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Charities and Not-for-Profit Update

Charities are constantly having to navigate a changing landscape. The General Data Protection Regulation (GDPR) provides new data handling considerations for our clients and with it new potential risks. Concurrently, subsidiaries are having to take on new Gift Aid reporting requirements.  Further, in our role as auditors, we are frequently advising our clients on year-on-year changes to reporting requirements. Below I summarise the topical key points and provide signposts for more depth of detail.

General Data Protection Regulation (GDPR)

The EU’s General Data Protection Regulation (GDPR) came into force on the 25 May 2018 and supersedes the UK Data Protection Act 1998. It expands the rights of individuals to control how their personal information is collected and processed, and places a range of new obligations on organisations to be more accountable for data protection.

The GDPR applies to personal data. This is any information that can directly or indirectly identify a natural person, and can be in any format.

The Information Commissioners Office (ICO) has produced some specific guidance for charities needing advice on implementing GDPR, click here.

Gift Aid payments from subsidiaries

Financial Reporting Standard 102 (FRS102) was updated in December 2017 to ensure there is clarity and consistency in how Gift Aid payments by subsidiaries are reported. The new guidance is effective for periods beginning on or after 1 January 2019 but may be adopted early.

  • The guidance states that Gift Aid payments must now be recognised in the subsidiary accounts only when paid, unless there is a deed of covenant in place.
  • If gift aid payments are declared after the year end, they will no longer be accrued for on the balance sheet of the subsidiary, however, if payment of the donations are made within nine months of the year end then tax relief will still apply.
  • Although payments of profit by subsidiary companies to the parent company are made as donations under Gift Aid (and will continue to be donations for tax purposes), FRS102 has clarified previous company law guidance that these donations be shown as a distribution (dividend) in the subsidiary’s accounts.
  • As the payments will now be classified as distributions they will be recognised in the subsidiary’s accounts as a movement in equity rather than as an expense.

Fundraising charities: additional reporting requirements

The Fundraising Regulator and the Charity Commission are seeking to raise awareness of the new reporting requirements in the Charities (Protection and Social Investment) Act 2016. The Act, which came into force on 1st November 2016, applies to charities reporting in 2018.  Typically, this would be charities with a December 2017 or March 2018 reporting year end.

The Charities Act 2016 introduced two new reporting duties for charities. Charities’ annual report should now include information about agreements between charities, professional fundraisers and commercial participators and also on compliance with voluntary regulation.

The 2016 Act requirements are mandatory for larger charities whose accounts are subject to audit under section 144 of the Charities Act 2011. Other charities who choose to have their accounts audited or independently examined, and are within the scheme of voluntary regulation, are also recommended to apply this guidance.

Charities must include a statement about the following in their trustees’ annual report including:

  • The charity’s approach to fundraising activity, and in particular whether a professional fundraiser and/or commercial participator was used.
  • Details of any voluntary fundraising schemes or standards which the charity (or anyone fundraising on its behalf has agreed to), detailing whether the charity has signed up to the regulation scheme established by the Fundraising Regulator.
  • Any failure to comply with a scheme or standard cited.
  • Whether and how the charity monitored fundraising activities carried out on its behalf.
  • How many complaints the charity or anyone acting on its behalf has received about fundraising for the charity.
  • What safeguards the charity has in place to protect vulnerable people and others from unreasonable intrusion on their privacy, unreasonably persistent approaches or undue pressure to give, in the course of or in connection with fundraising for the charity.

Please see the attached link to see how The British Heart Foundation has complied with the reporting duties of the Act here.

If you would like to discuss how any of these updates impact on your organisation, please do get in touch with me.



Date: 24th July, 2018
Author: Louise Giles


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