Charities Newsletter – October 2020

We hope this latest e-bulletin finds you safe and well as we start the new academic year. With schools opening back up for the new term, and many workplaces starting to do the same, there is some uncertainty about what the next few months hold, particularly in relation to COVID-19.

This edition of our newsletter brings you the latest news facing the Charities sector, including helpful guidance for those in charity leadership as we start to return to the ‘new normal’ in response to the easing of lockdown restrictions.

Supreme Court upholds decision for charitable company in question about members’ fiduciary duties

On 29 July 2020, the Supreme Court handed down its judgment in the appeal of Lehtimäki v Children’s Investment Fund Foundation (“CIFF”). The main issues in question were whether members of a charitable company have fiduciary duties, and whether the court has jurisdiction to direct these members on how to exercise their duty.

The Court held that a member in principle holds a fiduciary duty towards the purpose of the charitable company, and that by asking the Court to decide whether the grant was in CIFF’s best interests, the trustees had surrendered the members’ right to a free vote. Once a court has decided whether a transaction is in the charity’s best interests, not following the court’s decision would amount to “a plain breach of fiduciary duty“, thus, in exceptional circumstances the Court does have the power to direct a member in how to vote. Read our blog post here for a summary of the case and its findings.

Details of Charity Governance Code consultation findings revealed

The Steering Group of charity sector organisations responsible for the Charity Governance Code has published a report of the findings from its consultation on improving the Code. The consultation proposed a ‘light refresh’ of the Code in 2020, with further reaching changes in 2023.

84% of the respondents to the consultation said they were satisfied or very satisfied with the Code. There was, however, strong support for refreshing and improving the ‘Integrity Principle’ to reflect recent changes in the operating environment for charities. The ‘Diversity Principle’ also came up as an area to be improved, to address aspects of inclusion and equality. In response the steering group has appointed an external consultant to support further work on developing this.

The Steering Group had originally planned to publish the refreshed Code in summer 2020. However, this has been extended to the autumn. A web version of their consultation report can be found here.

The Charity Commission to hold its Annual Public Meeting virtually

The Charity Commission held its Annual Public Meeting on Thursday 1st October 2020.  Due to the impact of COVID-19, this year’s meeting was a virtual event open to all members of the public and charity representatives. You can view a recording of the meeting on YouTube here.

Guidance released for charity trustees on how to re-open safely

The Chartered Governance Institute (ICSA) have issued guidance for charity trustees on how to reopen safely as the COVID-19 lockdown restrictions ease. The guidance lays out practical steps and questions that trustees will need to address when planning for the resumption of their charity’s activities, particularly with regards to deciding whether and how to re-open physical sites. The guidance can be found here.

New changes to VAT rules in digital advertising could save charities millions

The Charity Tax Group (CTG) have published correspondence received from HMRC clarifying its position in relation to VAT rules and charities. CTG claim that the new advertising tax could save charities millions, although the full value will only be known when organisations start to reclaim funds under the new rules. The majority of digital advertising is subject to VAT under existing rules which were “being passed on to charities” when HM Revenue and Customs pursued advertising agencies for VAT payment. However, HMRC “now accepts that VAT is no longer considered due on the majority of internet search browsing advertisements”. It will still be charged on targeted advertising by email and on social media.

The government plans a broader review of advertising regulations in the near future, with VAT rules on digital advertising likely to be included in that review which is good news for charities and will provide clarity on this important advertising channel. The correspondence from HMRC can be found here.

Applications open for £5m emergency funding to boost the charity sector’s digital development

Charities are being invited to bid for a £5m fund, made available through the National Lottery Community Fund, distributed with the Centre for the Acceleration of Social Technology (CAST) with support from Catalyst, to improve their digital response to Covid-19. This fund is offering grants and support of up to £60,000 to charities in England looking to develop their online capabilities and is aimed at organisations whose work has been affected by COVID-19 and who need emergency funding to continue to deliver essential services. See here for more information about applications.

Fresh regulations adapt Part A1 moratorium to charitable incorporated organisations

New Regulations came into force on 13 August 2020 which revoke and supersede previous 2020 regulations, which contained drafting errors and omissions, and ensure that the moratorium in Part 1A of the Insolvency Act 1986 applies to CIOs.

A Part A1 moratorium is an insolvency process introduced into IA 1986 by the Corporate Insolvency and Governance Act 2020. Through this new insolvency process, insolvent companies, or companies that are likely to become insolvent, can obtain a 20 business day moratorium period. This is designed to allow businesses the time to restructure or seek new investment, without the threat of creditor action.

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