Tag: charity

A Guide for Embracing, Managing and Mitigating Conflict Within Your Charity

The dictionary defines conflict as “an active disagreement between people with opposing opinions or principles”. To differ, to be incompatible, to disagree, all of these sound like negatives for any organisation.


The Charity Commission defines trustee conflict as “a conflict of interest is any situation in which a trustee’s personal interests or loyalties could, or could be seen to, prevent the trustee from making a decision only in the best interests of the charity”.


It is essential to understand that conflicts affect all charities, large or small, simple or complex. Trustees have a legal duty to act in their charity’s best interests, they are expected to understand what conflict is, how it affects their organisation and to deal with any issue appropriately.


Therefore, it is fundamental that charities follow the guidance issued by the Charity Commission.
This document recognises that conflict takes many forms over and above the guidance issued by the Charity Commission and other Charity Regulators. It seeks to cover the various types of conflict that you could come across and recognises that some conflict can actually be a positive for the charity.


In each article we will cover the issue, the good, the bad and the best practice advice, along with some practical hints and experiences. We hope you find this year’s guide useful.


The report covers the following topics:

  • Conflict with Your Trading Subsidiary
  • Conflict of Leadership
  • Conflict Between the Needs of Today with the Demands of Tomorrow
  • Conflict Between the Board and the CEO
  • Managing Priorities
  • Conflict Amongst Your Trustees
  • Conflict can be Just What you Need
  • Conflict with Third Parties
  • Treasurers and Finance Directors
  • Transparency and Your Charity’s Reputation
  • Managing Conflict


Read the full report: Using Conflict as a Catalyst for Change.


If you would like discuss this further then please email Tracey Johnson or call us on 01772 821 021.



charity structure

Charity Structure

The Charity Commission have released revised guidance on changing the structure of a charity.  This includes a useful checklist of the things to consider when planning a change and the process that needs to be undertaken to ensure that the Trustees are choosing the right structure for the charity.


From 1 January 2108, charitable companies have been able to convert to a CIO.  Initially this was only available for very small charities but from 1 August 2018 is now available for all charities.  The change allows the charity to retain a limited liability structure but means that oversight is only by the Charity Commission and no accounts need to be submitted to Companies House.


A Community Interest Company can also now apply to convert directly to a charitable incorporated organisation. Changing the structure of a charity is not a decision that should be taken lightly and there are many factors to consider.  You can find the revised guidance by clicking .


After consulting the Charity Commission guidance, if you have any further concerns or questions please get in touch by emailing Tracey Johnson or calling 01772 821 021.

Charity Annual Returns 2018

From this summer, the Charity Commission are introducing a tailored annual return for charities to complete following a consultation across the sector. This will include a number of new questions which charities can prepare for now.


To strengthen public trust and confidence in charities the return will ask for more information on salaries to increase accountability. This will include disclosing the number of staff remunerated in excess of £60,000 and the amount of total employee benefits for the highest paid member of staff.


The Charity Commission will also request further information on charitable expenditure overseas on the basis that all money transfer processes bear additional risk. The return will ask for details on how these payments were made, and what controls are in place to monitor such expenditure.


There will also be a requirement to disclose more information on any income that has been received from outside the UK.


Some charities will need to make changes to their financial systems to collect and sort the information more easily and for that reason some of the questions will be optional in 2018 but mandatory from 2019.


You can read the full consultation report 


If you would like to discuss this blog in more detail please email Jack Steer or call 01772 821 021.


Alternatively, you can leave your comment or enquiry in the form below and we will respond to you as soon as possible.

Accountants quiz night raises funds for Hospice

A quiz night organised by a Lancaster firm of accountants has raised funds for St John’s Hospice.


Over 50 local professionals challenged their grey matter in the annual MHA Chiks quiz night held at The Royal Hotel & Bar in Lancaster.


Teams from Eckersley, Handelsbank, Barclays, Baines Wilson, Cumberland Building Society, NatWest, Harrison Drury, Oglethorpe Sturton & Gillibrand, HSBC and JWK Solicitors and Lloyds Bank all took part.


The team from the Cumberland Building Society were crowned champions on the night. The runners up place was decided on a tie-breaker question and NatWest just pipped Handelsbanken to the correct answer.


More than £700 was raised on the night for the Hospice.


Shirley Morch, Head of Finance and Resources from the hospice said. “Support from the local business community is much appreciated and the funds will help provide vital services to patients and families in our local community’’


Adam Parton, Partner at MHA Chiks, said “We are grateful to everyone in the Lancaster professional community for coming together to take part in the quiz and raise money for such a valuable community cause.”


If you would like to find out more or to support St John’s Hospice please visit .

queenscourt hospice

Coast to Castle Cycling Challenge… North West Chartered Accountants completed it!

Andy Webster Consultant with MHA Chiks, Chartered Accountants and Business Advisers, together with 5 local businessmen have raised over £3000 for Queenscourt Hospice in Southport.


The Team cycled over 170 miles in the Coast to Castles charity fundraiser this year in support for Queenscourt Hospice. The riders pedalled their way from Newcastle to Edinburgh in just three days, 10 – 12 May.


Andy Webster, said, “We are always delighted to fundraise for our local charities, especially Queenscourt Hospice. Queenscourt supports many families in the Southport area and it is great that we had the chance to raise funds and awareness for the fantastic service the staff at the Hospice provide. I personally was touched by Queenscourt and will be forever grateful when they helped me and my family, at a difficult time.”


Queenscourt Hospice provides free care and support to over 800 local people in the hospice or at home for those who are diagnosed with life-limiting conditions. The hospice ensures that patients enjoy the best possible quality of life whilst simultaneously providing support for their loved ones. The charity relies on the local community for money and time donations to ensure that they can continue to provide their service.


queenscourt hospice


Are you ready for GDPR?

If your charity asks for, receives or holds personal information from others (including beneficiaries, users, donors, staff and volunteers) then the new regulations will apply from 25 May.


The ICO has produced a dedicated for charities and a helpline has been opened – click to view detail.


The Charity Finance Group has also produced a GDPR guide for charities to help with the process, which you can view by clicking


If you would like to discuss this further, please contact Tracey Johnson. Alternatively, you can call 01772 821021.


Finding new trustees

The roles and responsibilities of charity trustees seem to be increasingly onerous and finding good, new trustees can be a challenge for many charities.


The Charity Commission has updated its guidance on Finding New Trustees (CC30) including advice on how to select, appoint and induct new trustees. The guidance covers topics such as:


  • What skills, knowledge and experience to look for
  • How to increase diversity
  • What checks should be carried out
  • How to induct and support new trustees


To read the updated document, please click


If you would like to discuss this further, please contact Tracey Johnson. Alternatively, you can call 01772 821021.

Southport Quiz Night raises funds for The British Legions’ Byng House

A quiz night organised by our Southport office has raised funds to support the British Legion’s Break Centre, Byng House in Southport.


Over 40 local professionals challenged their grey matter in MHA Chiks quiz night held at The Reuters Bar in Southport.  Teams from Handelsbanken, Lloyds, Napthens, Breens Solicitors, The County Group, Handelsbanken, MSIF, Birchall Blackburn and Byng House all took part.


The County Group were crowned champions on the night followed by the Handelsbanken team who were worthy runners up.


More than £350 was raised on the night for the charity.


Michelle Quinn, Business Manager from Byng House said: “We would like to thank MHA Chiks for organising the quiz and to all the local businesses who took part.  The support is very much appreciated.”


Keith Porter, Partner at Chiks, said “We are grateful to everyone who took part in the quiz to raise money for such a valuable community cause.”


If you would like to find out more or to support The British Legion’s Break Centre, Byng House please call 01704 537 875 or visit


Chartered Accountants take on the Coast to Castle Cycling Challenge for local charity

After successfully raising over £5,000 for charity last year in the Coast to Coast bike ride, MHA Chiks is undertaking yet another fundraising cycling challenge this year.


This year, the regional accountancy firm is cycling the Coast to Castles route which comprises 170 miles of pedalling over just three days, all the way from Newcastle to Edinburgh.


MHA Chiks is fundraising for their local charity Queenscourt Hospice in Southport and the bike ride will be taking place from 10 – 12 May.


Andy Webster, Consultant at MHA Chiks, said “Queenscourt has touched my life and I appreciate the help and support that they provided at a difficult time. The same is true for many families in the Southport area.


We are delighted to be taking part in their fundraising bike ride and we are doing so to help Queenscourt to raise their profile and funds as they are a great charity raising funds for a very worthwhile cause.”


Queenscourt Hospice is a local charity that cares for patients with serious illnesses who are diagnosed with life-limiting conditions. The charity relies upon donations of time and money from the local community. These donations ensure that Queenscourt can be there for local families for many years to come.


Accountants in action for World Autism Awareness Week – We walked, we baked, we raised £195 for Autism!

MHA Chiks Chartered Accountants and Business Advisers has raised £195 for Autism Initiatives.


Walk for Autism is a virtual walk organised by Autism Initiatives which encourages people to walk a healthy 10,000 steps a day during World Autism Awareness Week (26 March – 2 April).


MHA Chiks Southport staff put on their best walking boots, strapped on their pedometer and set out on their 10,000 steps every day. They also took their contribution to the kitchen and baked for a cake sale held on 29th March, World Autism Awareness Day.


Keith Porter, Partner at MHA Chiks said, “The team spirit we have had at MHA Moore & Smalley regarding fundraising for Autism Initiatives has been fantastic. We are all delighted once again to be involved with supporting one of our local charities and will continue to do all that we can to support their future endeavours.”


Over the last 12 months, MHA Chiks has raised a considerable amount for Autism Initiatives and continue to support their ventures to make a difference, raise money and raise awareness for those whose lives are touched by autism.



Collaboration is vital to charity sector’s future: top five considerations for Trustees

Following encouragement from the Duke of Cambridge (23 January 2018) for charities to work together, we discuss how collaborative working can enable charities to achieve greater impact.


When charities are encouraged to work together this often generates a feeling of fear. Charities are forced to operate in a very business-like manner in order to survive in a very harsh fundraising climate and this has understandably led to more competitive behaviour. As a result, the thought of partnering up with what is considered ‘the competition’ can be frightening, with the loss of the charity’s identity and ultimately what makes them unique being a highly reported concern.


Often when discussing charities working together people think of merging them together into one ‘super charity’. However, this isn’t necessarily so and it isn’t always the best approach. Instead many choose to undertake ‘collaborative working’ where two or more entirely separate charities join forces to achieve some common goals; this could be as informally as running a joint annual event together or at the other end of the scale it could be the joint delivery of services and contacts.


Collaborative working can be a really cost effective way to achieve greater impact and reach a wider audience. As a matter of good governance trustees should challenge their executive teams asking them not why they should work with other charities, but rather why not? As opportunities arise the question should be raised as to whether there are other appropriate partners to collaborate with, for example considering joint events, research projects or fundraising appeals.


The ability to share costs is a huge opportunity for charities, but it doesn’t stop there; they can share resources and expertise too. Many charities may provide similar services but perhaps to different age groups or in different geographical areas – collaborating can enable charities to engage with new audiences or support more beneficiaries. The far reaching benefits were not only endorsed by the Duke of Cambridge in his recent speech, but are evidenced by the requirements of donors and charitable trusts who often favour joint applications from charities over standalone applications.


Taking steps towards collaborative working is key to the future of the charity sector; trustees and management thinking about strategic plans in a different way and challenging themselves to engender a culture that is open to collaborative working is vital.


Through our experience of guiding charities through this process, there are many factors to consider. Five considerations for trustees are:


  • What does the charity and its beneficiaries stand to gain and lose?
  • Have all possible partners been considered and are the ones we are talking to compatible?
  • What are the key risks in terms of operations, financials and reputation
  • Do we have the expertise to enter into such arrangements or do we need specialist professional advice, and is due diligence work required? The Charity Commission can be a great source of support.
  • Treat collaborative working as a project which needs managing. It needs a communication plan, milestones, review and monitoring process, a budget and an exit plan. The most common barriers to successful collaborative working ahead of cultural and personality differences, is a lack of communication and a lack of project planning.


If you would like to discuss the above blog in more detail, or you would like to speak with a member of our team, please contact Tracey Johnson or call 01772 821021 to be put in touch with a member of our Charity and Not for Profit team.


A version of this blog originally appeared on the website of one our association member firms, .

subsidiary profits

Donation of charity subsidiary profits

Changes to accounting rules – will your charity need a deed of the covenant?


Recent change to accounting rules that were announced by the in December 2017 may affect the timing of accounting for donations from a charity trading subsidiary to its parent charity. It may be necessary to put a deed of covenant in place if the charity wants to accrue the gift of profits from the subsidiary to the parent charity in the year end accounts. Alternatively Trustees may decide that they are happy to account for the donations on a paid basis.


Accounting for corporate Gift Aid – until now


Many charities run their trading activities through a wholly owned subsidiary. The profits from the subsidiary can be paid to the charity as a Corporate Gift Aid donation up to nine months after the year end and still be allowable as a deduction for tax purposes. Until now, it has been common for subsidiaries to recognise the post year end payment as a creditor in the  year end accounts when it has been considered that there is a constructive obligation to make the payment at the year end.


There has been considerable debate over the last 12 months or so over whether this treatment complies with the requirements of FRS102 and following a consultation process in 2017, the Financial Reporting Council has concluded that a constructive obligation is not sufficient to justify accounting for these donations on an accruals basis.


New accounting rules for corporate Gift Aid


Amendments to FRS102 issued in December 2017 include a clarification of the permissible accounting treatment for corporate Gift Aid. The payment of the donation is a corporate distribution and can only be accounted for when paid or if there is a legal obligation to make the payment.


The most likely way for a legal obligation to be established is for the subsidiary company to execute a deed of covenant.  An established history of making the donation or a Board minute resolving to make the donation is not considered sufficient to create a legal obligation.


The timing of the recognition of the donation will be important to a parent charity that relies on the inclusion of the donation to stay solvent, and such a charity will probably want to ensure there is legal obligation.  On the other hand some charities may not be concerned about the timing and may conclude that they don’t need to create a legal obligation. In this case if they have previously accrued the donation, they will need to process a prior year adjustment to account for it on a paid basis.


Does this mean the subsidiary might need to pay tax?


No, none of this affects the tax payable provided that the subsidiary’s profits are donated across to the charity within 9 months of the year end.


What do we need to do and when?


First, understand how the change in rules will change the way you account for the donation currently. Then decide if you need to create a legal obligation, and whether you want to.


If you would like to discuss donations of charity subsidiary profits, or you would like to speak with a member of our team, please contact Tracey Johnson or call 01772 821021 to be put in touch with a member of our Charity and Not for Profit team.

Employee Stories: Zahraa Panchbhaya

Why did you choose a training opportunity/career with MHA Chiks?


MHA Chiks seemed like the perfect fit for me in terms of firm size/structure. The firm is big enough to provide experience on a wide variety of clients but also small enough to deliver high quality training that the larger firms would not be able to provide. When applying for the job it was very clear that a high level of support would be given, not only during my training contract but also once I’ve qualified and start progressing in my career.


Can you describe your job role on a day to day basis?


Working in audit, I spend most of my time at clients, reviewing their accounts to check for significant errors. I review their systems as well to ensure the relevant controls are in place in order to prevent fraud etc.


I also prepare accounts for both charities and academies.


Each day varies depending on the client and also depending on the sector the client is in (e.g. corporate, charity or academy). Each type requires a different set of skills and knowledge, there is always something more to learn.


What do you enjoy most about working at MHA Chiks?


MHA Chiks has a very friendly and supportive atmosphere – I have never felt intimidated or unable to ask a question; everyone is very willing to help one another. I also gain a lot of experience working on a wide variety of jobs which means I don’t get bored from constantly working on the same type of client.


How has MHA Chiks helped you?


MHA Chiks has helped me develop by encouraging me to be more confident in my abilities – I am constantly being given opportunities to progress in my career and apply the knowledge I have gained. Feedback forms are completed for each job I do, where the managers not only provide good feedback but also provide constructive comments to allow me to improve. Managers will then look for other jobs I could work on to allow me to gain more experience on that specific area and also further develop on the good feedback that has been provided.


What are your goals for the future?


My main goal is to qualify as an ACA chartered accountant. Once I have qualified, my goal is to become a manager on a mixture of clients. I also want to develop my knowledge of academies as I believe a lot of experience can be gained from this.


What advice would you give to somebody starting at MHA Chiks?


Starting a new job can be overwhelming, but everyone is friendly and accommodating; don’t be afraid to speak up and ask for help/guidance.


Independent examinations for charitable organisations

The Charity Commission has recently published updated guidance in respect of independent examinations for charitable organisations.


The new directions have been mandatory for any independent examination reports signed since the 1st December 2017.


The issue seems to be in response to the increase in the audit threshold for charities meaning there is a much larger number of charities with higher income levels caught within the independent examination routine.


Therefore, the new guidance is in place to ensure that there is sufficient oversight of those charities to ensure that accounts are prepared correctly and are transparent and there is an increased level of responsibility for the independent examiners.



Charitable Incorporated Organisation

New legislation regarding conversion to Charitable Incorporated Organisation

A Charitable Incorporated Organisation (CIO) is a relatively new structure available for charities registering since January 2013. To change to the new structure, charities registered as limited companies previously had to register a new CIO and then transfer assets and liabilities to the new entity. This could potentially resulted in significant legal and administrative costs and have implications for staff contracts, leases and other issues relating to funding and resources.


The Charity Commission has recently announced legislative changes which mean that limited company charities are now able to convert to CIO status without the need to establish a completely new entity. The ability to convert is being staggered depending on the level of income of the Charity, with the first conversions for charities with income less than £12,500 available from 1 January 2018. The Charity Commission has said that the conversion process should be straightforward and will require a special resolution of the company and the submission of a new CIO constitution. A template for the constitution is available on the Charity Commission website.


It is the responsibility of the Trustees to establish the most appropriate structure for the Charity.  There are advantages and disadvantages to conversion that Trustees will need to consider.




A CIO is a separate legal entity in the same way that a limited company is. This means that in converting to the new structure, the Trustees will retain their limited liability. However, the entity will cease to be registered at Companies House and information, including accounts and details of the Trustees, will only need to be filed with the Charity Commission. In addition to savings relating to the direct cost of filing documents with Companies House, this will also reduce the administrative burden on the Charity. The CIO will not be subject to Company Law which means that resources will not be spent ensuring compliance and dealing with instances where Charity law and Company law are not compatible.


For charities with income below £250,000 the preparation of accounts as a CIO can be completed on a receipts and payments basis whereas companies are always required to prepare accounts on an accruals basis. Again there may be a cost and time saving in preparing the more simplified accounts for smaller entities.




Given that the structure is relatively new, funders may be unfamiliar with it and may be more reluctant to provide funding. If the change in legislation encourages more charities to convert and makes the structure more common the impact of this is likely to reduce over time.


There is no provision of a register of charges by either a CIO or the Charity Commission, making it difficult for CIO’s to issue floating charges. The CIO structure will not therefore be appropriate for charities who raise funds through borrowing.


In the event that a CIO loses its charity registration it will cease to exist and all property will vest in the Official Custodian. If a company loses its charity registration it still exists as a company.

Trustees will need to consider the advantages and disadvantages of converting before deciding whether a CIO is the most appropriate structure.


If you would like to discuss the new legislation regarding conversion to a Charitable Incorporated Organisation, or you would like to speak with a member of our team, please contact Nicola Mason or call 01772 821021 to be put in contact with a member of our Charity and Not for Profit team.

better governance

11 Key Steps for Trustees, 1 Giant Leap for Your Charity – Month to Month Guide to Better Governance

The Not for Profit sector is dealing with continued challenges from numerous directions. Changing legislation is placing a cost burden onto organisations that are already struggling with funding issues. Governance continues to be key in maintaining and developing a successful organisation and has never been more important in the third sector. Being alive to taxation changes has become imperative and the charity regulators are adopting a more rigorous approach.


We have created a tool that can help you improve your organisation’s governance in a stepped and measured way. However, there are many tools, guides and websites you can use to help you on your journey and we have referenced some in our document. We can also help you with bespoke training, assistance with strategy, implementation, controls and so on. This guide has been put together to offer guidance and support to finance teams, trustees and the senior management teams in Not for Profit organisations. We hope you find this report useful.


The report covers the following topics:



Use the ‘Month to Month Checklist’ at the start to assess where you are now in each of the areas. Once you have read a section, fill in the ‘Where do you want to be and how will you get there?’ part of the checklist. Set yourself some timescales and then at the end of your period, assess whether you achieved your goals or not.


Read the full report: 11 Key Steps for Trustees, 1 Giant Leap for Your Charity


Don’t worry if you don’t quite get to where you want to be. If there is something that you are struggling with or would like some advice on, our specialist advisors to the Not for Profit sector are able to draw on a vast wealth of experience and expertise encompassing the full range of Not for Profit organisations, including education institutes, grant making bodies, religious organisations and a wide array of charitable focuses.


If you have any questions about the issues raised in this report or would like to discuss your accounting and business advisory needs with one of our sector specialists, please contact Tracey Johnson or call 01772 821021 to be put in contact with a member of our Charity and Not for Profit team.

charity finance for trustees

Essential charity finance for trustees guide

Charity Finance Group (CFG), sponsored by MHA member firm, MHA MacIntyre Hudson, have launched a new guide for trustees on their financial responsibilities. The guide is aimed to be a primer for new trustees and existing trustees that need to refresh their memories about their financial responsibilities.


The guide covers how trustees should approach financial governance in their charity, legal responsibilities, accounting and reporting requirements, financial strategy, policies and information, financial reporting, audits and independent examinations, regulators and law enforcement as well as key resources.


If you would like to discuss charity finance for trustees, or you would like to speak with a member of our team, please contact Tracey Johnson or call 01772 821021 to be put in contact with a member of our Charity and Not for Profit team.


To download this guide please click on the link below:


This publication originally appeared on the blog of our member firm, .

Charitable Incorporated Organisation

November Not for Profit sector update

Protect your charity from fraud – revised guidance by Charity Commission


The Charity Commission has updated its on how to protect your charity from fraud. Estimates of the scale of charity fraud in recent years vary between £150 million and £2 billion per year which highlights the importance of fraud awareness.


The Charity Commission advises that any fraud, whether successful or just attempted, should be reported to immediately. More serious fraud incidents should be reported directly to the Charity Commission.


As part of the update for fraud protection, the Charity Commission has included templates for anti fraud policies and fraud investigation plans. The other key issue is the prevalence of cyber fraud, which now accounts for approximately 70% of all fraud.


The Cyber Aware website has a for assessing how good is your charity’s cyber security.


Charity Commission Chair – pressure on charity finance


At Civil Society’s annual Charity Finance Summit in late October, William Shawcross – the outgoing chair of the Charity Commission – spoke about the challenges facing the charity sector. According to William Shawcross the main problem facing charities is a reduction in finance, particularly for charities relying on government grants for income.


After describing the pressure on finances as the biggest problem on the charity sector, William Shawcross discusses the risk of high senior executive pay alienating potential donors and the importance of effective governance.  This is an illuminating insight into the Commission’s regulatory concerns.


Updated Code of Fundraising Practice


The Fundraising Regulator has made several changes to their Code of Fundraising Practice in relation to static collection boxes. The revised sections can be found on the Fundraising Regulator’s .


The changes were made in response to concerns about data protection issues with regards to volunteers’ personal details and place a greater onus of responsibility on the organisers of static collection boxes.


New guidance on financial sanctions


The Office of Financial Sanctions Implementation (OFSI) has published new to help ensure compliance with financial sanctions. The move was prompted by requests, particularly from smaller charities, asking for clearer information on issues affecting the sector.


The guidance clarifies what activities are allowed under an OFSI license and how to apply. It also promotes sources of information and advice available to charities.



Charity register statistics


In late October the Charity Commission updated its charity register to include data for charities with a year end date of 30 September 2017. This latest data shows that number of charities has increased to almost 167.5k with annual income at almost £74.5 billion.


If you would like to discuss the sector in more detail, or you would like to speak with a member of our team, please contact Tracey Johnson or call 01772 821021 to be put in contact with a menmber of our Charity and Not for Profit team.


This article originally appeared on the blog of our member firm, .

Donated goods, facilities and services

Welcome to our series on SORP 2015 where the at Chiks will bring you bite size guidance on the changes that SORP 2015 will bring to your organisation.

Donations of goods, services and facilities enable a charity to further their aims and objectives.
When they should they be recognised?

They should be recognised when the criteria below are met:
1. The charity is entitled to them – control has been passed to the charity and any performance related conditions attaching to them have been met.
2. It is probable that the benefits from the donated items will pass to the charity.
3. The fair value can be measured reliably.
It is worth noting that the restriction on the use of the donation does NOT prevent it being recognised as income.

How should donated goods be valued?
Donations must be measured at their fair value unless it is impractical to do so. Where the fair value of am item cannot be determined a value can be derived from:
1. What the item would have cost the donor.
2. Where goods are to be sold; the estimated resale value less the cost to sell the goods.
If it is impractical or the costs of valuing the donations for resale outweigh the benefits the donated goods should be recognised when they are sold.
Charities using the UK retail gift aid scheme are only entitled to an admin fee until the donor waives their right to the sale proceeds. Using historical data some charities use an estimation technique to calculate the amount of donations that will result from their subsequent sale. When a donor does not waive their right; the admin fee is analysed in the SOFA as ‘income from other trading activities’.
If stock is donated for distribution to the charity’s beneficiaries they should be valued at their fair value at the time of their receipt, if this is impractical it should be recognised as both an income and an expense when the goods are distributed.

How should donated facilities and services be valued?
These should be valued at the amount the charity would have paid for them in the open market. The donated facility or service would be recognised in income as well as an expense in the accounts.
Donated fixed assets should be recognised in income and as a fixed asset and subsequently depreciated over the assets useful economic life.

How should volunteer time be valued?
Placing a value on volunteer’s time can be extremely difficult. As there is no way to reliably measure the cost of volunteer’s time; the contribution of general volunteers should not be included as income in the accounts.

What disclosures are required in the accounts?
Charities receiving donated goods, facilities or services must disclose in the accounts:
1. An accounting policy for recognition and valuation.
2. The nature and amounts of donated goods.
3. Any unfulfilled conditions.
Where the charity has benefitted but not recognised an amount in the accounts – i.e. the contribution of volunteer time.

If you require any assistance or further information on any of the areas covered in this article or our SORP2015 bite sized guidance series, please contact a member of .

On the Fourth Day of Christmas my tax adviser gave to me …. A tax relief for donating to Charit-ee!

The combination of the Christmas spirit and the ongoing humanitarian crises, such as the spread of the Ebola virus and the civil war in Syria, will encourage many of us to donate our hard earned cash to charity, but what are the tax implications of doing so?


When making a donation you will notice an option to ‘Gift Aid’ the donation – but what does this mean?


By ticking this box the individual is declaring that they will pay sufficient Income Tax for the charity to reclaim an additional 25% of the donation made from HM Revenue & Customs (HMRC). So for example if an individual donates £80 to charity and ticks the Gift Aid box, the donation is worth £100 to the charity. The reason for this is that a taxpayer makes the donation out of their net (after tax) income, and this allows the charity to reclaim the tax suffered by the individual. As this only provides relief for Basic Rate (20%) tax, let’s look at three examples to see what tax relief is available for different taxpayers:


1)     Stephen earns an annual salary of £60,000, with part of this income being taxable at the higher rate of 40%. Stephen decides to donate £800 to charity. He ticks the Gift Aid box and the charity can reclaim an additional £200. As he is a Higher Rate taxpayer Stephen can also claim additional relief via his annual Tax Return (or through his tax code if he is not in Self Assessment). The donation reduces the amount of income taxable at the higher rate of 40%, and in this case it will reduce Stephen’s tax liability by £200. If Stephen was an Additional Rate taxpayer (taxable income over £150,000) the donation would reduce his tax liability by £250.


2)     John earns an annual salary of £20,000 and is therefore a Basic Rate taxpayer. He donates £400 to charity. He ticks the Gift Aid box and the charity can reclaim an additional £100 from HMRC. As John is a Basic Rate taxpayer no additional tax relief is available to John personally.


3)     Mrs Smith receives an annual state pension of £6,000 and bank interest of £2,500 (received gross). As all of her income is covered by the tax free personal allowance she does not pay any Income Tax. As Mrs Smith has significant savings she likes to donate some money to charity each year, and this year she decides to donate £500 to the RSPCA. Mrs Smith is unsure as to whether she should tick the Gift Aid box. She understands that by ticking this box the charity will receive additional money and decides to go ahead. So what are the implications of this? By ticking the box the charity will receive an additional £125, reclaimed from HMRC. As Mrs Smith has not paid any Income Tax during the year she has made a false declaration, and this amount should be repaid to HMRC (usually via an annual Tax Return).


There are also other situations where making a payment to charity through Gift Aid will be of financial benefit to taxpayers, for example when calculating an individual’s assessable income for tax credits purposes. In this situation the payment to charity reduces the claimant’s assessable income (and could therefore increase the level of tax credits received).  If a taxpayer receives child benefit payments and their income is over £50,000 it may reduce any amount which is repayable to HMRC under the ‘High Income Child Benefit Tax Charge’, but this will depend on individual circumstances.


Companies can also get tax relief for making charitable donations, although they are not eligible to make donations under the Gift Aid regime.

Is your charity type fit for purpose?

When you set up a new charity you need to decide what sort of legal structure it will have – the options are:


  • Charitable incorporated organisation (CIO)
  • Charitable company
  • Unincorporated association or
  • Trust


Each of these types of entity will have a different governing document which will determine how the charity will be run.  The structure chosen will also affect the operation of the charity in terms of who will run it and whether it has a wider membership, whether the contracts that it enters into (with staff, customers, suppliers etc) are in the charities own name and whether the trustees will be personally liable for the charity or if it is a separate legal entity.


The first 2 types of charity listed above have a corporate structure and are considered to have their own identity in law.   This is often seen as very beneficial especially to the trustees as (assuming they do not ignore their trustees’ responsibilities) it will limit their personal liability for the charity.


The downside of being a charitable company is the administrative burden of having to comply with regulations of both Charity Commission and Companies.


The CIO is a relatively new type of organisation which has the benefits of being a separate legal entity as described above and the benefit of having a single regulator, the Charity Commission.


In the past it has been quite common for unincorporated charities to transfer their activities and operations to a new charitable company and recently also to a new CIO.


We have assisted a number of charities with understanding the benefits of the different types of structure, if you think your structure may no longer be fit for purpose then we can do the same for you.


For further information, please contact 01772 821 021.

Chiks’s pedal push raises £2.5k for national children’s charity

Staff at Preston-based financial advisory firm Chiks pedalled 259 miles to raise money for a national children’s charity.


In its own take on the Tour de France, Le Tour de Smalley saw 49 Chiks staff cycle a virtual route at its Preston headquarters, covering the distance between the firm’s six offices and raising £2,528 for Ronald McDonald House Charities (RMHC).


Cheered on by colleagues and clients, the team smashed their 185 mile target – the distance between its northernmost office in Kendal and its southernmost base in Nottingham.


Graham Gordon, managing partner at Chiks, said: “The work of Ronald McDonald House Charities is fantastic. A number of Chiks staff have made use of RMHC facilities which made a huge difference at a difficult time in their children’s lives.


“We wanted to give something back and help other families in similar situations, so decided to get on our bikes for a miniature Chiks style Tour de France.


“The event was a huge success, with 49 people taking part throughout the day. With team spirit at a high, we managed to raise £2,528 for RHMC, quadrupling our initial £500 target.”


With houses in 14 locations across the UK, Ronald McDonald House Charities aims to keep families together by providing free ‘home away from home’ accommodation to families with children in hospital.


RMHC’s houses helped over 7,000 families in 2013, but the charity relies on donations to continue its work.


Two bikes for the challenge were provided by Chiks client, Preston-based Ribble Cycles.

Autumn Statement 2013 Review: Not for Profit


There were a number of changes to the tax system for charities and not for profit organisations.


A new tax relief will be introduced for donations by limited companies to Community Amateur Sports Clubs (CASC). This will take effect from 6 April 2014.


The government will also revise the model Gift Aid Declaration to make it easier to understand, and develop new promotional material to increase take up. A working group is to be established, and announcements will follow next year.


A new tax relief is to be introduced for shares and loans in social enterprises with effect from April 2014. This will benefit charities, community investment companies and community benefit societies. In due course, companies will be able to issue ‘social impact bonds’ and a consultation process on this will start in the new year.

Autumn Statement 2013: Make it easier for charities to ‘recruit and retain’


As part of our preview of Autumn Statement 2013, Tracey Johnson, partner at Chiks, offers her thoughts on what government can do to help charities and not-for-profit organisations.


The Autumn Statement is once again the big opportunity for the chancellor to boost confidence in the recovery. Businesses need to see incentives to invest and create jobs, as well as simplification of the tax system and administrative bureaucracy.


In the charity and NFP sector, we really need to have a degree of certainty about funding streams and simplification of procurement processes to enable more charities who are delivering essential services to be able to bid for contracts and access funding.


The sector employs a significant number of people, so any incentives which reduce employment costs, for example NIC relief, and help them to be able to afford to retain employees will be welcomed.


Any incentives that encourage private giving through donations, legacies, or social investment initiatives will also help the sector to increase or maintain income levels or, in the case of grant making trusts, to provide funding and support to other voluntary organisations.


As ever, the ability to recover more VAT would be very welcome, though this is unlikely.

Changes to UK GAAP


UK GAAP, which underpins charity reporting, is changing with a new regime proposed for accounting periods beginning on or after 1 January 2015.  At the core of the ‘New UK GAAP’ is a single comprehensive new standard, FRS102, which will replace almost all SSAPs, FRSs and UITFs.


In March 2013 the Financial Reporting Council issued


– FRS100 Application of Financial Reporting Requirements,


– FRS101 Reduced Disclosure Framework and


– FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.


FRS102 will be applicable to all UK companies (except those required or opting to report under EU-adopted IFRS and small entities reporting under the FRSSE), meaning the majority of large and medium sized UK entities, including public benefit entities, will apply FRS102 when preparing their financial statements.


Initial plans to have a separate standard for public benefit entities have been abandoned, instead additional guidance for public benefit entities has been inserted into FRS 102 and changes have been made to the proposals in FRED 45 FRS for Public Benefit Entities, notably in clarifying the treatment of donated goods or services.


The key difference between current UK GAAP and FRS102 include:


– The basis of measuring and recording Financial Instruments, Investments in shares, Derivatives and Foreign exchange forward contracts


– The basis of valuing Investment properties


– The basis of determining the useful life of Goodwill and Intangible assets


– When Hedge accounting can be applied


– The basis of accounting for step acquisitions and disposals of subsidiary companies


– How intangible assets are recognised in a business combination


– The basis of accounting for group reconstructions


– The basis of recognising deferred tax


– The basis of accounting for defined benefit pension plans and group defined benefit pension plans


The first set of financial statements that are required to be prepared under FRS102, say 31 March 2016, will include comparative figures to 31 March 2015 that will need to be restated on the basis that they had been prepared in accordance with FRS102.  In order to restate the Income and Expenditure account for the year ended 31 March 2015 the opening Balance Sheet for that year, 1 April 2014, or effectively 31 March 2014 will need to be restated.  Early adoption is permitted for accounting periods ending on or after 31 December 2012.


Charities are also required to prepare their financial statements in accordance with the Charity SORP and early adoption of the new FRSs is only permitted if it does not conflict with the requirements of the current SORP.  A new charity SORP, which will aim to eliminate conflict with the new FRS is currently in the consultation process.


Small entities will continue to have the option to prepare their financial statements in accordance with the FRSSE which will be known as FRSSE (effective January 2015).  This new standard is based on FRSSE (effective April 2008) with consequential amendments being made to update references to accounting standards that will be withdrawn or for greater consistence with legislation.  Two additional amendments to the new FRSSE relate to the useful life of goodwill and intangible assets which will be presumed not to exceed five years (although this can be rebutted) and to requiring an annual assessment of indications that an asset should be written down.


If you would like more information on this topic, please call 01772 821021.

Proposed tax incentives for investment in social enterprise


At the same time as taking on high profile multinational companies in respect of what is seen by some as morally questionable tax avoidance the Government have also launched a consultation on proposed changes which, if enacted, will encourage a new form of “socially acceptable” tax avoidance.


The proposed changes relate to encouraging individuals to provide financial support for Not for Profit organisations such as Charities, Community Interest Companies and Community Benefit Societies. The encouragement is in the form of new income tax incentives for providing the financial support.


The consultation on Social Investment Tax Relief proposes that investors in Social Enterprises such as Community Interest Companies, Community Benefit Societies and also Charities will be able to claim a tax relief on the amounts that they invest. This proposed new relief will be similar to that which already operates for venture capital investment under the EIS and SEIS schemes and will allow the individual to claim income tax relief on the investment.


However, the SITR proposals differ from EIS and SEIS in two key ways.


Firstly, as many Social Enterprises have either minimal share capital or are Limited by Guarantee (rather than shares), an equity based investment may not be relevant. To address this, the consultation proposes that a qualifying investment will be capable of being in the form of a broader range of securities than just equity, such as debt or quasi-equity.


The second key difference is that the range of activities which the Social Enterprise can carry out is proposed to be wider than the activities allowed under EIS or SEIS, so potentially allowing Social Enterprises to receive investment for projects which EIS and SEIS companies cannot such as property based businesses including residential care.


At present there is increasing awareness that EIS and SEIS can be used to assist certain Co-Operatives to raise funding via SEIS and EIS and many community based renewable energy projects are now structured to qualify for EIS. It would be reasonable to assume that once enacted the reliefs offered by the provisions would be taken up in a similar manner.


The logical conclusion of the proposals are that such a tax relief would be likely to encourage investment into Social Enterprise by providing a tax based incentive to do so and so will be likely to be of interest to people who want to assist socially worthwhile projects but still want to receive a return on their support. Crowdfunding platforms similar to Kickstarter, Seedrs or Crowdcube could be used to provide a platform to raise investment from a broad range of investors and could promote the fact that the investments are “tax efficient”.


These proposed changes should be considered not just by new Social Enterprise projects, but existing qualifying organisations so that they are aware of both the potential opportunities the proposals create and also the potential negative impacts. For existing Charities for example, it is accepted by the Government that the changes could divert funding away from outright donations into term based funding which has to be repaid.


The consultation closes on 6th September 2013.


Charities and Fraud


There has been a recent increase in fraudulent scams aimed at charities, which is a huge worry when charities are struggling for money in the current economic climate.


A Recent scam


This involved large donations being offered by way of a credit/bank card on the condition that 50% was subsequently forwarded on to a specified charity, which the fraudster would provide the bank details for. The cards with which the donations are being made are stolen, and the bank account details that are provided for the 50% transfer are for the fraudsters personal bank account.


When the card issuer then identifies that the credit/bank card was compromised it recalls the full amount from the charity. The charity is liable for the full sum. The charity has also unwittingly been involved in money laundering.


Obviously the loss of a large amount of cash could be catastrophic for a charity.


How can trustees protect their charity from this abuse?


The best way to protect a charity from any form of financial abuse is to have good governance and strong financial controls. To avoid falling prey to these particular scams, trustees should also make sure they carry out proper due diligence on those individuals and organisations that give money to, receive money from, or work closely with their charity. This forms part of trustees’ legal duties to protect their charity’s assets and is referred to as the ‘Know your principles.’


How can trustees identify suspicious donations?


The key to identifying suspect donations is to look out for exceptional features, such as:


– unusually large amounts,

– conditions or complex banking and transfer arrangements,

– a donation which in reality is some kind of loan


What do trustees need to do if they identify a suspect donation?


Trustees should report a suspicious donation to Action Fraud and/or other appropriate authorities. They should also report this to the Charity Commission under the ‘reporting serious incidents regime’ as soon as they become aware of it.


For further guidance on Charities and fraud visit the


Alternatively if you have any questions arising from this article, or any other queries relating to this article, please do not hesitate to contact me on 01539 729727 or email [email protected]

Latest Charity News


The Charity Commission held its latest public meeting on 26th March 2013, here are the key headlines from the meeting:


Self – reliance


Sam Younger, the Commission’s Chief Executive spoke of how the Commission are focusing on developing charities self-reliance and underlined the importance of ensuring the trustees take ownership of their charity and its activities. He urged charities to submit their accounts online and make use of the raft of tools available on the Commission’s website such as the Trustee Handbook and audio podcasts on topics such as fraud awareness and the rewards of trusteeship. Our recent blog post highlights the key responsibilities of trustees duties


Charitable Incorporated Organisations (CIOs)


The benefits and disadvantages of this new legal structure and that of unincorporated and incorporated charities were presented. For more information about the CIO legal status and how it could benefit your organisation please refer to.


Changes to governing documents


Neil Robertson, Head of Operations at the Commission highlighted that in many cases, minor changes to governing documents, for example, a change in trustee numbers do not require the Commission’s prior approval. Instead, trustees would simply need to inform the Commission once the amendment has been made. For more complex amendments such as a change in charitable objects or change in distribution of property, a scheme of amendment may be required. Each case will depend on the charities existing governing document and specifically whether the trustees have ‘power of amendment’.


How to avoid serious problems


The Commission’s Head of Investigation & Enforcement, Michelle Russell presented common findings from the Commission’s investigations. The overarching theme is that many serous issues investigated by the Commission result from a failure of the trustees to fulfil their basic core duties. Common issues include a dominant individual on the board of trustees, poor financial controls, poor record keeping and poor documentation of decision making. The key message is that strong governance and financial management result in a charity that is better protected against potential fraud and abuse.


If you have any questions arising from this article, or any other queries relating to your charity, please do not hesitate to contact me on 01772 821021 or email [email protected]


Gift Aid – Small Donations Top-up Scheme…Will you be eligible?


As you may be aware, a new Gift Aid “Top-up” scheme is being introduced from 6 April 2013, which will enable charities to claim a top-up payment from HMRC on small donations of <£20 without having to fulfil the normal Gift Aid requirements on these donations. The maximum total value of donations which can be claimed for in one tax year is £5,000, which would result in a maximum refund of £1,250, based on the current basic rate of income tax. The total value of donations on which the top – up can be claimed is, however, restricted to an amount equal to ten times the normal Gift Aid donations in the same year.  So, if your normal Gift Aid claim for the year is < £500, you will not be able to claim the maximum £5,000, even if you have received that amount in small donations.


The Government has only recently announced the details of the scheme and there are a number of  hoops which need to be jumped through. These may need action to be taken very soon if charities who do not currently make regular Gift Aid claims, want to be able to participate as early as possible.


The main conditions are:


– The charity must have existed for 2 full tax years prior to the first year in which a claim is made.

– The charity must have made successful normal Gift Aid claims in 2 out of 4 of the previous tax years before the year in which the claim is made and must have a clean claims record

This means, for example, that if a charity wishes to make a claim for 2013/14, it must have made a normal Gift Aid claim in 2 of the last 4 tax years. Otherwise it will have to wait until at least 2014/15.


The 2012/13 tax year ends on 5 April 2013!  If you have not made 2 claims in the last 4 years, it is not too late to take action.


– If a charity has received any donations from individuals in 2012/13, which could qualify for Gift Aid, it should make sure that it is registered as a charity with HMRC and that Gift Aid declarations are in place to enable it to make a claim for 2012/13.

– If not, could a donation(s) still be made between now and 5 April?

If you would like any further advice, please contact:

Tracey Johnson, 01772 821021

Christine Wilson, 01772 821021

Tracey Richardson, 01539 729727

Trustees’ Responsibilities


A report by the Charity Commission last year claimed that many charity trustees still ‘fail to understand their duties’. Recent press claims that this is still the case , so in this blog post I take 5 minutes to remind trustees of their key responsibilities and how best to discharge them.


The Commissions ‘Charities Back on Track 2011-2012’ Report revealed that 85% of the Commission’s investigations involved concerns about poor governance or poor trusteeship.


Key responsibilities


So what are the key duties of a trustee? Ultimately, the trustees are responsible for the affairs of the charity including ensuring the charity is solvent, well-run and delivering its charitable outcomes.


The Charity Commission’s guidance ‘The Essential Trustee’ splits out trustees’ duties into 3 key areas; Compliance, Duty of Prudence and Duty of Care.




Trustees must:


– Ensure the charity is compliant with charity law, and with Charity Commission requirements; this means ensuring that the necessary reports, Annual Returns and Financial Statements are prepared and filed as required by law and the Charity Commission.


– Ensure that the charity operates in accordance with the rules, charitable purpose and objects set out in its governing document. (“Mission Drift” can often cause issues).


– Ensure compliance with requirements of any other relevant legislation or regulators e.g. Registered Social Landlords.


– Act with integrity, avoiding any personal conflicts of interest or misuse of charity funds or assets.




Trustees must:


— Ensure the charity is and will remain solvent.


– Use charitable funds and assets reasonably and only to further the charity’s objects.


– Avoid undertaking activities that might place the funds or reputations of the charity at risk.


– Take special care when investing funds or borrowing funds.


Duty of care


Trustees must:


– Use reasonable care and skill in their work, using their personal skill and experience.


– Consider obtaining external professional advice on matters where there may be risk to the charity or where the trustees may be in breach of their duties.


Top tips for ensuring key responsibilities are met…


Trustees must be able to demonstrate that they have fulfilled these responsibilities.  I summarise below our top tips for ensuring that key responsibilities are met:


Top tips


– Keep detailed minutes of all trustee meetings, noting the decision making process behind key actions.


– Ensure that the trustees regularly review the charity’s financial records and ensure regular management accounts are produced.


– Regularly review the charity’s governing documents to ensure any new activities, or grants to carry out services, are in line with its objects.


– Ensure the trustees are aware of the necessary returns to be made to the Charity commission and the deadlines for submission.


– Seek professional advice when considering changing the activities of the charity, or undertaking anything out of the ordinary, e.g. investing or borrowing funds.


– Strive for a balanced board of trustees with a wide range of skills and experience.


– Document any potential or perceived conflicts of interest, carefully outlining the trustees’ decision making process.


Further details can be found in the Charity Commission’s document ‘The Essential Trustee’ which is available to download from their website .


If you have any questions arising from this article, or any other concerns relating to the governance of your charity, please don’t hesitate to contact me on 01772 821021 or by email [email protected]


What is a Charitable Incorporated Organisation (“CIO”)?


The Charity commission has started to accept applications from charities wishing to be set up as a CIO. For the time being only brand new charities will be able to apply, but existing charities will be able to adopt this structure in due course.


What is a CIO?


A Charitable Incorporated Organisation is a new legal structure designed specifically for charities. Incorporation offers significant advantages, such as limited liability for trustees. CIOs will be subject to charity law and regulation by the Charity Commission only, unlike charities which are limited by guarantee who suffer from dual regulation from both the Charity Commission and Companies House.


A CIO is brought into existence when it is registered with the Charity Commission. Each CIO will be governed by a constitution which is intended to be simpler than the Articles of Association used by companies limited by guarantee. Model constitutions have already been provided by the Charity Commission and are designed to be easily understood by charity trustees, members and employees. A CIO must have one or more members who can either be the same people as the trustees or can comprise a much wider body.


Can you apply to convert an existing charity?


Applications are currently open to brand new charities wanting to set up as a CIO. A timetable for applications from existing unincorporated charities has been announced. There are also plans to allow existing incorporated charities to convert to CIO status, however, further Statutory Instruments will need to first be drawn up and approved by Parliament, which is not anticipated until 2014.


Indicative timetable (may be adjusted according to the volume of applications received)


Opening date for applications Who may apply?
10 December 2012 Brand new charities with anticipated annual income over £5,000
Late March 2013 Existing unincorporated charities with annual income over £250,000
May 2013 Existing unincorporated charities with annual income between £100,000 & £250,000
July 2013 Existing unincorporated charities with annual income between £25,000 & £100,000
October 2013 Existing unincorporated charities with annual income between £5,000 & £25,000
January 2014 Existing unincorporated charities with annual income less than £5,000, and brand new charities with anticipated annual income of less than £5,000
During 2014 Provisions expected to be made for existing incorporated charities to convert into CIOs (subject to the passing of separate secondary legislation)


Advantages of CIO status
– Limited liability protection for members and trustees, which is expected to improve a charity’s ability to recruit and retain trustees.
– CIOs have their own ‘legal personality’ so they are able to enter into contracts with third parties in their own right instead of the name of individual trustees.
– Administrative cost savings. CIOs are accountable to only one regulator: the Charity Commission. They will need to submit only one set of accounts and annual return. Unlike Companies House, the Charity Commission does not currently charge for registration or the filing of information, nor does it impose fines for late filing.
– CIOs will be governed by a constitution which is designed to be simpler and easier to understand than the Articles of Association of a company limited by guarantee. The duties of members and trustees will be laid down with charitable, rather than commercial, principles in mind.


Disadvantages of CIO status
– The CIO will be a new legal vehicle and unfamiliar to third parties.
– The legislation relating to CIOs will be very new, and therefore charities will need some time to get to grips with it.
– There will not be a register of charges maintained at the Charity Commission in relation to charges granted by the CIO. There is concern that this may deter potential lenders, although the CIO would still need to register any charges with HM Land Registry.
– If a charity has permanent endowment, such property can never become part of the CIOs corporate property and therefore would need to continue to be held on permanent trusts, the CIO being appointed the trustee of it.


What to consider in a charity merger


Tracey Johnson, a partner and charities specialist at Chiks Chartered Accountants and Business Advisors, identifies crucial issues that must be taken into account by charities considering a merger.


Preparing for a merger


The importance of thorough planning for a charity merger cannot be overstated. For a merger to be legally sound, trustees must act in line with the powers in their charity’s governing document, or those given to them by law. If these powers are insufficient, the trustees can ask the Charity Commission for extra powers to facilitate the merger.


It is equally vital to make sure you have comprehensive information about the purposes, powers and property of the charities involved in a potential merger in order to identify any problems or legal barriers in advance of a formal decision.


Make sure the purposes of the two merging charities are compatible


The purposes of the merging charities do not have to be identical, but they do have to be compatible and the main duty of trustees transferring assets to another charity is to take into account the interests of the people their charity was set up to help. Also, transferring charities must ensure the recipient charity has purposes which are suitable in relation to the terms of the dissolution clause, or any other power being used by the transferring charity.


Look carefully into the rules controlling any special trusts, restricted funds or permanent endowment


It is essential to identify at the outset any classes of funds – such as special trusts, restricted funds or permanent endowment – because they must be dealt with according to the rules governing their use. They cannot be simply mixed in with the general assets belonging to the recipient charity.


Consider the involvement of your members in the merger process


Usually, unincorporated associations and charitable companies have a membership structure and the governing document will explain the role of members in the administration of the charity. Trustees looking to complete a merger should consider the involvement of members from the start. This is especially important if the proposal requires the consent or other input of members.


Make sure the estimated costs of the merger are realistic


Underestimating the cost of a merger can create major problems further down the line, so it pays to keep actual and expected costs under close scrutiny at all stages.


Some costs can be anticipated early in the process, such as changes to services; using common ICT systems; professional advisory fees; advertising; rebranding; relocation; and governance costs.


Costs that are less predictable include missing out on opportunities due to time spent on the merger, and disruption to the smooth running of the charity through, for example, having to relocate your premises or implement a redundancy programme.