Annual return for 2018 – information collected from charities will not include questions on Gift Aid and rates relief

*UPDATE* Charity Commission response to the consultation

Following the recent consultation on proposed changes to the charities Annual Return for 2018 (AR18), the Charity Commission has announced a number of amendments to the content of the annual return for 2018.

Of particular relevance to CTG members, the Commission has also decided not to ask charities:

  • whether they are claiming rate relief for the premises they use
  • the amount of Gift Aid they have claimed (charities are already required to declare whether they are registered for Gift Aid, and the Commission will ask charities to provide their HMRC number).

The Commission says it requires these two pieces of information for regulatory purposes, but accepts that they may be available from other sources, and that it should pursue other options before adding to the reporting burden for charities.

These recommendations are in line with those outlined in CTG’s response to the consultation (see more details below). While recognising the importance of transparency, CTG queried whether the additional information requested could not be sourced from other data already publicly available, highlighting the potential additional administrative burden for charities. Further details on the relevant proposed amendments are outlined below.

The Charity Commission is also amending a proposed new question on income received from overseas. Only information about income from overseas governments or quasi-governmental bodies, charities and NGOs will be mandatory for the first year. This is information that relevant charities should already record and hold. Providing information about income from other overseas institutions and donors will be voluntary for the AR18 and then mandatory in following years. The Commission will also introduce a threshold for this information. These changes will ensure that charities can update their records and systems before the question areas become compulsory.

Charity Commission Consultation response: Annual return for 2018 – information collected from charities

Question: During the financial period for this Annual Return how much Gift Aid did the charity claim?

What you said

  • Information is already held by HMRC and charities should not have to report to the Commission on information held by another government department.
  • As Gift Aid is the responsibility of HMRC it was questioned why the Commission was concerned about this.
  • The Commission already asks if the charity is registered with HMRC for Gift Aid, but it is not clear why the Commission needs this information.
  • Charities should be asked for the amounts of Gift Aid received rather than claimed as Gift Aid is paid in different accounting periods.
  • Gift Aid arrangements are complex. Claims can be made across a number of years and accounting periods vary. This means that the question is difficult to answer and the information may not be useful.

What we have done

Some respondents questioned why we could not obtain information on the amount of Gift Aid claimed by a charity from HMRC, which is the government department responsible for administering Gift Aid. Whilst some of the information we were proposing to ask for is also collected by HMRC, it is not done on the annual cycle required by the Commission, nor is it currently collected or held by HMRC in a format that enables the Commission to easily data match. Obtaining the information directly would simplify our work.

However, on balance, we accept that the questions are asking for information supplied to another government department and we will not ask this question.

Through the Update Charity Details service we will continue to ask charities whether they are recognised by HMRC. Charities will also need to provide their HMRC reference number. From annual return 2018 onwards this information does not form part of the annual return. Knowing the HMRC reference number is critical for effective data matching so the Commission and HMRC can work together more effectively. Information about Gift Aid helps the Commission to identify poor administrative practice where trustees have failed to comply with their trustee duties or where there could be abuse or mismanagement. Alongside the annual return 2018, we will carry out a census of the information held as part of the basic information held on charities and managed through Update Charity Details. This census will ensure that the information held, which is compulsory as part of the register details, is provided and up to date.

We will explore further with HMRC how bulk data relating to Gift Aid can be provided.

We will not ask this question

Question: Does the charity get rate relief on the premises?

What you said

  • This information is not useful for the Commission
  • Explanation is needed about the difference between mandatory and discretionary rate relief
  • The information could be obtained from local authorities
  • As local authorities regulate this area the Commission does not have a role

What we have done

The intention of this question was to obtain a complete picture of all rate relief claimed by charities. This would help us understand the impact on the sector of any future proposals to change rate relief arrangements and to better understand funding vulnerabilities in individual charities.

Each individual local authority is responsible for granting rate relief. There are over 300 tax collecting local authorities in England and Wales. To obtain information from them all in the same format and time periods would be lengthy and require significant taxpayer resources. In addition, local authority records are not necessarily sorted in a way which identifies charities registered with the Commission. Collecting it through the annual return would be a proportionate, and more efficient, use of taxpayer funded resources.

Initial research on the use of rate relief indicates that there is some abuse of this relief. However, we accept that the question in its current form does not provide information to enable us to address possible abuse of charitable status. We will continue to explore this issue as it has the potential to create concern about the benefits which charities receive. We will not ask this question in annual return 2018.

Background and CTG response

The proposed questions included a specific section on Gift Aid. As well as asking whether or not a charity is registered for Gift Aid, the Commission suggested that under AR18 it should ask these charities for additional information about the amount of Gift Aid claimed in the reporting year. The reasons given for this additional line of questioning are that: it will enable the Commission to carry out proactive, informed risk assessments of individual charities; it will enable the Commission to deal more efficiently with cases where there is evidence of poor administrative practice indicating a failure by the trustees to comply with their trustee duties or where there could be abuse or mismanagement; and it will help identify where there are trends in Gift Aid claims, either across all registered charities which file returns or in certain groups of registered charities, ensuring that charitable funds are applied properly.

Annual Return 2018 consultation – CTG response

CTG’s consultation response noted:

“As a general observation, while these questions should increase overall transparency – which we are in favour of – we are uncertain as to the actual usefulness of the data that many of them will collect. It is not always clear how the Commission will actually use this data to achieve its aims. In a number of instances, there is also a clear duplication of information required with that already available in charity accounts and tax returns and we are not convinced by the Commission’s arguments for being unable to access this information.

“While the actual cost of submitting each bit of newly required information may be small, the overall additional administrative burden on charities (particularly small ones) is unlikely to be negligible. Therefore, though charities are usually willing to give this extra effort to provide information that is in the public interest, most would be reticent to provide information that should be available elsewhere and which appears to be of limited usefulness against stated objectives.”

On proposed questions about the level of Gift Aid claimed, CTG’s response stated:

“While members have stated that they are happy to provide information, the disclosure of which is in the public interest, we find it difficult to understand precisely how the introduction of this question would actually meet the objectives stated in the consultation document.”

Concerns about duplication of information and differences in presentation of information due to accounting processes were also flagged.

In respect of the question: “Do you agree with the proposal to ask charities which own or lease land and/or buildings if they receive rate relief?” CTG’s response stated:

“While there would be no particular cost in answering this question, it would be expected that a charity would claim business rates relief if it were eligible to do so. We would therefore find it strange to ask a charity that is entitled to claim whether or not it does so. On the other hand, if it became apparent, for example, that numerous eligible charities were in fact not claiming business rates relief, a simplistic “no” answer to this question would not actually yield any useful information about the reasons for the lack of claim.”