is a "person", it is not an individual.

    The definition of consumer is significantly changed; previously, individuals were consumers only if they were acting for purposes wholly outside their trade, business, craft or profession.

    Any organisation, whether charitable or not, which sells goods, services or digital content directly to individuals should review its terms and conditions to ensure they comply with the relevant provisions of CRA. It may also want to display the new rules near the payment section on its website, and in its premises near where service users, customers or others pay for goods or services.

    The next part of this article, up to Further information, is adapted from "A guide to the Consumer Rights Act 2015", published by Stone King LLP. Many thanks to solicitor Brian Miller and Stone King for consent to use this.

    Key points
    Some of the main points of the Consumer Rights Act are:
    • Within 30 days of purchase, a consumer has a right to an immediate refund if the goods supplied are faulty.
    • Within six months of purchase, if a faulty good cannot be repaired or replaced, the consumer will be entitled to a full refund in most cases.
    • For up to six years, if purchased goods do not last a reasonable length of time, the consumer may be entitled to some money back.
    • If a trader does not carry out a service with reasonable care and skill, the consumer has a right to request that the service be repeated or fixed. If it cannot be fixed, the consumer will be entitled to some of their money back.
    • If a consumer and trader have not agreed a price before the service is delivered, the consumer must pay a reasonable price.
    • If a timescale for the delivery of a service has not been agreed beforehand, it must be carried out by the trader within a reasonable time.
    • A consumer who has purchased digital content which is faulty is entitled to a repair or replacement.
    • If a fault with digital content cannot be fixed, or if it has not been fixed within a reasonable time and without significant inconvenience, the consumer is entitled to either a full or partial refund.
    • If a consumer can demonstrate that the faulty digital content has damaged their electronic device and that the trader has not used reasonable care and skill, the consumer may be entitled to a repair of that device, or compensation.

    The sale and supply of goods
    What can the consumer expect?
    Under ss.3-32 of the Consumer Rights Act, certain standards apply for the sale and supply of goods. This includes hire purchase, hire, part exchange and contracts for work and materials.
    • The trader selling the goods must have the right to do so.

    • The goods must be of a satisfactory quality. This means they must be of a standard that a reasonable person would regard as satisfactory. The quality of the goods covers a number of factors including fitness for purpose (in the context of the purposes for which the goods of that type are usually supplied), appearance and finish, minor defects, safety and durability.

      In assessing the quality of the goods, all of the relevant factors must be considered, including price, description, and the advertising used by the trader.

    • The goods must be fit for a particular purpose. When a consumer indicates that goods are required for a specific purpose, or where it is obvious that goods are intended for a particular purpose and a trader supplies them to meet that requirement, the goods should be fit for that specified purpose.

    • The goods must match the description. When a consumer relies on a description (or perhaps a sample or display model) the goods supplied must match expectations. If the goods do not conform, an offence may have been committed.

    • Where installation has been agreed as part of the consumer contract, the goods must be installed correctly.
    A consumerís remedies for breach of rights
    Previous consumer rights legislation was unclear about the length of time consumers were entitled to a refund for faulty goods. This has now been clarified.
    • Short-term right to reject. If the goods do not meet the requirements above, there is a short period during which the consumer can reject them. This period is 30 days unless the expected life of the goods is shorter (such as highly perishable goods). This right does not apply where the only breach relates to an incorrect installation of goods.

      If the consumer asks for repair or replacement during the 30-day period, the period is paused so that the consumer has the remainder of the 30-day period or seven days, whichever is longer, to check whether the repair/replacement has been successful and to decide whether to reject the goods.

      When the goods are rejected, the consumer is entitled to a full refund.

      The trader is responsible for the reasonable cost of returning the goods, unless the consumer is returning them to the place where he or she took possession of them, if this is a requirement under the contract in order to get a refund.

    • Repair or replacement. When there has been a breach of the sales contract, a consumer who has failed to exercise any right to reject the goods will be entitled to claim a repair or replacement.

      This repair or replacement must be carried out with no cost to the consumer, and in a reasonable time and without causing significant inconvenience to the consumer.

      Where repair or replacement fails, the consumer is entitled to further repairs or replacements or can claim a price reduction or the right to reject.

    • Price reduction and the final right to reject. If repair or replacement is not available or is unsuccessful, or is not provided within a reasonable amount of time and without significant inconvenience to the consumer, the consumer can claim a reasonable price reduction or reject the goods by returning them to the trader.
    The burden of proof
    Regardless of the remedy being pursued, if the defect is discovered within six months of delivery, it is assumed that the fault was there at the time of delivery unless the trader can prove otherwise.

    If more than six months has elapsed, the consumer has to prove the defect was there at the time of delivery.

    The supply of services
    What can the consumer expect?
    The trader supplying the service must ensure that the following standards are met (Consumer Rights Act ss.48-57).
    • The service must be carried out with reasonable care and skill. Where it has been relied upon by the consumer, information that has been relayed to the consumer (either orally or in writing) is binding.

    • Where the price is not agreed before the service is carried out, the price must be reasonable (and will be judged against the prices that similar traders have charged).
    Where there is no agreement in relation to time, the service must be carried out within a reasonable timeframe.

    A consumerís remedies for breach of rights
    When a service does not comply with the requirements, the consumer has the following remedies.
    • A repeat performance of the service can be requested when the service has not been carried out with reasonable care and skill.

      This work must be done at no cost to the consumer, within a reasonable time and without causing significant inconvenience to the consumer.

    • The consumer can claim a price reduction where a repeat performance is impossible or cannot be done within a reasonable time and without causing significant inconvenience to the consumer.

      A reduction in price can also be claimed where the service has been carried out to a good standard, but where it has not been carried out in a reasonable time.

      The price reduction can be anything up to 100% of the amount paid, depending on how serious the breach has been.

    • Exceptions. If the service has been carried out using reasonable care and skill and in a reasonable amount of time, a consumer cannot make a claim if the service did not achieve the consumerís desired outcome, unless that outcome was agreed first.

      A consumer cannot make a claim where they are responsible for things going wrong (e.g. they requested that the trader use cheaper materials, short-cuts, etc).

    The sale of digital content
    With digital and downloadable products becoming an ever-growing and prominent part of the consumer market, the Consumer Rights Act ensures that consumer law makes specific requirements in relation to such content (ss.33-47).

    Digital content can include products such as computer games, television programmes, films, music, e-books, computer software, and phone and tablet apps.

    What can the consumer expect?
    The trader supplying the digital content must ensure that the following standards are met.
    • The digital content must be of satisfactory quality. When deciding whether digital content is satisfactory, three factors are taken into account: any description that was attached to the digital content; the price paid; and all other relevant circumstances such as public statements made in advertising and labelling.

      Quality of the digital content is to be considered in terms of safety, durability, the product being free from minor defects, and the fitness for all the purposes for which digital content of that kind is usually supplied.

    • Fit for a particular purpose. If, before a contract is made, a consumer makes known to the trader a particular purpose for which they intend to use the digital content, this becomes a term in the consumer contract. The consumer may make this particular purpose known to the trader directly or by implication.

      An exemption to this requirement is if it can be shown that the consumer did not rely on, or it was unreasonable for the consumer to rely on, the skill or judgement of the trader.

    • The digital content is as described. The content must match the description that has been given to it by the trader. This applies regardless of how the content compares to any trial version that had been examined prior to the completion of the contract.
    A consumerís remedies for a breach of rights
    • Repair or replacement. If there is a quality defect in the digital content, the consumer can request that the content is replaced or repaired. This must be done by the trader within a reasonable amount of time and without significant inconvenience to the consumer.

      The trader must bear any costs that are involved in replacing/fixing the content.

      The consumer does not have a right to repair or replacement if it would be impossible to do so, or it would be disproportionate in comparison to any other remedy.

      If the consumer shows that the digital content is defective within six months of its supply, it is to be taken as being defective on the day it was supplied.

    • Price reduction is only available where replacement/repair is not possible, or replacement/repair has been requested by the consumer, but not carried out within a reasonable time or not without significant inconvenience to them.

      The agreed reduction must be refunded without undue delay, and no more than 14 days after the reduction has been agreed between the trader and the consumer.
    Free digital content
    The rights and remedies available to consumers under the CRA are still available when digital content has been given away for free, provided that the free digital content has been supplied under a contract where the consumer has to pay for goods, services or other digital content in order to get the "free" content.

    For example, if a consumer is given free anti-virus software when purchasing a laptop computer, the consumer would have the same rights as described above in relation to the software.

    Damage caused to a device or other digital content
    Where digital content has been supplied and causes damage to a device or to other digital content belonging to the consumer, and the damage is of a kind that would not have occurred if the trader had exercised reasonable care and skill, the consumer can request:
    • Repair of the damage. This must be carried out within a reasonable time, without significant inconvenience and without cost to the consumer.

    • Payment of compensation. This must be given by the trader to the consumer without undue delay, and in any event within 14 days of the trader agreeing to pay the compensation

    Unfair terms
    The Consumer Rights Act has built upon the Unfair Contract Terms Act 1977 in relation to protecting consumers against unfair contract terms (ss.61-76).

    The test for "unfair terms" in the CRA is the same as that in UCTA: that a term is unfair if, "contrary to the requirements of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer".

    The most significant change as now embodied in the CRA relates to relevant terms. These are terms specifying the key elements of the contract, such as the main subject matter of the contract or setting the price. These relevant terms are not subject to the fairness test provided that they are:
    • transparent: in plain language, and legible (if in writing); and
    • prominent: brought to the consumerís attention in a way that an average consumer (defined in the CRA as reasonably well informed, observant and circumspect) would be aware of the term(s).
    This test goes further than existing law, which includes the 'transparency' requirement but not the 'prominence' requirement. Traders should now be even more wary of ensuring that relevant terms are clearly brought to a consumer's attention.

    Further information
    The above information is slightly adapted from Stone King LLP's "A guide to the Consumer Rights Act 2015", by Brian Miller and Richard Jones. It is on the Stone King website via

    Other useful briefings are "The Consumer Rights Act 2015" on p.9 of the Bates Wells Braithwaite summer 2015 Charity and Social Enterprise Update, at; "Get ready for the Consumer Rights Act" from Charles Russell Speechlys, at; and "The Consumer Rights Act" from Reed Smith, at

    These three briefings summarise aspects of the CRA additional to the article above, including:
    • any pre-contract information or statements said or written to the consumer, by or on behalf of the trader, about the trader or a service, is to be treated as a contractual term of the contract for that service, if it is taken into account by the consumer when deciding to enter into the contract or when making any decision about the service after entering into the contract (CRA s.50);

    • issues around credit agreements;

    • of particular interest to charities and other organisations which organise major events: new rules on secondary ticketing, where tickets are resold for events by someone other than the original seller (CRA ss.90-95 & sch.10);

    • the right of enforcement bodies such as trading standards departments and the Competition and Markets Authority to apply to the courts for an enforcement order, which may include enhanced consumer measures such as requiring the trader to appoint a compliance officer, provide training to staff, collect information from customers on compliance by the business, sign up to an alternative dispute resolution (ADR) scheme to manage complaints, and/or set up a scheme to provide redress to consumers and ensure the scheme is publicised (CRA ss.77-79 & sch.5-7);

    • new rights of collective action by consumers (CRA s.81 & sch.8).
    The Business Companion website, with information on all aspects of trading standards, is at It has separate sites for England, Scotland and Wales (it is not clear enough that "England" at the top of the page is a drop down menu). It does not cover Northern Ireland, where the law is generally very similar but specific advice should be taken.

    Business Companion's article about the Consumer Rights Act, at links to a consumer rights summary, in plain English, from the Department for Business, Innovation and Skills. This is in a colourful PDF version for display by traders for their customers and staff, and in a Word version that traders can adapt. There are versions for England and Wales, and for Scotland.

    The same article also has links to guides on the sale and supply of goods, supply of services, digital content, mixed contracts, returns policies, letting agents, sale and resale of tickets, unfair contract terms, and trading standards. At the end of the article are checklists for traders.

    Note that nearly all of the above articles and guidance, apart from the one from Bates Walls Braithwaite, refer only to businesses. But the Consumer Rights Act applies in the same way to charities and other not for profit organisations which sell or charge for goods or services.

    The Consumer Rights Act 2015 is at For related regulations search for consumer rights at

    Go back to contents
    Go to archived items about contract law (VSLH3 chapter 21)



    Updated 26/5/15. This information updates s.49.2.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    If and when the relevant provisions of the Charities Act 2006 ever come into effect, a collection in a public place will require a public collections certificate (PCC) issued by the Charity Commission and a permit from the relevant local authority, and a door to door collection (whether for money, direct debits etc or goods) will require a PCC and notification to the local authority. An exemption for local short-term collections apples where the collection is local in nature, takes place within a prescribed period of time, and the organisation has notified the local authority about the collection.

    PCCs will be valid for up to five years. For unincorporated charities, there will be special provisions for the certificate to be transferred from its holder(s) to another trustee or trustees within the same charity.

    These provisions were originally in the Charities Act 1992 and then became ss.45-66 of the Charities Act 2006. They are amongst the few provisions of that act which were not consolidated in the Charities Act 2011, so they still remain in the 2006 act.

    Because of pressure on the Charity Commission's resources, implementation of the new provisions has been postponed indefinitely. Until the new provisions come into effect, the 1916 and 1939 legislation governing public and house-to-house collections remains in effect.

    See archived items
    for changes proposed by Lord Hodgson's review of charity law in July 2012.

    Go back to contents
    Go to archived items about fundraising (VSLH3 chapter 49)


    Updated 14/4/13. This information updates s.50.2.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).

    HMRC's guidance on all aspects of gift aid is at Telephone information or advice is available from the HMRC charities helpline on 0845 3020203.

    Registered charities should be aware that the Charity Commission's new annual return form, introduced in January 2013, now asks whether the charity is registered for gift aid.

    Updated 11/2/13. This information updates s.50.2.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    From 1 January 2013 new gift aid declarations must follow the format of the model gift aid declarations issued by HMRC in February 2012 or, if a charity creates and uses its own declaration form, the form must comply with the checklist of minimum information that must be included. Stocks of declaration form that do not comply with the February 2012 requirements can no longer be used.

    In particular, a new declaration must now make clear that the donor must pay enough UK tax to cover all of their charitable donations during the tax year. There has always been a requirement to pay enough tax to cover all donations, but until now, HMRC's approved wording only required the donor to confirm they would pay enough tax to cover the particular donation(s) referred to in the declaration.

    The written declaration does not need to include all of the information required by HMRC if this has been provided to the donor in a different way, for example verbally to a fundraiser using a set script.

    Enduring declarations — those that cover future donations — made before 1 January 2013 will remain valid and do not need to be replaced, but if the donor makes a new declaration for whatever reason, the new one must include the new information.

    Guidance on declarations, including links to HMRC's model declaration forms for one-off donations, past and/or future donations and sponsorship, can be accessed via

    Universal declarations database
    Added 11/2/13. This information updates s.50.2.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Representatives from HMRC, the Treasury, the Cabinet Office and charity infrastructure organisations met in October 2012 to discuss the possibility of the sector setting up an organisation to run a database of universal gift aid declarations. HMRC is interested in the idea, but has said it will not set up, pay for or maintain the database.

    As proposed the database would not be "universal" in the sense of including every gift aid declaration. Rather the database would include universal declarations, where the donor has declared that every donation they make to any charity qualifies for gift aid. The donor would have a unique ID number and would give this to a charity when making a donation, instead of having to complete a declaration every time they donate to a charity for the first time (or successive times, if the donor did not make an enduring declaration to the charity in the first place.)

    The idea is at an early stage but even if it does not come to fruition, there is interest in the possibility of HMRC-approved software on which each charity could store its declarations, rather than having to retain paper declarations for every donation for six years.

    Retail gift aid (charity shops etc)
    Updated 14/4/13. This information updates s.50.2.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    The administration of gift aid for charity shops was simplified in April 2013, with information on at or from the HMRC charities helpline on 0845 3020203.

    A donor can make a gift aid declaration to a charity in each tax year covering sale proceeds of up to £100 if the goods are donated to a shop run directly by a charity, or proceeds of up to £1,000 if the goods are donated to a shop run by a charity's trading subsidiary. The charity only needs to contact the donor to confirm it can claim gift aid if the proceeds exceed this amount in the tax year.

    The difference between the amounts for shops run directly by charities and shops run by trading subsidiaries is because of technical issues in charities acting as agents for the sale of the goods.

    Prior to the changes in 2013, even if the donor made a gift aid declaration at the time of donating the goods, the charity had to contact the donor again after the goods were sold, to confirm it could claim gift aid. The confirmation was required because gift aid could be claimed only on donations of money, not goods, so the goods had to legally remain the property of the donor until they had been sold and the donor confirmed that the s/he was donating the sale proceeds to the charity.

    Record keeping and audit
    Updated 1/4/12. This information updates s.50.2.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    On 1 April 2010, the six-year period for recovering tax on gift aid donations decreased to four years from the end of the tax year to which the claim applies (for charitable trusts) or four years from the end of the accounting period to which the claim applies (for all other charities and community amateur sports clubs). HMRC had said in its guidance that the retention period for gift aid records was also reduced from six years to four, but announced on 24 February 2012 that this was an error, and records must be kept for six years. Organisations which destroyed records based on the previous guidance will not be penalised if HMRC asks to see the records, but records which are still held should not be destroyed until they have been held for at least six years. HMRC's guidance on gift aid record keeping and audits is at

    Repayment claims / Charities Online
    Updated 14/4/13. This information updates s.50.2.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    HMRC's move to online filing for gift aid repayment claims started in March 2011 with form R68(i), an "intelligent" form that contains automatic checks to improve the accuracy of information and reduce administration. But although R68(i) has to be completed online, it has to be printed out and sent to HMRC on paper.

    From 22 April 2013, R68(i) and all other R68 forms are replaced by HMRC's Charities Online service, although HMRC announced on 11 February that it would continue to accept R68(i) until 30 September 2013.

    Charities Online will enable charities and community amateur sports clubs (CASCs) to submit online claims for ordinary gift aid, claims under the gift aid small donations scheme, and claims for repayment of tax on other income. Guidance is at

    Claim forms. Claims can be made through HMRC's online form and spreadsheet, or by using in-house or third party software, or on a new ChR1 paper form.

    HMRC's online claim form, with a linked spreadsheet on which all donations are listed, can be used for up to 1,000 entries per claim. It will go live on 22 April 13 but can be downloaded before then at

    For claims with more than 1,000 entries, database software purchased or developed by the charity/CASC must be used. It can also be used for smaller claims. For charities that use open source CiviCRM database software, Leukaemia & Lymphoma Research announced on 5 April that they are offering free use of technology they have developed that will integrate the CiviCRM database with Charities Online. I don't have specific contact details but Leukaemia & Lymphoma Research's general email is, tel 020 7504 2200.

    ChR1, the paper form provided by HMRC, can be used for up to 90 entries. The ChR1 form will have space for five entries, and continuation forms (ChR1CS) can be used for additional entries, up to a total of 90. Each ChR1 and ChR1CS must be completed by hand with each letter or number in a separate square, so it can be scanned by HMRC into the Charities Online system. Photocopies will not be accepted as they cannot be scanned; this means information must be entered by hand on every sheet, even if it is the same as on previous forms.

    ChR1 and ChR1CS will be available from the HMRC helpline from 22 April, but this paper-based method will be tedious for any organisation making more than a small number of claims.

    Changes. Changes being brought in along with Charities Online are:

    • Donations from multiple donors of £20 or less can be aggregated up to a total of £1,000 per entry (rather than donations of £10 or less to a total of £500 as at present). But this is not obligatory, if it is easier for the charity or CASC to enter each donation separately.

    • A donation from someone taking part in a sponsored event can be treated as a single donation, rather than all the separate donations from people who sponsored the person having to be listed separately as is currently necessary if there are fewer than 10 donors. But individual donations of £500 or more shown on individual sponsor sheets will need to be separated out and listed separately on the claim.

    • During the transitional period until 30 September, organisations still using form R68(i) must use the old rules on aggregated claims and sponsored events, rather than the new rules above. Form R68(i) cannot be used for claims under the gift aid small donations scheme, so charities/CASCs wanting to claim top-up will need to make a separate Charities Online claim.

    • For claims made on online claim forms or using the charity's/CASC's own database, HMRC aims to get the repayment to the charity/CASC within 15 working days or less. For ChR1 paper claim forms the target is 15 working days, and for R68(i) forms it is 30 working days.

    • The term "responsible persons" (used on some forms) will be changed to "other officials", and the ChV1 variations form will be renamed the change of details form.
    Getting ready. As preparation for the new system, HMRC is advising charities and CASCs to:
    • ensure donor details are up to date and in a compatible format for Charities Online, allowing details to be entered in the following order: donor initials or first name; donor surname; house name or number, or first line of address if this is how the information is already stored; postcode (this will be the first time that donor address details are required on a gift aid claim form, and HMRC's guidance explains what to do if the postcode is unknown or the address is outside the UK).

    • ensure those involved in the gift aid process within the organisation, including trustees, are aware of the April 2013 changes;

    • if claims will be made online, ensure that the organisation's current software can edit and save Open Document Format (.odf) files — if not, free software can be downloaded from the internet, and HMRC's detailed guidance at includes information on these software packages and how to download them;

    • if claims will be made through the organisation's own database, which only large organisations are likely to do, ensure the software provider is adapting their software to be compatible with Charities Online, or if the organisation is buying or building a new system, ensure it is compatible.
    Issues. Charity finance experts have identified potential issues, including that access to Charities Online will be through the government gateway — HMRC's access point for online services such as VAT and corporation tax — and many charities may not be familiar with this.

    In response to concerns by charities that there would not be enough time to adapt donor databases and IT systems, HMRC agreed to a transition period until 30 September 2013 when the R68(i) paper form can continue to be used. There have been calls for this to be extended to 31 March 2014, but there is no indication that this will happen.

    Electronic repayments. As well as expecting most claims to be made electronically, HMRC is moving towards making all gift aid repayments electronically through BACS. Charities and CASCs which have not already supplied their bank details to HMRC should do so on form ChV1 at It is expected that Charities Online will not include provision for repayments to be made by payable order (cheque).

    Review of gift aid
    Added 11/2/13. This information updates s.50 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    In his autumn statement on 5 December 2012, Chancellor George Osborne said the Treasury would carry out a review "to examine whether the administration of gift aid can be improved to reflect new ways of giving money to charity, in particular digital giving".

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    Updated 14/4/13. This information adds a new section between ss.50.2 & 50.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).

    The gift aid small donations scheme (GASDS) enables charities and community amateur sports clubs (CASCs) to claim a top-up payment, similar to gift aid, on up to £5,000 per year of small cash donations without the donor having to make a gift aid declaration. The maximum for an individual donation is £20.

    The scheme came into effect on 6 April 2013, but claims could not be made until the charities online service started on 22 April.

    HMRC's guidance was published on 3 April. This covers eligibility for the scheme, what counts as a small donation, working out how much can be claimed, making a claim, record keeping, connected charities and CASCS, the special rules for community buildings, and what happens if a charity changes legal form or merges. The guidance is at

    The Small Charitable Donations Act 2012 and very helpful explanatory notes are at
    Draft regulations setting out administrative details are on the website via The final regulations are expected soon. The legislation followed a consultation from 27 March to 25 May 2012 and a public reading stage from 12 July to 23 August 2012, only the second time a bill has had this stage.

    "Charities" is used throughout the act to refer to both charities and CASCs. The only exception is the provisions relating to activities in community buildings, which do not apply to CASCs.

    The main provisions of the scheme are set out below.

    Top-up claims. Unlike ordinary gift aid which is linked to tax relief for individual taxpayers, the GASDS will be funded by the Treasury as government expenditure. It is estimated that it will eventually be worth at least £145 million annually to charities and CASCs.

    The term gift aid exemption claim is used throughout the act to refer to what has been called a gift aid repayment claim. The change in terminology is because a top-up payment to a charity or CASC is not a repayment of tax paid by the donor, as an ordinary gift aid payment is.

    Also unlike ordinary gift aid claims, which must be made within four years from the end of the tax year to which the claim applies, a top-up claim must be made within two years from the end of the tax year to which it applies.

    The maximum amount of donations on which a top-up payment can be claimed is the lower of £5,000, or an amount 10 times the gift aid donations amount.

    The gift aid donations amount is the amount of the gifts made to the charity/CASC in the tax year and in respect of which it has made successful gift aid exemption claims. So if a charity/CASC receives, for example, £400 in ordinary gift aid donations (donations with a gift aid declaration) and recovers tax from HMRC on this amount, it is entitled to claim top-up on £4,000 of small donations (10 x £400). But if it receives £600 in ordinary gift aid donations, the maximum on which it can claim top-up is £5,000, not £6,000. This change will benefit small charities/CASCs that receive £500 or less in ordinary gift aid donations, but up to 10 times that amount in street collections and similar cash collections from unidentifiable donors.

    Before it can make a top-up claim the organisation must have been recognised by HMRC as a charity or registered as a CASC for at least two years, and must have made successful ordinary gift aid claims for at least two of the past four tax years.

    If a penalty has been imposed on the charity/CASC in relation to a gift aid or top-up claim, it cannot claim top-up for the tax year to which the penalty relates or the next tax year.

    Definition of small donation. To be eligible for the scheme, the full amount of a small donation has to be used for charitable purposes, and cannot be a membership fee.

    The small donation must be £20 or less. If the charity's managers do not know whether the gift is £20 or less, it is eligible for the scheme only if they have taken reasonable steps to find out. Managers are defined as the persons having the general control and management of the administration of the charity, which under s.177 of the Charities Act 2011 means the trustees. The government has said that when the scheme is reviewed in three years, it will consider including non-cash donations such as donations made by text message.

    The donation must be received in the UK by or on behalf of the charity, and must be deposited in a bank account or other allowed account in the UK. The donor, if known, must not have made a gift aid declaration that would cover the donation, such as a permanent (enduring) declaration that continues until the donor cancels it.

    The donation must not be made under the payroll deduction scheme, or be tax deductible for the donor, or be subject to repayment, or be connected with any arrangement under which the charity will acquire property from the donor or a person connected with the donor.

    And finally, there must be no benefits associated with the gift, or any benefits associated with the gift must be of negligible value (for example, a lapel sticker designed to acknowledge the donation).

    Connected charities. In general, if two or more charities/CASCs are connected with one another in a tax year and their purposes and activities are the same or substantially similar, the £5,000 on which a top-up payment can be claimed is divided by the number of connected charities making top-up claims for that year. The definition of connected charity is quite wide and could include two substantially similar charities which each have the same person as one of their trustees. It draws on ss.993-994 of the Income Taxes Act 2007 and ss.450-451 of the Corporation Tax Act 2010 and quite frankly I haven't looked at the detail, so charities/CASCs which could be subject to the connected charities rule should read HMRC's GASDS guidance and if necessary take advice on how it applies to them.

    The rules on connected charities apply differently if any of the connected charities run charitable activities in a community building during the tax year — see below.

    Community buildings. Charities (but not community amateur sports clubs) that run charitable activities in a community building on at least six occasions during the year, each involving at least 10 group members, can claim top-up on donations (to a maximum of £5,000) made to the charity by group members while it is running charitable activities in each community building; and can also claim top-up on other remaining donations (also to a maximum of £5,000) to the charity during the year. A group member is a member of the group of people with whom the charity is carrying out the activity (probably more usefully referred to in many cases as beneficiaries, clients or service users). Paragraphs 45-46 in the explanatory notes to the act give an example of how this would work for a charity running activities for beneficiaries in two community buildings and also undertaking street collections. There are also examples in HMRC's guidance on GASDS.

    The beneficiaries attending the activities can (but do not have to) be different on each occasion, but they cannot count towards the minimum 10 beneficiaries if they have to pay to access the building or part of the building where the charitable activity is carried out. I interpret this as referring only to payment to enter the building or part of it, and not to payment to take part in the charitable activity. But if this provision might apply to your charity, take advice about exactly what it means.

    "Charitable activities" in this context include only activities that are part of the charity delivering its charitable objectives for the benefit of its beneficiaries. Activities carried out primarily for the purpose of fundraising are explicitly excluded. Other activities, such as trustee meetings or other administrative meetings, are also excluded. Top-up on donations received during these activities would be claimed as part of the charity's "remaining donations".

    "Community building" means a building such as a village hall, town hall, church, mosque, synagogue etc, or those parts of it, to which the public or a section of the public have access at some or all times. It does not include any parts of a building used wholly or mainly for residential purposes or the supply of goods. It also does not include any parts of a building that are used wholly or mainly for other commercial purposes, unless a charity is carrying out a charitable activity in those parts, and the parts are available for use exclusively by the charity in carrying out the activity.

    Where a person (including an organisation) owns a freehold or leasehold interest in land, two or more buildings on the land or on any adjoining land owned by the same person are treated as a single building for the purposes of the community building provisions.

    Despite concerns expressed at consultation and public reading stage and as the bill was going through Parliament, nothing was done about the complexity of the community building rules, the narrow definition of community building, and the rule that top-up can be claimed only on donations received while charitable activities are taking place. In some ways the rules were made even more complex, for example by saying that donations would only count towards the community building amount if they were made by beneficiaries taking part in the charitable activity.

    Connected charities/CASCs in community buildings. S.9 of the act explains the rules for determining the specified amount for a charity or CASC that is connected with one or more other charities or CASCs in a tax year, and where at least one of the connected charities (but not a CASC) runs charitable activities in a community building.
    HMRC's guidance on GASDS and paragraphs 57-72 of the explanatory notes to the act have a detailed explanation of how this will work in practice. It looks like an administrative nightmare.

    Merger and change of charity's legal form. The HMRC guidance explains the provisions in ss.12-13 of the act and regs.14-16 in the (not yet final) regulations, for situations where a new charity or CASC is created to take over all of the activities of an existing charity (for example when an unincorporated charity sets up a charitable company or charitable incorporated organisation), or when a new charity is created to take over the assets of several charities/CASCs.

    When a new charity is created in this way it can apply to HMRC to use the gift aid compliance history of the predecessor charity.

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    Updated 11/2/13. This information updates s.50.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).

    The payroll giving scheme enables employees to make charitable gifts by deduction from their salary or pension. It is different from gift aid because the charity does not recover the tax paid by the donor. Instead, the deduction is made from the donor's gross pay before tax has been deducted — so the donor does not pay income tax on the money used for the donation. Because the donor does not pay tax on the amount, a £1 donation costs a basic rate taxpayer 80p and a higher rate taxpayer only 60p. (National insurance remains payable on the full salary.)

    An employer or pension scheme signs up with a payroll giving agency (PGA), which at present must itself be a charity, and employees or pension scheme members sign up to donate to a nominated charity. The employer deducts the donation from the employee's or pension scheme member's gross salary and submits it to the PGA which passes it on to the charity. At present, only 2% of employers offer the scheme with around 3% of employees making regular donations.

    HM Treasury consulted from 24 January to 19 April 2013 on how how to improve the payroll giving scheme and increase overall donations to charity. The government's proposals include:

    • exit packs when an employee stops giving to the scheme, including materials to help them maintain a relationship with their chosen charity;
    • standardised forms for donors, employers and agencies, to make it easier for employers and donors to sign up;
    • reducing the processing time from 60 to 30 days so charities receive their donations more quickly;
    • allowing non-charities to become payroll giving agencies, in the expectation that they will invest in and improve the system (there are currently 12 active PGAs in the UK);
    • ensuring that PGAs are transparent to donors on the cost of processing their donation. A PGA's administrative fee is agreed with the employer or pension scheme provider, but there is no obligation to tell the donor or potential donor how much it is.
    The consultation also asks whether HMRC's role as regulator of PGAs needs to be changed.

    The Institute of Fundraising has said that the proposals do not go far enough, and that the system should be substantially changed in order to improve access, make it easier for charities to create relationships with payroll donors, and make donations portable so they can move with an employee who changes jobs.

    The consultation document can be accessed via

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    Added 21/11/10. This information updates s.51.1.1 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    The government defines social enterprises as "businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners". But this is not a statutory definition, and is not used by the social enterprise movement.

    The coalition government seems to be using the term even more widely than its own definition, for example calling John Lewis a social enterprise. (It's not, because it does not have to use its profits for social purposes. It is a mutual; what makes it different is that it is owned by its employees rather than shareholders, and profits are divided amongst the employees as bonuses rather than amongst shareholders as dividends. But its purpose is still to make money for its owners, nor for social purposes.)

    The problem of definition may be eased by the launch of the social enterprise mark in January 2010. Created by the Social Enterprise Coalition and RISE, the social enterprise network for the south west, in association with other social enterprise bodies and the Office of the Third Sector, the mark has no legal status. But its definition of social enterprise is likely to become accepted as standard.

    To qualify for the social enterprise mark, an organisation or business must be able to show that:

    • it has social and/or environmental aims;
    • it has its own constitution and governing body;
    • at least 50% of its profits are spent on socially beneficial purposes;
    • it earns at least 50% of its income from trading;
    • it can demonstrate that social/environmental aims are being achieved; and
    • if it ceased operating, its remaining assets would be distributed for social/environmental purposes (an asset lock).
    This definition could include charities such as a charitable community nursery at least half of whose income comes from fees charged to parents or to the local authority, a charitable arts centre at least half of whose income is from admissions to performances and workshops, a care service receiving most of its income from contracts with local authorities. It includes a charity's trading company, whose objects are commercial but whose governing documents require it to donate all or most of its profits to the charity. It includes businesses which operate commercially and have shareholders, but which have a cap which prevents them distributing more than 49.9% of their profits to shareholders or others who have invested in the business.

    Information about the social enterprise mark is at

    The lack of agreement about what constitutes a social enterprise was illustrated by debate about the profit distribution cap as the mark was being developed. The initial proposal was that a social enterprise had to use at least 65% of its profits on socially beneficial purposes. By the time the final definition was agreed, it had been changed to only 50% of profit having to be spent on social purposes.

    The lack of agreement is also illustrated by research showing that most of the 62,000 organisations defined as social enterprises by the government, using its definition, would not qualify for the social enterprise mark, because they do not have an asset lock preventing the sale of the business to a profit-making company.

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    Updated 14/4/13. This information updates s.51.1.1 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Setting up a social enterprise which will be a charitable trust, association or company is not significantly different from setting up any other charity; setting up a social enterprise which will be a non-charitable company or a community interest company is no different from setting up any other company; setting up a social enterprise as a community benefit society (industrial and provident society) is no different from setting up a community benefit society.

    But a social enterprise might also be set up as a commercial company, community interest company or co-operative society. The range of options can be confusing, especially because they are often not clearly differentiated or explained.

    To help clarify the options, the Department for Business, Innovation and Skills published A guide to legal forms for social enterprise in November 2011. This can be accessed via

    Social Enterprise UK has a wide range of publications and other resources at, including Start your social enterprise which can be accessed via This covers the social enterprise approach, finding investment and funding, deciding on a legal structure and much more.

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    Updated 20/11/10. This information adds to chapter 52 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    For organisations that want to go down the contracts route — or have no alternative, as grant finding increasingly mutates into service agreements and contracts — various resources are available. I recommend the ones listed below.

    The second edition of Pathways through the maze: A guide to procurement law was published on 26 October 2010. It is a clear, detailed guide, explaining commissioning and procurement, the EU procurement rules and when they apply, the procurement process, and how to challenge public body decisions. Written by Anthony Collins Solicitors and published by the National Council for Voluntary Organisations and the National Association for Voluntary and Community Action, it costs £15 and can be ordered at (sign of the times: the first edition was a free download).

    The National Audit Office published on 17 March 2010 Successful commissioning: How to secure value for money through better relationships with third sector organisations. Intended for local authorities and local health organisations, including primary care trusts, the guide will also help third sector organisations think about their involvement in delivering public services. Endorsed by relevant government departments as well as the Commission for the Compact and the National Council for Voluntary Organisations, it can be accessed via

    The handy guide to tendering and procurement, published by Tendering for Care in May 2009 with a second edition in March 2012, is one of the clearest publications I have seen about the law on public sector procurement and on bidding for contracts — including the all-too-often ignored possibility that collaborative or consortium bidding could be in breach of competition law. 15 pages, big print, easy to read and highly recommended. Download via

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    Added 11/6/15. This information updates s.53.1.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    You may think it could never happen to your organisation ... but it could, and it might.

    Fraud is a form of dishonesty, involving false representation, failure to disclose information and/or abuse of position, undertaken in order to make a gain or cause loss to someone. Theft is dishonestly appropriating property belonging to someone with the intention of permanently depriving that person or organisation of it. Fraud generally involves theft, but they are separate criminal offences, and may relate not only to financial assets, but also to other assets such as databases and information.

    Recent cases
    Here are just a few recent examples of theft and fraud within charities, followed by a round-up of useful resources to ensure your organisation is aware of the risk of theft and fraud, and has procedures in place to reduce the risk of it happening and to maximise the likelihood of it being discovered if it does happen.

    For more information about these cases, search on the organisation's and individual's name via Google or any search engine. Third Sector at and Civil Society at have regular — distressingly regular — articles about fraud within charities and other voluntary organisations.
    • Cyrenians Cymru: Head of finance and a finance employee accused of "systematic and extensive" £800,000 fraud. Cyrenians Cymru, a charity for homeless people based in Swansea, went into administration in January 2015, following the dismissal and arrest of finance director Mark Davies and another employee. The fraud was discovered after the board and senior management commissioned an independent examination.

    • Royal Horticultural Society: Head of operations steals £43,000 worth of goods and services, and transfers nearly £680,000 to two individuals over an 11-year period. Stuart Medhurst, former RHS head of operations, pleaded guilty in April 2015 to one count of fraud by abuse of position and two counts of conspiracy to steal. Two individuals who allegedly received the funds pleaded not guilty to conspiracy to steal. Their trials are scheduled for July 2016 and Medhurst will not be sentenced until then.

    • Afghan Poverty Relief: Trustees transfer more than £350,000 to their own accounts. Trustees Syed Hajnajafi and Akila Kassam, a married couple, were sentenced to five years and three years respectively in April 2014 for theft of more than £350,000 between 2005 and 2011 from this humanitarian charity based in south London. They used their access to the charity's bank accounts to transfer funds to their personal and business accounts. The Charity Commission appointed an interim manager (an independent expert who temporarily manages a charity, usually to the exclusion of the existing trustees) in September 2014.

    • Bethel United Church of Jesus Christ Apostolic: Treasurer/trustee steals £186,000. Gerald Edmund, former magistrate and bishop of this church in Birmingham, was sentenced to two years in January 2014 for stealing £14,000 from petty cash, transferring £15,000 from a church bank account, and cashing £157,000 of cheques in 2010 and 2011. The judge said, "You were able to take the money because of the high degree of trust that was placed in you by your church. ... You had effective control of the bank accounts, which enabled you to fool a co-signatory into signing blank cheques."

    • Oxfam: Head of counter-fraud steals nearly £65,000 while investigating misconduct by aid workers following earthquake in Haiti. (Some things really do make the mind boggle.) Edward Mckenzie-Green, former head of counter-fraud, was sentenced in May 2014 to two years and five months, after filing 17 false invoices from fictitious companies in 2011, for a total of £64,613.

    • Together 4 All: Chief executive diverts more than £50,000 to family bank accounts. Nuala McGee, former chief executive of this children's charity in Northern Ireland, pleaded guilty in May 2015 to false accounting, transferring criminal property and theft. The charges involved diverting cheques from donors into family bank accounts between 2008 and 2010, and the theft of a £2,000 laptop from the charity's office. Her husband has been charged with helping her defraud the charity.

    • Age UK: Cameras in 13 shops to catch staff and volunteers suspected of stealing goods or money. Third Sector reported on 4 March 2015 that following both regular and targeted monitoring, cameras had been installed in 13 of Age UK's 430 shops. According to the article, a shop volunteer in Nottinghamshire was given a 12-month community order and required to pay £800 compensation after admitting stealing £1,530 by failing to register sales and taking money from the cash box, and Dorset police were investigating an alleged theft by a Weymouth shop staff member.
    And here are a few more from 2015, compiled from Third Sector and Civil Society:
    6 January: Court rejects application by ShelterBox founder Tom Henderson — charged with three counts of fraud by abuse of position — to move trial to Cornwall.
    15 January: Former office manager of Yorkshire transport charity Bentham Development Trust sentenced to more than four years for stealing £94,000.
    17 February: Former purchase ledger clerk who stole £100,000 from Motor Neurone Disease Association sentenced to three years.
    17 March: Former finance officer of Pembroke College, Cambridge, sentenced to two and a half years for stealing £286,000.

    This is just a small sample of recent thefts and frauds — and these are only the ones that reach the voluntary sector media. The vast majority may never be discovered, or are discovered and dealt with internally, or involve the Charity Commission, police or other authorities but are reported only locally or not at all.

    And the cases above are only frauds and theft carried out within organisations. They do not include scams, or individuals posing as bogus charity collectors or using a charity's name for other fraudulent purposes, or even going as far as setting up two fake charity shops, supposedly raising funds for NSPCC, as John Whitcombe did in Cambridgeshire in 2008 and 2009.

    The extent of fraud in the sector
    For three years prior to its demise in 2014, the National Fraud Agency produced an Annual fraud indicator, estimating the cost of fraud to the UK, including to charities. Its final report, covering 2011-12 and published in June 2013, reported on a sample of 1,599 charities with income over £100,000. Of these, 9% had detected fraud during that year, of which 23% was by, or enabled by, people inside the charity. The most common types of fraud involved payments and banking (47%), accounting (15%), and identity (14%).

    Overall, the 2011-12 survey estimated that fraud had cost registered charities £147.3 million during the year, although some commentators thought this was likely to be an under-estimate.

    The 2011-12 report is available via

    Since March 2014, the work of the National Fraud Agency has been subsumed into the Action Fraud (see Reducing the risk, below) and the National Crime Agency. As far as I am aware there is no longer any systematic annual reporting of estimated fraud within the charity sector. CIFAS, a UK-wide service to prevent fraud by sharing data, published its most recent Fraudscape, an annual fraud report, on 25 March 2015, but this does not break it down by sector.

    The Charity Commission announced in July 2014 that losses from fraud and theft reported to it in 2013-14 totalled £13.5 million, but this covers only amounts reported via serious incident reporting or whistleblowing. In July 2012, the National Audit Office estimated that only 0.5% (half of 1%) of fraud within the charity sector was reported to the Commission. If this was a reasonable estimate, and still applied in 2013-14, it would put the total value of fraud at £2.7 billion.

    In February 2014, a report by the Centre for Counter Fraud Studies at the University of Portsmouth and accountants BDO estimated that for charities with annual income over £10 million, the annual cost of fraud is £1.65 billion.

    No one really knows how much fraud there is or might be. But it's a lot. The NFA survey showed that 9.2% of its sample of charities had detected fraud during the year. Some experts say that only 1/30th of fraud (3.3%) is detected. Still think it can't happen in your organisation? It can, but you can take steps to reduce the risk.

    Reducing the risk
    7 tips from CIFAS
    From a Third Sector article on 27 February 2015 by Simon Dukes, chief executive of crime prevention service CIFAS:
    • Treat fraud as a serious risk
    • Support staff to raise concerns
    • Carry our spot checks and look for warning signs
    • Know that data is as valuable as money
    • Collaborate
    • Plan for the worst
    • Report it.
    Full article at

    10 tips from Sayer Vincent
    Abridged from an article 19 May 2015 by Kate Sayer of Sayer Vincent accountants on the excellent VoluntaryNews website:
    • Don't imagine your charity is immune
    • Most fraud can be prevented with basic controls ...
    • ... but only if you implement the controls
    • A common fraud is false purchase invoices slipped into the system and paid as part of the batch ...
    • ... and relying on the manager who is authorising the invoices not paying attention and thus not implementing the control
    • Don't publish details of your normal bank account on your website — use a deposit account that can only receive funds, not be used to pay expenditure
    • Don't publish reports or accounts with scanned signatures
    • Check if you receive notice from a supplier that their bank details have changed
    • Establish the principle that it is OK to report any suspicious activity
    • Introduce a strong culture that fraud is not acceptable.
    Full article via

    Guide for trustees
    Once you get past the quick tips stage, far and away the best starting point for reducing the risks of fraud is Charity fraud: A guide for the trustees and managers of charities (but just as relevant for non-charities), produced in 2012 by the Charity Fraud Project. This is made up of 15 public, law enforcement and charity sector organisations.

    The publication provides an easy to use overview of the key aspects of charity fraud, pulling together guidance from the Charity Commission, Fraud Advisory Panel, National Fraud Authority and other bodies. Its eight sections cover what fraud is; what is required of trustees by law; practical steps to help prevent fraud; warning signs; what to do after an instance of fraud; reporting fraud; dealing with reputational damage; and contacts and resources.

    The guide can be downloaded free from the Charity Finance Group website via (it's a large document, and may take a while to download on a slow connection). A printable summary is at

    Action Fraud
    Action Fraud, the national fraud and cyber crime reporting centre, provides a central point of contact for information about fraud and financially motivated internet crime at

    Its many resources include a terrifying A-Z of fraud, "to help understand which fraud you've been affected by" (, and fraud alerts by email, voicemail or text message, targeted to your geographic area (register via

    Charity Commission toolkit
    Part 3 of the Charity Commission's Protecting charities from harm compliance toolkit, published in 2011, covers fraud and financial crime. A summary and the full 66-page document can be downloaded via

    Fraud resilience self-assessment
    The Charity Commission issued on 19 February 2015 information about a free online tool to help large charities (annual income over £1 million) assess how well they are protected against fraud.

    The self-assessment fraud resilience (SAFR) tool, designed by accounting firm PKF Littlejohn and based on large databases managed by it and the Centre for Counter Fraud Studies at the University of Portsmouth, is based around 29 questions and allows an organisation to establish how well it is protected against fraud.

    Responses are strictly confidential, and charities completing the self-assessment receive instant results. However, the Charity Commission will see an overview of outcomes, which will allow it to identify areas of particular strength or weakness and help it focus and improve its guidance for charities.

    The current SAFR tool is designed for larger, more complex organisations, but the Commission is working with the designers to develop a system suited to smaller charities.

    The Commission press release, with a link to the tool, is at

    Reporting fraud
    Action Fraud
    Any organisation which experiences fraud should report it to Action Fraud (see above, under Reducing the risk), and ensure they obtain a crime reference number. Action Fraud is the national police reporting centre for fraud and internet crime, with a 24-hour online fraud reporting service at, or by telephone (0300 123 2040) or textphone (0300 123 2050) weekdays 8am-9pm, Saturday and Sunday 9am-5pm. Reporting can be anonymous if done by telephone.

    Theft should be reported to the police (999 if it is in progress or has just occurred, 101 otherwise), and a crime reference number obtained.

    Charity Fraud Line
    Since May 2013, the employees of any charity registered with the Charity Fraud Line can anonymously report actual or suspected fraud at the charity. The Charity Fraud Line is operated by Crimestoppers, itself a charity, and information can be reported on its 24 hour phone line or secure website. The information is forwarded to a designated contact in the charity, or if the designated person is believed to be involved in the fraud, the information is passed to the Charity Commission.

    The Fraud Line's website, at has remarkably little information for charities about how to sign up, how it operates, and whether there is any charge for signing up. According to media articles at the time it was launched, if the Fraud Line received information about a charity that was not registered with it, the information would be passed to the police. This is not mentioned on the website, although presumably the employee could report the fraud anonymously (telephone only, not online) to Action Fraud.

    Media articles at the time of the launch also said the service could be used by charity volunteers, but the website only mentions employees. They said the service would be free of charge for charities during 2013/14 with a decision to be made about future years, but there is nothing on the website about whether there is a charge now.

    The original press release from Crimestoppers about the Charity Fraud Line is no longer online. So if you want to know more, see the Charity Fraud Line website for what little there is there, then ring 0208 835 3700 if you are a charity interested in registering with them, or 08000 232 101 (24 hours) if you are an employee wanting to report fraud.

    Charity Commission
    Registered charities must report actual or suspected instances of serious fraud, theft or other financial crimes to the Charity Commission. Reporting serious incidents: Guidance for charity trustees, downloadable via, explains what constitutes a serious incident, what needs to be reported, and other steps the trustees should take.

    The Commission says there is no minimum amount of fraud or theft that should or must be reported, and the trustees must decide whether incidents are serious or significant enough to report in the context of their charity and the circumstances of the incident. They point out that the circumstances of low value incidents can pose serious risks, and repeated or frequent incidents, even if low value, may be symptomatic of weak financial controls and poor oversight, which over time could lead to loss of significant amounts.

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    Added 15/12/13.
    The Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Accountants' Benevolent Association (CABA) set up a website in June 2013 to match volunteers with financial and other skills with not for profit organisations. Organisations can post unlimited volunteering opportunities free of charge to the website, and download CVs of potential volunteers.

    The potential volunteers are primarily ICAEW members, but the website is also open to others, including those whose skills are in fields other than finance. And ICAEW makes the point that the finance experts may not be looking for a volunteering role that is too similar to their day job; they may be looking for a volunteering role that is completely different.

    The website is at

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    Updated 27/1/16. This information updates s.54.2.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Two new statements of recommended practice (SORP) for charity accounts and reports came into effect for financial years starting on or after 1 January 2015. One is based on financial reporting standard 102 (FRS 102), and the other on the financial reporting standard for smaller entities (FRSSE, which you can pronounce frizzy).

    For financial years starting between 1 January and 31 December 2015, charities meeting the 'small entity' criteria can choose to use the either SORP; charities which are not eligible to use the FRSSE SORP must use the FRS 102 SORP. However, for financial years starting on or after 1 January 2016, the FRSSE SORP has been withdrawn, and all charities must use the FRS 102 SORP.

    For more about the two SORPs and the small entity criteria, see Which version?, below.

    What is a SORP?
    Financial reporting standards are issued in the UK by the UK Accounting Standards Board and the Financial Reporting Council, and form part of UK general accepted accounting practice (GAAP). Information about UK GAAP is on the Institute of Chartered Accountants of England and Wales website via

    A SORP is a set of supplementary recommendations on accounting practices for specialised industries or sectors. The full name of the charities SORP is Accounting and reporting by charities: Statement of recommended practice.

    The Charity Commission for England and Wales the the Office of the Scottish Charity Regulator are the SORP-making body for the charity sector in the UK. They are advised by a charities SORP committee, made up of charity representatives, funders, auditors and independent examiners, and others.

    Virtually all charitable organisations throughout the UK, even if they are not registered with the relevant charity regulator, must comply with at least some parts of the charities SORP. The only exceptions are charities which have their own SORP, such as registered social landlords.

    Charities which prepare annual accounts on an accruals basis must comply with SORP rules on accounts and reports. This includes:

    • all charities which are companies, regardless of income;
    • non-company charities with annual income over £250,000;
    • non-company charities with annual income no more than £250,000 which choose to prepare accounts on an accruals basis.
    Non-company charities with income no more than £250,000 which prepare accounts on a receipts and payments basis (also called cash basis), rather than an accruals basis, do not need to comply with the SORP rules on accounts. But they do have to comply with SORP rules on the trustees' annual report.

    Although the SORP is only "recommended" practice, regulations require charity accruals accounts to be prepared in accordance with SORP methods and principles unless doing so would produce a distorted view of the accounts. If SORP is not followed, this must be explained in the notes to the accounts.

    Unlike previous charities SORPs, those in effect for financial years starting on or after 1 January 2015 distinguish clearly between what must be done, what should be done as best practice but does not have to be, and what may be done as an option.

    Which version for financial years starting in 2015?
    For financial years starting between 1 January and 31 December 2015, charities have a choice of two SORPs.

    One of these, the FRSSE SORP, can be used by charities which meet at least two of the conditions for a 'small entity': annual income not exceeding £6.5 million; balance sheet total not exceeding £3.26 million; average number of employees not more than 50. Over 98% of charities are eligible to use FRSSE.

    The other SORP, FRS 102 SORP, must be used by charities which are not entitled to use FRSSE SORP.

    Charities entitled to use the FRSSE SORP may use the FRS 102 SORP if they choose. In many cases, but not necessarily all, this will be advisable.

    The FRSSE SORP might have seemed the obvious choice for charities eligible to use it. However, a consultation by the Financial Reporting Council in late 2014 proposed that for financial years starting on or after 1 January 2016, the FRSSE reporting standard should be withdrawn, in order to comply with changes in international standards. This change was accepted.

    Following a consultation by the charities SORP committee in summer 2015 about the implications of this change, it was announced in early December 2015 that for financial years starting on or after
    1 January 2016, the FRSSE SORP would be withdrawn, and all charity accounts and reports would have to comply with the FRS 102 SORP.

    For financial years starting during 2015, charities entitled to use the FRSSE SORP still have two choices. Given that we now know the FRSSE SORP will be withdrawn for financial years starting in 2016, the obvious choice now, in most cases, will be to go direct to the FRS 102 SORP. But for some charities there may be advantages in using the FRSSE SORP, even if it can only be for one year, so trustees should take advice from their charity's auditor or independent examiner.

    Factors which might lead a charity to consider using the FRSSE SORP, even though it can only be for one year, are that the FRS 102 SORP currently requires cash flow statements, and requires employers in multi-employer defined benefit pension schemes to disclose details of any payment plan to pay towards a pension deficit. The FRISSE SORP does not require cash flow statements or disclosure of pension deficit payment plans. There are also other differences between the FRSSE and FRS 102 SORPs which may be relevant for some charities, such as the way investment income is shown.

    For all charities, regardless of which SORP they use, a significant change is that the trustees' report, rather than simply stating that the trustees have considered major risks to the charity, as under the 2005 SORP, must include the principal risks and uncertainties facing the charity.

    Changes for financial years starting in 2016
    One concern about withdrawal of the FRSSE SORP was that FRS 102 requires cash flow statements, but FRSSE does not. Following consultation, the charities SORP committee agreed that FRS 102 would be amended to make such statements optional for charities meeting the "small entity" criteria that would have entitled them to use FRSSE.

    Another change is that the SORP definition of larger charity, instead of being linked to the statutory audit threshold as it has been, will be set at £500,000.

    The charities SORP website at, includes the SORPs, background information, and guidance on how to select the right SORP.

    Helpsheets at map each paragraph of SORP 2005 to the relevant paragraph in the FRS 102 SORP; set out significant changes between SORP 2005 and FRS 102 SORP; and compare, module by module, the FRS 102 and FRSSE SORPs.

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    Updated 27/1/16. This information updates s.54.2.7 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    For financial years ending on or after 31 March 2015, the income threshold at which registered charities in England and Wales are, in general, required to have a full audit — rather than being able to choose whether to have an independent examination or full audit — was increased from £500,000 to £1 million.

    In addition, the total group income threshold at which parent charities should have group accounts was increased from £500,000 to £1 million, and the preparation threshold for group accounts was increased from £500,000 to £1 million.

    For charities with total assets (before liabilities) more than £3.26 million, the income threshold for audit remains unchanged at £250,000.

    Even where there is no longer a statutory requirement to have an audit and it would therefore appear that an independent examination is adequate, it is necessary to check whether an audit might be required by the charity's governing document or its funders. Or the charity may choose to have an audit to provide additional assurance about its financial situation to funders, donors and other stakeholders, or because audited accounts could be required when bidding for some contracts.

    Also from 31 March 2015, the Institute of Financial Accountants and the Certified Public Accountants Association were added to the list of recognised professional accountancy membership bodies whose appropriately qualified members can carry out independent examinations of the accounts of charities with incomes more than £250,000. The rules remain unchanged on who can carry out an independent examination where income is more than £25,000 and not more than £250,000.

    The basic rules on audit and independent examination are in the Charity Commission's Charity reporting and accounting: The essentials March 2015 (CC15c), via, and in more detailed guidance via

    The changes on 31 March 2015 arose from Lord Hodgson's recommendations in his review of charity law back in 2012, which was followed by the coalition government's response in 2013, and an Office for Civil Society consultation for seven weeks in December 2014/January 2015.

    Scotland and Northern Ireland
    The above increases in the threshold for audit do not apply in Scotland, where it remains £500,000, or in Northern Ireland, where it is £500,000 for financial years starting on or after 1 January 2016, now that s.65 of the Charities Act (Northern Ireland) 2008 has come into effect and all registered charities are required to have an independent examination or audit.

    In changes welcomed by the charity sector in Northern Ireland, the threshold above which a charity has to produce accrual accounts (rather than simpler receipts and payments accounts) has been increased from the originally proposed £100,000 to £250,000, and the threshold at which a charity must have audit, rather than being able to have either an independent examination or audit is also increased from the originally proposed £100,000 to £250,000.

    Information about the changes and a Charity Commission for Northern Ireland consultation on draft guidance is on the CCNI website via, and from the Northern Ireland Council for Voluntary Action (NICVA) via

    The relevant sections of the Charities Act (Northern Ireland) 2008 are at
    The Charities Act 2008 (Substitution of Sums) Order (Northern Ireland) 2015 is at

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    Updated 27/1/16. This information updates s.54.2.10 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    All charities registered with the Charity Commission for England and Wales with annual income more than £10,000, and all charitable incorporated organisations (CIOs) regardless of income, must submit an online annual return within 10 months from the end of their financial year.

    The Charity Commission announced on 4 September 2015 that the annual return for 2016, for financial years ending on or after
    1 January 2016, would remain the same as for 2015, apart from some new financial information required for charities with income of £500,000 or more, because of changes in the new SORP.

    A question on campaigning costs, originally proposed for the 2015 return, has now been rejected because of the administrative burden the question would place on charities. Sector concerns about the proposal involved not only the administrative burden, but also concern about how widely campaigning would be defined.

    Also in 2015, the Commission proposed requiring charities with annual income between £10,000 and £500,000 (and CIOs even if below £10,000) to provide a detailed breakdown of key financial information, similar to what charities with annual income above £500,000 must provide. The Commission accepted that this requirement would have a significant impact on these charities, especially smaller ones, so said they would not introduce it in 2015. However, they said they would continue working towards a technical solution that would allow the information to be submitted, displayed and used more easily.

    The Commission is seeking to ensure the format for the 2016 return is intuitive, accessible and easy to use. A test version is planned for release in early 2016, and the form may be adapted based on feedback.

    All charities registered with the Office of the Scottish Charity Regulator (OSCR) must submit an annual return to the regulator within nine months from the end of their financial year, and those with annual income over £25,000 must submit a supplementary monitoring form.

    OSCR consulted from August to October 2014 on proposed new questions for the annual return. In its response to the consultation on 19 March 2015 it confirmed there would be some changes to the questions and the return would be made more flexible, but did not elaborate.

    Northern Ireland
    The Charity Commission for Northern Ireland announced on 30 November 2015 that annual monitoring returns, accounts and reports must be submitted via a new online system.

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    Updated 27/1/16. This information updates ss.54.2.9 & 54.2.10 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Registered charities in England and Wales with annual income over £25,000 are required to send their audited or independently examined annual accounts and trustees' annual report to the Charity Commission within 10 months from the end of their financial year. In addition, charities with income over £10,000 must submit an annual return within the same period [see above]. These income thresholds do not apply to charitable incorporated organisations (CIOs), which must submit accounts, reports and returns to the Commission regardless of income.

    The basic rules on annual filing requirements are in the Charity Commission's Charity reporting and accounting: The essentials March 2015 (CC15c), via, and in more detailed guidance via Failure to file annual documents on time is a criminal offence, and failure to file on time for two or more years can trigger a statutory inquiry by the Commission, with attendant publicity. (And this is definitely not a situation where "any publicity is good publicity").

    In January 2015 the Charity Commission launched a new online tool to allow a charity's accountant or another nominated agent to submit accounts on the charity's behalf. Before this can be done, the charity must log on to "change your charity's details" on the Commission website, and in the "trusted third party" field enter the email address that the advisor will use to sign up to submit accounts. Prior to the introduction of this service, only the charity could submit its accounts.

    Even where an accountant or other advisor has been authorised to submit accounts, the trustees as a body — not just the treasurer, or finance staff, or the accountant — are responsible for ensuring the accounts, trustees' report and independent examiner's or auditor's report are filed on time.

    Problems with annual documents
    Charity Commission sampling shows that approximately one-third of accounts and are incomplete or are otherwise unacceptable. These problems include:

    • some charities failing to submit one or more of the principal components: the trustees' annual report (TAR), the report of the independent examiner or auditor, or even the accounts themselves;
    • some submitting notes of the AGM rather than a report that meets the statutory requirement for a TAR;
    • a majority of charities failing to explain adequately how the charity's activities further the charity's purposes for the benefit of the public, and not including the required statement that the trustees have had due regard to the Commission's guidance on public benefit.
    Late filing
    The Charity Commission published on 27 December 2015 a list of some of the excuses they've received for late filing, including "The person with the password is in Malaysia", "No one told me when we registered", and "The accounts aren't ready so I recorded zero income and zero expenditure so we wouldn't show as being in default on the register". The full list is in the press release at And they actually received one set of incomplete accounts with bite marks.

    The Commission starting clamping down on recurrent late filers in September 2013. Between then and 31 December 2015, a total of 88 charities were brought into a class inquiry of "double defaulting" charities which have failed to file their annual documents for two or more of the previous five years.

    On 19 January 2016, the Commission announced that 73 of these had fully complied with their obligations and as a result had ceased to be part of the inquiry. In addition, three charities had been removed from the class inquiry and been placed into inquiries in their own right, due to serious regulatory concerns being identified which required further examination by the Commission.

    The inquiry started with defaulting charities with annual income over £500,000. The threshold has been progressively reduced, so that by 2015 the inquiry was looking at double defaulter charities with a last known income over £200,000. In early 2016, it will consider looking at charities with a last known income of less than £200,000.

    As the Commission repeatedly reminds charities, failure to file on time is a criminal offence, and charities which do so risk enforcement action, removal from the register of charities, or being put into the class inquiry of double defaulters.

    Failure to file on time can also lead to very negative publicity. The Commission publishes details and a final report on each charity in a double defaulter inquiry. It continues to remind potential funders and donors to check the register of charities to see if a charity's accounts and returns have been submitted as required. It also, in January 2016, started publicising lists of charities in a specific geographic area that are not up to date with filing their annual accounts.

    All charities registered with the Office of the Scottish Charity Regulator (OSCR) must submit an annual return and signed annual accounts to the regulator within nine months from the end of their financial year, and those with annual income over £25,000 must submit a supplementary monitoring form. At present OSCR publishes information on its online register of charities about a charity's annual income and expenditure and whether it filed its annual return on time. But unlike the Charity Commission, it does not make the actual accounts available via its website.

    In its annual report in July 2014, OSCR said it had asked the Scottish government to consider a change in the law to allow the accounts of all Scottish charities to be published on its website. It then consulted from August to October 2014, and announced on 9 February 2015 that it intended to publish online accounts for all Scottish charitable incorporated organisations (SCIOs), and for other charities with an annual income above £25,000. Its recommendations, following 373 written responses to the consultation, were published on 19 March 2015.

    OSCR is now working on publishing charities' accounts online, but initially is encouraging charities to publish their accounts on their own website. It is also planning to produce guidance for smaller charities on trustee annual reports.

    Northern Ireland
    For financial years starting on or after 1 January 2016, the Charities (Accounts and Reports) Regulations (Northern Ireland 2015, issued under the Charities Act (Northern Ireland) 2008, sets out requirements for accounts, group accounts, audit or independent examination, and annual reports for charities registered with the Charity Commission for Northern Ireland (CCNI). The regulations were finalised after a consultation by the Department for Social Development from 1 September to 30 October 2015.

    CCNI consulted from 22 December 2015 to 11 March 2016 on draft guidance intended to help trustees, independent examiners and others involved with charities understand the new rules and what they need to do to comply with them. Information about the consultation is available from CCNI via, and from the Northern Ireland Council for Voluntary Action (NICVA) via

    The Charities (Accounts and Reports) Regulations (Northern Ireland) 2015 are at

    For financial years starting between 1 April 2014 and 31 December 2015, the 2014 interim regulations continue to apply. Guidance on the interim requirements can be accessed on the CCNI website via

    CCNI announced on 30 November 2015 that its online register of charities has been updated and it can now display the annual accounts and reports of each registered charity.

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    Updated 17/11/14. This information updates ss.54.2.9, 54.2.10, 54.3.8 & 54.3.11 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    In his review of the Charities Act in July 2012, Lord Hodgson recommended that work by Companies House and the Charity Commission to create a single reporting system for charitable companies should continue as a matter of urgency, and the potential for joint accounting requirements should also be investigated.

    The Public Administration Select Committee, in its inquiry into the regulation of charities in May 2013, did not go this far, but recommended that Companies House and the Charity Commission work towards a single filing of annual returns for charities registered with both Companies House and the Commission.

    At its public meeting on 3 July 2013, the Commission said the "next evolution" in the filing of accounts would probably be provision for such joint submission. But in its annual report in July 2014, the Commission said its initial work on this had raised real doubts about the affordability of joint electronic submission. However, it is continuing to look at ways of reducing the costs or spreading them over a longer period, and is also looking for other affordable ways to tackle the issue. The Commission 2013-14 annual report can be accessed via

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    Updated 3/8/14. This information updates s.54.3.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    A new financial reporting standard for companies (FRS 102) will come into effect for accounting periods starting on or after 1 January 2015, along with a revised statement of recommended practice for charities (SORP) based on the new FRS [see Two new charities SORPs, above].

    Large global companies will have to continue to comply with international financial reporting standards (IFRS) for large companies. But for other UK companies, most current accounting standards for the UK and Republic of Ireland will be replaced with the single FRS 102. FRS 102 is based on the IFRS for small and medium-sized entities.

    The financial reporting standard for smaller entities (FRSSE) will be retained for companies which qualify as smaller: meeting any two of annual income not exceeding £6.5 million, balance sheet total not exceeding £3.26 million, and average number of employees not exceeding 50. Non-charitable smaller companies will have a choice whether to use FRS 102 or FRSSE, and charitable companies which meet the current criteria for FRSSE will be able to choose whether to use the new charities SORP based on FRSSE or the one based on FRS 102 [see SORP article above].

    FRS 102, as approved by the Financial Reporting Council in March 2013, can be accessed via There are many summaries listed on Google but I don't know enough to assess them. Finance specialists will have received many analyses and summaries of FRS 102; non-specialists should take advice from their company's accountant or auditor about how their company will be affected.

    Although FRS 102 will come into effect only for financial years ending on or after 1 January 2015, comparative figures for the previous financial year (ending on or after 1 January 2014) will need to be prepared in the same format. So it is important to be aware of relevant changes during the 2014 or 2014-15 financial year.

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    Updated 3/8/14. This information updates 54.3.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    For financial years ending on or after 30 September 2013, micro-entities which are not charities can choose to submit simplified micro-entity accounts to Companies House. A micro-entity is a registered company which meets any two of the following three criteria: turnover not more than £632,000, balance sheet total not more than £316,000, and employing no more than 10 people on average during the financial year. The statutory definition explicitly excludes companies which are charities.

    A micro-entity must submit a balance sheet to Companies House each year, and may (but does not have to) also submit the profit and loss account for that year, directorsí report, auditorís report (unless the company is claiming exemption from audit as a small company), and any notes to the accounts.

    The balance sheet must contain a statement in a prominent position above the directorís signature and printed name that the accounts have been prepared in accordance with the micro-entity provisions. This statement should appear in the original accounts as well as the copy sent to Companies House.

    If the company has opted not to file a directorsí report and/or a profit and loss account, a statement should also appear on the balance sheet sent to Companies House that the accounts have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.

    The rules for micro-entity accounts are explained on the Companies House website at

    Implementation of these provisions follows a consultation by the Department for Business, Innovation and Skills and the Financial Reporting Council from August to October 2011 on Simpler reporting for the smallest businesses, and a BIS consultation on specific proposals in March 2013.

    The Small Companies (Micro-Entities' Accounts) Regulations 2013 are at

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    Updated 4/8/14. This information updates 54.3.6 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    For financial years ending on or after 30 September 2013, the annual reports of large and medium companies — including charitable companies — must include both a strategic report and the directors' report. Medium and large companies are generally those with a turnover of at least £6.5 million.

    The strategic report must cover the company's strategy, business model, principal risks and challenges, and must include certain specified information. It replaces the previous business review.

    The Charity Commission and the Office of the Scottish Charity Regulator (OSCR), as the joint SORP making body, issued guidance on 28 January 2014 for charitable companies which must comply with the new rules. The guidance says that for a charity which is a company, the strategic report should provide context for the related financial statements, provide an analysis of the charity's past performance, and provide insight into the charity's main objectives and strategies, and the principal risks it faces and how they might affect future prospects. Affected charities should incorporate the strategic report (as required under company law) into the trustees' annual report and accounts (as required under charity law). In approving the trustees' annual report, the trustees must also explicitly approve the strategic report.

    The Commission/OSCR guidance can be accessed via

    On 9 June 2014, the Financial Reporting Council published non-mandatory guidance on preparing company strategic reports. This is aimed at quoted companies, but is intended to serve as best practice for all companies preparing strategic reports. The FRC guidance can be accessed via

    The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 are at

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    Added 17/11/14. This information updates s.54.3.11 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Following a consultation from 7 October to 22 November 2013 on company filing requirements, the government announced on 21 April 2014 that it intends to remove the requirement for companies to complete an annual return at a set point each year. Instead, companies will be able to confirm, at any point in the year, that their company information is correct.

    Companies which make changes inside a 12-month period, for example if they notify Companies House that a director has been appointed, will be asked whether they wish to check and confirm other information at the same time. If they do so, no further action will be needed for a further 12-month period, unless the company needs to notify a new change to Companies House.

    The legislation to bring in this change won't happen until there is parliamentary time for amendments to the Companies Act 2006.

    The consultation documents and government response can be accessed via

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    Updated 20/10/17. This information updates ss.57.2.1 & 57.8.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    From 1 April 2017 the VAT registration threshold is increased from £83,000 to £85,000 in any 12-month period, and the deregistration threshold goes up from £81,000 to £83,000.

    The Value Added Tax (Increase of Registration Limits) Order 2017 is at

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    Updated 21/10/12. This information updates s.57.14.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    From 1 October 2012, VAT zero rating for approved alterations to protected buildings has been removed. Repairs and maintenance work were already subject to standard rate VAT, and now alterations are as well.

    For VAT purposes a protected building is a listed building or scheduled monument that is (or will become, on completion of the work) a dwelling, residential building such as a nursing home or student accommodation, or building used by a charity for non-business purposes such as a place of worship or as a village hall or similar. The zero rating on the first grant by a developer of a major interest in a substantially reconstructed protected building will also be removed.

    Zero rating continued to apply temporarily if listed building consent, or the equivalent approval for listed places of worship, was applied for before 21 March 2012, or if in relation to substantial reconstructions, at least 10% of the reconstruction had been carried out before 21 March 2012. The transitional period for completion of these works lasted until 30 September 2015.

    For those not eligible for the transitional concessions, the withdrawal of zero rating increases the cost by 20% on alterations to listed buildings used for residential or charitable purposes and listed places of worship. This could include, for example, adding or altering toilet and kitchen facilities.

    The provisions are in s.196 and schedule 26 para.3 of the Finance Act 2012, at

    Listed places of worship
    Updated 21/10/12. This information updates s.57.14.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    The Department for Culture, Media and Sport runs a listed places of worship grant scheme, under which a listed place of worship of any faith or denomination may apply for a grant equal to the VAT paid on eligible repairs and maintenance works. To mitigate the impact of the removal of zero rating on alterations, the scheme has been extended from 1 October 2012 to include VAT on alterations.

    Following a campaign by the Church of England and other denominations and faiths for listed places of worship to be exempted from the withdrawal of zero rating or for the places of worship scheme to be increased to cover the additional demand, an additional £30 million per year will be made available to the listed places of worship grant scheme throughout this parliamentary session. Other changes from 1 October 2012 are that the grant will be paid monthly rather than quarterly and it will cover 100% of VAT claimed on repairs, maintenance and alterations to listed places of worship. The new funding for the scheme is ringfenced until the end of this parliament, but there is no guarantee it will continue from 2015 onwards.

    Information about the scheme is on the listed places of worship grant scheme website at, and a summary of the October changes is at

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    Added 1/4/12. This information updates s.57.14.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    VAT at the reduced rate of 5% currently applies to the supply and installation (but not DIY installation) of specified energy saving materials in all homes, including residential homes, and in buildings used for qualifying charitable purposes. Qualifying charitable purposes are purposes carried out by a charity which are defined as non-business in VAT terms, or are the purposes of a village hall or similar building, such as a community centre or sports pavilion, providing social or recreational facilities for a local community with any economic activities incidental to that use.

    Eligible energy saving materials include insulation, boiler controls and solar panels.

    The government announced in para.2.187 of the budget on 21 March 2012 that the Finance Bill 2013 will withdraw charitable buildings from the scope of this VAT reduced rate. Reduced rate will still apply to the supply and installation of energy saving materials in residential accommodation, including accommodation operated by charities.

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    Updated 11/2/13; links updated 4/8/14. This information adds a new section in s.60.5 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    As a way of allowing non-commercial use of empty shops while the landlord continues to look for a commercial tenant, the Department for Communities and Local Government (DCLG) launched a "meanwhile lease" in December 2009, with the most recent version updated in November 2012. A meanwhile lease is designed for temporary occupation by charities and other voluntary organisations, but is also suitable for artists, musicians or others who want temporary exhibition or performance space. A separate form of lease is available where one organisation takes on the lease and then sub-lets to temporary occupiers.

    Meanwhile spaces are rent-free, but the temporary occupier pays a flat-rate service charge and insurance, and a damage deposit may be required.

    Specimen leases, sub-lease and guidance notes developed by DCLG are at

    The Meanwhile Project, funded by DCLG and delivered by Locality and Meanwhile Space CIC, describes "meanwhile use" as a way of using vacant property to benefit the area, the local community, the local authority and the landlord, until it can be used for commercial purposes again. Meanwhile leases and licences are not the same as temporary leases or licences, because they explicitly recognise that the search for a commercial use will be ongoing.

    Meanwhile leases are not only for shop premises. They have also been developed for use of vacant land, to enable community groups and others to set up temporary parks, gardens and other green spaces. The Meanwhile Project has on its website a growing lease for land, a playing field lease for land, and a farm lease where food grown on a space will be sold.

    Meanwhile Space CIC has information about meanwhile leases, and a matching service for landlords and projects, at

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    Updated 4/3/12. This information is included in s.62.4.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    At present a landlord may, without a court order, send bailiffs onto premises to seize the tenantís goods as soon as the tenant is in arrears. This is called distress or distraint. Under the Tribunals, Courts and Enforcement Act 2007 distress will be abolished and for commercial premises will be replaced by commercial rent arrears recovery (CRAR). This was supposed to come into force in April 2012, but no date has been set.

    Unlike distress which can be used to recover service charges and similar charges if they are defined as "rent", CRAR will be able to be used only to recover sums due for actual rent (possession of the premises). Also unlike distress, CRAR will not be able to be exercised until a notice of enforcement has been served upon the tenant. CRAR can only be exercised by an enforcement agent (currently known as a bailiff), and can be used only for premises used solely for commercial (non-residential) purposes. Complex rules will apply and specialist advice should be sought.

    The Act is at

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    Added 19/7/10. This information updates s. in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Charities and registered community amateur sports clubs (CASCs) get 80% mandatory rate relief on premises used wholly or mainly for charitable/CASC purposes. In addition the local authority may, at its discretion, allow relief to charities and CASCs on all or some of the remaining 20%, and may grant discretionary relief of up to 100% to other not-for-profit organisations.

    Faced with the need to make huge cuts in expenditure, some local authorities are not surprisingly planning to cancel or reduce discretionary rate relief. If this is happening in your area it is important to be aware of regulation 2(3) of the Non-Domestic Rating (Discretionary Relief) Regulations 1989, which says any change or revocation of discretionary relief can take effect only at the end of a financial year and only after there has been at least one year's written notice.

    The regulations won't stop the local authority from reducing or revoking discretionary relief, but will at least give organisations a year's notice or more before the change can take place.

    The regulations are at

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    Updated 4/3/12. This information updates s. in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3). THIS ARTICLE IS OUT OF DATE AND WILL BE UPDATED AS SOON AS POSSIBLE.
    Business rates are due to increase by 5.6% from 1 April 2012, based on the September 2011 retail price index rate of inflation. There will be an option of deferring 60% of the 2012-13 increase, and to pay it back in equal instalments in 2013-14 and 2014-15.

    Alongside the bad news of the rates increase is the good news that the temporary doubling of small business rate relief, originally scheduled to end in September 2011 and then extended to 31 March 2012, has been further extended to 31 March 2013. This means that many small businesses will get relief for up to 100% of their rates bill.

    In England, a business with a single property whose rateable value is below £6,000 is ordinarily eligible for 50% mandatory relief from non-domestic rates, with the relief decreased by 1.2% for every £100 of rateable value from £6,000 to £11,999. Where the business has more than one property, the additional properties must not have individual rateable values of more than £2,600, and the rateable value of all the properties added together must be less than £18,000 or £25,500 in London. Only the main property is eligible for this relief. Similar rules apply in Wales, Scotland and Northern Ireland.

    To reduce the impact of revaluation of rateable values in 2010, the amount of small business rate relief was temporarily doubled between 1 October 2010 and 30 September 2011. Because of the economic situation, this doubled relief has now been extended to 31 March 2013.

    Religious buildings, charities, community amateur sports clubs and some rural businesses are entitled to rate relief under different legislation.

    Information about business rates, including rateable values of properties in England and Wales, is on the Valuation Office Agency's website at

    Further information about business rates and the various rate reliefs is available from Business Link at

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    Updated 4/3/12. This information updates s. in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Under the rules on rate relief for empty non-domestic properties in effect in England since 1 April 2011, office and retail premises are eligible for full rate relief for the first three months of becoming vacant, and industrial and warehouse premises and listed buildings for the first six months, provided the rateable value is below £2,600 (reduced from £18,000 prior to 1 April 2011). For properties with rateable value of £2,600 or more, full rates are payable after the first three or six months.

    Properties where occupation is prevented by law or by a public authority are exempt from rates. Empty property owned by charities and community amateur sports clubs is eligible for 100% rate relief, so long as it appears that it will next be used wholly or mainly for charitable purposes or the purposes of the club. However, property held by a charity as an investment is subject to the same rules as non-charity property.

    A Financial Times investigation, published on 21 November 2011, showed that in order to reduce their rates liability for empty properties, retailers and other landlords of hard-to-let shops were making large "donations" to charities, in return for the charities occupying the premises and claiming charity rate relief (mandatory 80%, with the possibility of a further 20% discretionary rate relief). The FT reported that some charities were not even occupying the premises, instead simply putting up posters in the windows.

    At the same time, charities were also taking the initiative, approaching landlords and asking for a low or peppercorn rent, on the basis that such occupation gave the charity much-needed space, and would reduce the landlords' rates liability.

    Following an investigation into these practices, the Charity Commission issued an alert on 12 December 2011 acknowledging that landlords' desire to rent their properties could provide good opportunities for charities to lease accommodation for low or nominal rents. But the Commission warned that unless the charity was actually using the premises for charitable purposes, the local authority (as rating authority) could find the landlord liable for business rates avoidance, and the charity's discretionary rate relief could be jeopardised.

    The Commission advises that before entering into any tenancy agreement to occupy empty properties, charity trustees should:

    • be assured that the tenancy agreement is for the exclusive benefit of the charity, will further the charityís purposes and is in its best interests;
    • ensure the property is genuinely required and is fit for purpose;
    • consider the potential liability of the charity to pay outstanding rates if the local authority disputes occupation and refuses discretionary rate relief;
    • very carefully safeguard the charityís independence and ensure the charity is not being abused for the benefit of a commercial company;
    • where appropriate, take suitable professional advice, including legal advice, before entering into a tenancy agreement.
    At the time of its alert, the Commission was investigating more than 700 arrangements where charities might have been claiming business rates relief.The Commission's alert can be accessed via

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    Updated 4/3/12. This information updates s.63.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
    Water charges cover water supply, waste water drainage from sinks and toilets, surface water drainage, and highway water drainage. Charges for non-domestic premises were traditionally based on the rateable value of properties, but since 1999 some water companies have charged for surface and highway water drainage on the basis of site area rather than rateable value, and in 2003, the water regulator Ofwat required all water companies to start moving towards charging for surface water drainage on this basis. Where this charging has been implemented, it has led to huge increases — nicknamed a rain tax — for organisations such as Scout huts, churches, sport clubs and village halls. From 2010 all water companies are supposed to charge non-domestic properties on a site area basis for surface water drainage.

    After extended campaigning by a coalition of organisations, the Flood and Water Management Act 2010 s.43 allows (but unfortunately does not require) water companies to provide concessionary charges to community groups for surface water drainage. It is left to each company to decide whether to provide concessions, and if so which types of community groups to provide them to, what constitutes a community group, and whether to have different concessions for different types of group. Community groups may include youth groups; community centres; places of worship or other religious facilities; recreational, cultural, social or sporting facilities; or groups providing a local community benefit of any other kind.

    Following consultation from July to October 2010 intended to ensure charges are fair and affordable for community groups, DEFRA published guidance for water and sewerage companies and a summary of consultation responses in December 2010. This can be accessed via

    Ofwat is pressing the water companies to consult on concessions but not much seems to be happening. Environment minister Richard Benyon said on 26 April 2011 that four water and sewerage companies were at that time charging for surface water drainage based on the impermeable surface area of the site being drained. At that time United Utilities had 3,314 customers on concessionary charges; Severn Trent Water capped the surface water drainage charges for community premises, and charged places of worship on the basis of rateable value which in most cases is zero; Northumbrian Water had just started a concessionary scheme and expected to have 1,768 customers on the scheme; and information was not available for York Water.

    The Flood and Water Management Act 2010 is at

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    Updated 4/3/12 . This information updates s.63.10.5 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3). THIS ARTICLE IS OUT OF DATE AND WILL BE UPDATED AS SOON AS POSSIBLE.
    Since 6 April 2010 local authorities have had power to charge a community infrastructure levy (CIL) to landowners and developers who create new buildings of 100 square metres or more, or make changes to existing buildings. Where CIL is implemented, it will in most (but not all) cases replace section 106 agreements and will be used to help fund community infrastructure such as roads, schools and hospitals.

    Charities are exempt from CIL in relation to developments that will be used wholly or mainly for charitable purposes, but must apply for and obtain the exemption before starting work on the development. Developments which include social housing are also exempt. Local authorities may give discretionary relief to charities which develop land as an investment and use the investment income for charitable purposes. The Department for Communities and Local Government published an information document on 11 May 2011 on the relief for charities, social housing and exceptional circumstances, with examples. This can be accessed on the CLG website via

    CLG consulted from 11 October to 30 December 2011 on detailed implementation of its proposals for CIL reform, including draft regulations. The consultation documents and background information can be accessed via

    Practical Lawyer reported in its December 2011/January 2012 issue that no local authority had yet introduced CIL, but three were in the late stages of preparation. It notes that one authority is planning a flat £70 per square metre regardless of size, use or type of development, while another is planning a completely different approach with a nil rate for all development except residential, and the residential rate dependent on whether it is in an urban or rural area.

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