scruttonbland.co.uk
CHARITY NEWSLETTER
Topical updates for your charity and not for profit organisations over the next 12 months
Contents 3 Welcome to our latest newsletter, covering the key financial issues facing charities and not for profit organisations
6 VAT and the pandemic
8 Insurance for Pride marches
10 It’s only large
charities that need an audit – isn’t it?
4 Charity Event Insurance –
what do you need to know?
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Charity newsletter introduction
The impact of Covid on the world has been enormous, but it has also served to show charities at their best: helping to tackle local and national calls for help and delivering support to those most in need. But there have also been some worrying trends. The Charity Commission has reported that 60% of charities experienced a loss of income, and almost a third suffered a shortage of volunteers*.
A s we move closer to a post- delivering services online and refocusing on their core projects. Looking ahead, over half the charities in the Charity Commission survey said that they anticipated some level of threat to their charity’s financial viability in the next 12 months – however, crucially only 1% said they thought that threat would be crucial to their charity’s survival. Bearing that in mind, it is important that charities make best use of the financial services that exist to help them manage and mitigate the risks they face. Insurance is a key requirement for not for profit and charitable organisations, but the different covers and the levels of protection will vary considerably depending on the size and complexity of their operations. Similarly getting an independent audit may be something that a charity now needs to organise, if they need a bank loan, or apply for a grant from a government body. pandemic world, the need for charities to adapt and innovate has never been greater. Many have moved to a hybrid way of working, And finally, getting to grips with their tax requirements is vital in order to meet their regulatory obligations, and avoid the financial pitfalls that could result in unforeseen fines.
Our latest charity newsletter addresses many of these concerns. Anticipating the return of fundraising events over the summer, our experienced charity insurance team gives a useful overview of the do’s and don’t’s of what you need to put in place to ensure your event is fully protected. Our VAT expert Chris George explains some of the tax issues currently facing the sector, and how talking to a friendly tax person can alleviate your VAT fears. And our new Audit Partner, Adam Smith clarifies the situations when a charity needs to arrange an independent audit, and why it may be useful - even when it’s not a legal obligation. Finally we have a Q&A with Richard Atkinson, Charity Insurance Adviser with experience of arranging insurance for Pride marches (as well as going to them!) who looks at some of the issues when planning a Pride march. We hope you’ll find some useful content in this newsletter and would love to hear from you if you have any comments or suggestions, or if you’d like to know more about any of the subjects we’ve covered. We love dealing with our charity clients, and we appreciate that your priority is to always act in the best interests of those that you serve. We’re here to help you manage your financial operations as simply and cost effectively as possible.
Tim Mulley , Senior Partner
*What new research tells us about the impact of COVID-19 on charities - Charity Commission (blog.gov.uk)
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Charity Event Insurance – what do you need to know?
I f your charity is planning events this your events a success. With good planning and management, the chances are that your event will run smoothly, but there are always things that might happen which are outside of your control, such as bad weather, a piece of equipment breaking down, or a headline celebrity not turning up. This is where your insurance policy will help to prevent serious financial consequences for your organisation. year, the peace of mind that comes with getting the right insurance cover in place will mean you and your team can reduce your ‘to do’ list and focus on making
Almost every charity will choose to have a public event at some point during the year. Running an event can boost the finances and reputation of your charity, but it is important to recognise the kinds of risks that it brings, and how the right insurance cover can help.
What insurance should I consider for my charity event?
Public Liability Public Liability insurance will cover you and your charitable organisation for potential costs in defending any injuries to attendees or damage to property during your event. It isn’t a legal requirement in the UK but it may well be required if you are using land, property or facilities owned by a third party. Employers Liability If you employ any staff at your event, it is a legal requirement to have a minimum of £5 million cover of Employers Liability insurance, but most policies offer cover of at least £10 million. This will cover physical and mental injury, or fatality to employees which happens at or through work or because of workplace conditions. Employers Liability is almost always needed for any volunteers at a charity event as they are defined as representatives for your organisation, which makes you, the event organiser, responsible for their wellbeing.
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Motor Insurance If you hire vehicles to transport equipment, rubbish, water and so on then these need to be properly insured, as will any cars, vans or minibuses used to carry people at the event. Money Donations at events are often made through collecting tins or buckets, or through the sale of things like clothing, food and drink. Money cover will protect cash kept in safes and cash boxes and whilst in transit to a bank. Business Equipment Electrical equipment like laptops and sound equipment can cost thousands of pounds to replace. Business equipment insurance can help provide cover against damage when setting up, during and after the event. Cancellation Insurance An event can be cancelled for a number of reasons: the event venue goes into liquidation; the venue or key performers are double booked, or there is a power cut or flood, and the location is out of action.
Live Event Reinsurance This cost indemnification scheme has been brought in by the UK government to offer insurance against the risk of a live event being unable to happen because of Covid restrictions. The scheme started in September 2021 and will run until 30 September 2022. Cover must be purchased at least eight weeks before the event, and the amount policyholders can claim will depend on the total limit purchased on their non-Covid insurance. Not all insurers are offering this cover, and events organisers need to show they have non-Covid insurance in place - in other words you can’t buy this insurance in isolation. Cover applies to UK public events such as festivals, music and sports events but not to private events such as weddings and private parties. There are a number of specific conditions for cover from this scheme and your broker can talk you through the terms and conditions, and help you apply for the scheme.
Other event insurance you may need:
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Non-appearance by a key featured person (such as a celebrity who fails to show up)
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Adverse weather such as high winds and rain which can shut down the event at short notice
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Terrorism cover, should your event be targeted by extremists
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Fireworks – bonfires and firework displays can easily go wrong if the wind changes direction, or bad weather occurs
Whether your charity is holding a coffee morning, a Pride march or a three-day music festival, you will need insurance to cover you for potential injuries, damages or unforeseen cancellations. Scrutton Bland has a specialist charity insurance team with extensive experience of helping charities arrange event insurance to protect against a range of risks. Our friendly and knowledgeable advisers can guide you through the policies you may need and will be there to help should you need to make a claim.
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If your charity has changed the services it offers, it may have affected your tax liabilities VAT and the pandemic
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O ver the past two years, the cloud of the COVID pandemic has meant many charities and businesses in the not-for- profit sector have had to make a pivot in the services they offer. However, a change in the services offered can have unintentional VAT consequences. Charities have been hit with a multitude of challenges as a result of the pandemic. In many cases, income has contracted because of a reduction in the availability of grant funding, while sales and fundraising activities have been impacted by the various lockdowns and other COVID related restrictions enforced upon the population. At the same time there has been an increasing need for charities and other organisations to step in and help vulnerable groups who have been heavily impacted by this once-in-a-generation event. These pressures have caused many charities to alter, decrease or increase the services they offer. Whilst this can be beneficial in helping the organisation plug a hole in their finances, care needs to be taken to ensure that VAT is accounted for correctly. Given the complexities of the VAT legislation, even a small alteration in the services offered can lead to markedly different VAT liabilities.
With multiple different income streams, if can be difficult to
Where a charity undertakes supplies which are both taxable and exempt for VAT, their ability to recover VAT incurred on expenses will fall under the Partial Exemption provisions. These calculations can be complex, and care needs to be taken when looking at VAT recovery. During the course of the past 18 months, the tax team at Scrutton Bland has seen a noticeable increase in the number of HMRC investigations opened to look into the VAT affairs of charities and organisations in the not- for-profit sector. These investigations can start off with a simple request to check a small number of items on the last submitted VAT Return, but they can quickly escalatel into an in-depth review of the organisation’s activities over the previous four years. Such investigations can last in excess of 12 months and result in substantial liabilities for VAT, late payment interest and penalties as well as significant amounts of professional fees. We recommend to all businesses, including those within the charity sector that they undertake a professional review of their VAT affairs every three to five years. This ensures that they are not only complying with their VAT obligations, but also that they are making use of any available tax reliefs and are maximising their opportunity for recovery of VAT on expenses. By having regular reviews, it means that should HMRC open an enquiry, there are no surprises and matters should be brought to a close efficiently. The Tax Advisory team at Scrutton Bland have significant experience advising businesses in the charity and not-for-profit sector on VAT matters, as well as dealing with HMRC enquiries. If you have any concerns at all regarding your organisation’s VAT affairs or are interested in having a VAT review carried out, please contact us at hello@scruttonbland.co.uk or phone us at 0330 058 6559.
determine if VAT should be charged on the supply of charitable services. If the supply should not have VAT applied, it could be because the supply is zero-rated, exempt or non-business income and therefore outside the scope of VAT. All three have the same VAT applied, zero, but each one has a different impact on the recovery of input VAT. Take for example grant income. Where this is freely given, and the funder receives no direct benefit from the activities which are funded by the grant, this will usually fall outside the scope of VAT. However, where there is a clear and direct link between the services being carried out by the organisation and the consideration received, this can fall within VAT. In some cases, although this income is within the scope of VAT, a specific exemption may be applicable meaning that VAT should not be charged. Where a charity undertakes activities with a view to realising a profit to help fund its primary work this will ordinarily fall within the scope of the VAT legislation. It follows that if organisations have (possibly as a result of the pandemic) developed new services to help fill a funding gap, it is likely that these activities will also be viewed as having a profit motive and could have VAT implications.
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Insurance for Pride marches
It’s the time of year when events like Pride marches are starting to be planned, and after the problems of the last couple of years we’re looking forward to some fabulous parades this summer! Richard Atkinson has arranged cover for several Pride marches around the country and answers some frequently asked questions about insuring your Pride march.
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When should I start planning the event? As soon as possible! Get a Pride March committee together and work out what you want to do to make the event a success. Local and borough councils will need to be involved in your plans, especially if they need to close roads for the event. As far as insurance goes, the easiest thing to do is to speak to an insurance broker who can guide you through what you need and explain how much it will cost. There are some policies, like the one introduced by the government to cover costs if the event is disrupted by Covid restrictions, which need to be taken out at least eight weeks before the event. You really can’t leave it until the last minute. What insurance do I need for a Pride March? Your insurance broker can help you understand this, but it is a part of the Pride March organisation process that you can’t ignore. Many local authorities will need you to show you have £5,000,000 of cover before they will authorise a street closure. As a quick guide:
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Live event reinsurance is the new(ish) government scheme that was brought in last year to help live events organisers cover their costs if the event has to be cancelled because of Covid. It will cover events happening up to the end of September this year, but before you rush to sign up, I should say that there are loads of terms and conditions to fulfil, not least that you must have non-Covid insurance in place before you can sign up for it, and also that not all insurers are offering this cover. Talk to your broker about it, it’s what we’re here for! Sadly, we’ve seen quite a few no-shows by celebrities who were booked to appear at Pride marches. Non-appearance by a key featured person will cover you for the expense of a headline act who fails to show up. Terrorism cover is also something that we’re advising on more and more, as events are targeted by extremists.
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Public Liability insurance will cover you for injury to members of the public or property damage. It’s not a legal requirement but is a common claim we have to deal with where for example a member of the public has hurt themselves tripping over a power cable. Also bear in mind that public liability cover is often compulsory if you’re using land, buildings or facilities owned by someone else. Employers Liability is a legal obligation if you employ any staff at the event. We strongly recommend it for your volunteers who are helping to run the Pride March, as they are defined as representatives for your organisation, which makes you, the event organiser, responsible for their wellbeing. Claims for Event Cancellation happen more often than you’d think. Events venues can go into liquidation, or we’ve heard of places that have double booked events. And the good old British weather can be unpredictable, even in summer, when torrential rain can mean it’s unsafe to hold a Pride March. Equipment cover is self-explanatory, but should be part of your plans if you are using expensive sound equipment or computers – they are very expensive to replace if they get damaged during the event.
How much will it cost me? The amount that you pay will depend on the limit of the liability you require for each policy. A knowledgeable and experienced broker can help you work out the policies you need and will work with you to make sure you don’t pay any more than you need to. It’s important to work with a broker who is transparent about costs, so you’re not hit with nasty surprises. At Scrutton Bland all of our policies include insurance premium tax, and we will always work with you to find the most cost-effective solution available. If an event supplier has said they already have insurance, do we still need to take out cover for those things? Even if your venue and suppliers have cover, it could prove costly to rely on the insurance policies of others. A claim could still be made against you as the event organiser, and without the appropriate cover you may have to pay defence and settlement costs yourself. What are some of the common misconceptions event organisers have about insurance? Lots of our clients say they were told in the past that they only needed public liability, or event insurance (without being told exactly what it covered). Then something unforeseen happened and they were left with a nasty claim which was expensive to settle. It’s always best to speak to an expert, we love getting to know your stories and you never know – I might well be doing your Pride March with you!
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Contact Richard on 01473 945744 or email richard.atkinson@scruttonbland.co.uk
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It’s only large charities that need an audit – isn’t it?
At Scrutton Bland we specialise in audits in the not-for-profit sector, particularly charities. Adam Smith, Corporate Services Partner, discusses the need for charities to have audited financial statements and the benefits that brings, particularly in a time of economic uncertainty and the collapses of some businesses due to accounting irregularities.
F or some charities an audit can be seen as an unnecessary compliance cost, diverting valuable time and resources away from the charity’s core activities and purpose. However, the benefits of an audit are far more extensive than achieving a legal requirement. An audit can provide stakeholders and Trustees with the comfort that they are compliant with the necessary Charities Commission requirements as well as providing them with credibility to donors and stakeholders that their funds are being appropriately managed.
Basic principles Charities are regulated by the Charities Commission which requires that all charities must maintain accounting records and prepare accounts. These must be made available to the public on request. Registered charities must also prepare a Trustees’ Annual Report incorporating their financial statements, which will vary in terms of content, dependent upon the size and constitution of the charity. The Trustees’ report is a method for the charity to explain to the users of its financial statements the charity’s purpose and how its activities have helped to achieve that in the previous year. This can be seen to be a method of promoting the charity, however the report should be balanced.
Does my charity need to be audited? In most cases charities are governed by the Charities Act, and for incorporated charities, also the Companies Act. However, the threshold for charities to be legally required to prepare and file audited financial statements is much lower than those of private and public companies. The law now states that charities with an income of £1 million and over are legally required to be audited. An audit will also be needed if total assets (before liabilities) exceed £3.26m, and the charity’s gross income is more than £250,000 per annum. Audits may also be undertaken if it is required by the charity’s governing document or due to a condition imposed by a funder. Charities with a gross income in excess of £25,000 are required to have an independent examination of their financial statements, which requires a lower level or inspection, but provides stakeholders with the reassurance that their financial affairs are in order at a basic level. However, a charity can voluntarily request an audit and there is a strong argument for charities voluntarily submitting their accounts for inspection by an auditor.
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So why have an audit?
Reputation and credibility – An audited set of financial statements can be an important piece of information in presenting your charity’s credibility to future donors. If the donor can see that donations are being managed and spent appropriately then they are far more likely to support the charity. Typically, donors will provide funds with certain restrictions and will gain comfort that the expenditure incurred is appropriately offset. Furthermore, your lenders will typically request audited financial statements as a prerequisite for a loan agreement. Control and process improvement – Whilst an audit is typically focused on the numbers in the financial statements, the insight that an independent auditor is able to provide to your charity’s processes is extremely valuable and will highlight areas of your financial processes that may need attention or tightening up. A good auditor will work with you to suggest improvements to your charity’s administrative systems which could save your charity time and resources. They may also have suggestions for methods that can be done to reduce your charity’s tax and VAT liabilities. At Scrutton Bland our experience in auditing a range of charities means that we are able to benchmark your charity against other similar organisations, to help you understand how you are performing and to suggest areas that can be improved.
How do I choose an auditor? Working with an independent auditor who understands the charity sector is a great place to start. They will know the kind of issues that you face and will be able to work with you and your teams to offer practical solutions and useful assistance. At Scrutton Bland we offer a range of services for the charity sector including audit, accounts, taxation and insurance and we have experienced and friendly specialists in each area who understand how important it is to help you to manage and mitigate the risks you face.
The benefits of having an audit are split into 3 areas:
Assurance - If you are a Trustee or a stakeholder of a charity, then an external audit of your financial statements can give you much greater confidence that the financial position is appropriately presented. You will be able to demonstrate that your accounts are being properly managed and that your accounting systems are producing reliable financial information. This information can then be used as a clear basis to make future decisions. Furthermore, whilst an audit cannot guarantee that fraud is not taking place, it is an important tool in the prevention of fraud. The audit process will assist Trustees and management in highlighting where processes can be improved to reduce the risk of fraud and identify risk areas. A common issue for smaller charities is either the lack of segregation of duties or the lack of in-house financial expertise.
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Meet the Team We have a long-standing association with the charity sector and our specialists have a thorough understanding of the opportunities and challenges facing the sector. We aim to build long-term trusted relationships with our charity and not- for-profit clients. It is important to us that we fully understand the charitable organisation’s aims and objectives, in order for us to provide bespoke and appropriate advice. Get in touch with a member of the team to see how they can help you.
Tim Mulley Senior Partner tim.mulley@ scruttonbland.co.uk 01473 945741
Adam Smith Corporate Services Partner adam.smith@ scruttonbland.co.uk 01473 945866
Shirley Greer Charity Team Sales Director shirley.greer@ scruttonbland.co.uk 01206 417279
Tim O’Connor Audit Partner tim.oconnor@ scruttonbland.co.uk 01206 417225
Graham Doubtfire Private Client Tax Partner
Barry Davis Charity Team Manager barry.davis@ scruttonbland.co.uk 01473 945743
graham.doubtfire@ scruttonbland.co.uk 01206 417267
Paul Goddard Risk & Assurance Partner paul.goddard@ scruttonbland.co.uk 01473 945842
Chris George Tax Advisory Director chris.george@ scruttonbland.co.uk 01473 945836
Richard Atkinson Insurance Adviser richard.atkinson@ scruttonbland.co.uk 01473 945744
0330 058 6559 scruttonbland.co.uk
@scruttonbland
Scrutton Bland Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Our FCA registered number is 828934. 0728/03/2022/MKTG
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