Changing Your Charity’s Financial Year

You cannot change your charity’s financial year or period if your latest annual return and accounts (if required) are overdue.

charity collecting tinRules for charities that are not companies

If your charity is a charitable incorporated organisation (CIO) or unincorporated (not a company) you can change the financial year or period to run for more or less than 12 months.

It needs to be a minimum of 6 months, and no longer than 18 months.

You can only:

  • change the dates for your current financial year
  • make a change once every 3 years

Changing your financial year or period will also change your deadline for filing the annual return and accounts.

Rules for charities that are companies

If your charity is incorporated (a company) you can shorten your financial year or period as often as you’d like.

The minimum period you can shorten it to is 1 day.

You can lengthen your company’s financial year to a maximum of 18 months, but this can only be done once every 5 financial periods.

Rules for newly registered charities

If your charity is newly registered, and you have not submitted an annual return you will need to request permission to change your financial year.

To sign in and change your financial year you will need your:

This password gives people in your charity access to detailed information about your charity and individuals connected with it.

When giving access to this password you need to have measures in place to make sure the system is only used for proper purposes, and that the information accessed through the Commission’s services will be treated carefully and sensitively and in accordance with legal requirements including the General Data Protection Regulations (GDPR).

Read the privacy notice before you use the service.

Payroll Annual Reporting

Payroll 21If you are an employer running payroll, you need to:

  • report to HM Revenue and Customs (HMRC) on the previous tax year (which ends on 5 April) and give your employees a P60
  • prepare for the new tax year, which starts on 6 April

Update employee payroll records

For each employee working for you on 6 April, you’ll need to:

  • prepare a payroll record
  • identify the correct tax code to use in the new tax year (The most common tax code for tax year 2021 to 2022 is 1257L.  You can find out more about tax codes here)
  • enter their tax code in your payroll software

You should include in your payroll:

  • all employees you pay in the tax year, no matter how much you pay them
  • any employee who has worked for you in the current tax year (since 6 April) even if they have already left

What the Charity Commission expects from trustees in its casework

CC903546-E4A0-491B-9E28-17765EEBB663Trustees or charity officers contact the Charity Commission for different reasons. These include applying to register a charity, updating the recorded details of a charity or using one of the electronic forms to apply for a service. When you contact the commission, it expects you to always:

  • prepare carefully – this includes reading relevant commission guidance, ensuring you have all the information you need before contacting the commission and being clear what it is you want or need from the commission
  • provide information which is true, complete and correct

When the Charity Commission contacts you, it needs to be confident that its regulatory concerns have been fully addressed. This means the commission expects you to:

  • fully cooperate with it
  • provide full, frank and honest answers to its questions
  • provide information or documents it has asked for by the date specified

This will help ensure the commission’s engagement with your charity is completed as soon as possible.

Sometimes the commission may decide to check some of the information you have given it with other people or organisations, or it may ask for evidence to prove what you are telling it is correct. This is standard practice.

If you cannot meet a deadline the commission has set, you must let it know immediately and before the deadline expires. You must also ensure that you answer the commission’s questions fully and honestly. This means you should not provide limited or partial responses.

If you:

  • do not cooperate with the commission
  • do not provide information the commission has requested, or
  • provide partial, inadequate or no response

the commission is likely to conclude that the regulatory concerns are not resolved or allayed. If you do not provide the information requested, or provide limited, partial or inadequate responses the commission will often consider this a regulatory concern in itself. This may result in it deciding to take stronger regulatory action.

The courts have made clear that they expect trustees to cooperate with the regulator.

The commission will consider non-cooperation as evidence of mismanagement or misconduct, which is a matter the commission takes seriously.

It is a criminal offence under section 60 of the Charities Act 2011 for anyone to knowingly or recklessly provide false or misleading information to the commission. This includes suppressing, concealing or destroying documents.

Converting A Charitable Company To A Charitable Incorporated Organisation (CIO)

We're now a Charitable Incorporated Organisation (CIO) - Raising Futures  KenyaThe main advantage of CIOs over charitable companies is that CIOs don’t have to register with and send accounts to Companies House as well as the Charity Commission.

Changing to a different charitable structure usually involves setting up a new charity, transferring your original charity’s assets and liabilities to it then closing your original charity.

The conversion process should be simple and straightforward in most cases. As part of this process, the new CIO Constitution and Special Resolution will need to be included before submission to the Commission.

Using this process means that the charity continues to exist but in a different form. This means you’ll be able to keep the charity’s existing name and charity number.

You should also be able to keep the charity’s existing bank accounts and in most cases the new CIO should receive any legacies left to the original charitable company.

To change a company into a CIO you need to apply to the Charity Commission here.

The Commission will liaise with Companies House to ensure that necessary records are updated correctly. This will mean that the date of conversion of the charitable company to a CIO – as shown on the public register of charities – will match the date of removal of the charitable company at Companies House.

Please note that due to limited resources, your application may be rejected if:

  • complete documentation is not sent or received
  • your charity is not in compliance with its reporting requirements to the Charity Commission and Companies House
  • your charity has made any changes to the new CIO governing document that would require the Charity Commission’s approval including:
    • name change, except a minor change such as removing limited or company and replacing it with CIO and also if the name is not one that is regulated on the business register and no approval has been submitted with the application
    • any additional trustee benefits especially if there is an express prohibition in the company’s governing document
    • amendments to the dissolution clause that will change the spirit of the intention of who receives the funds on dissolution

More information about changing your charity’s structure can be found here

Know Your Charity’s Financial Position

Set a budget and follow it

Your charity should have a budget.  Check that it is being used.  It helps make sure you have realistic plans based on how much money your charity:

  • currently has
  • plans to raise
  • plans to spend each year

By checking how much your charity receives and spends against the budget, you can identify problems in good time and agree what to do about them.  It’s particularly important to do this where you see big differences between the budget plans and what is actually being spent.

Mr Claw Cover

 

Our publication Mr Claw in the World of Charity Accounting explains charity budgeting and planning in more detail.  We still have a few copies available, so contact us here if you would like a copy.

Get the funds you need

Your charity may get the funds it needs in different ways.

This can include:

Make sure you know what the rules are for getting funds in these ways and that your charity complies with them.

If your charity does not spend all its income

Check that your charity has a reserves policy.  This explains whether your charity is aiming to keep a reserve of unspent income, what it will be used for and why this is reasonable.  Check that your charity sticks to the policy or can explain why if it does not.

Make sure that your charity’s annual report explains the policy and says how much money (if any) it has kept in reserve, what it is for and when the charity will use it.

If you want more information on Reserves, see the Charity Commission’s guidance here

Making Debt Deductions From An Employee’s Pay

COURTORDERPICYou have to make deductions from your employee’s wages if a court orders you to. This could be to pay off:

  • unpaid maintenance payments
  • a county court judgment

How it works

  1. You’ll get a document from the court telling you to make deductions from your employee’s pay.
  2. Work out how much you have to deduct each time your employee is paid.
  3. Start making deductions the next time you pay your employee. Pay them their reduced wages on their normal payday.
  4. Make the payment to the court.
  5. Stop making deductions when the debt has been paid off.

You and your employee can be fined if you do not deduct their wages, or if you deliberately give false information about their earnings.

Full details can be found here

Charity Trustee – Declaration of Eligibility and Responsibility

Protect Your Charity’s Money – Internal Financial Controls

Fraud Top TipsAs a trustee you must take steps to make sure that your charity’s money is safe, properly used and accounted for. Every trustee has to do this. Even if your charity has an expert to manage its finances, you are still responsible for overseeing your charity’s money.

Protect your charity’s money

Make sure that money is only spent on what is allowed by the charity’s governing document and policies. If it is not, you and the other trustees need to put it right.

Use the Internal financial controls checklist (MS Word Document, 31.6KB) to help you know you are doing this properly. This will help you make sure that money coming into the charity is:

  • secure and recorded
  • only spent on your charitable purposes
  • at less risk of theft, fraud or cyber crime

National Living and Minimum Wage Rates Increase April 2021

WagesThe Government announced at the end of  November 2020 the National Living Wage (NLW) and National Minimum Wage (NMW) rates which will come into force from April 2021.

It accepted in full recommendations made by the Low Pay Commission at the end of October 2020

The National Living Wage, ie for those aged 25 and over, will increase by 2.2 per cent from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time.

For workers aged under 23, Commissioners recommended smaller increases in recognition of the risks to youth employment which the current economic situation poses.

Rate from April 2020 Rate from April 2021 Increase
National Living Wage £8.72 £8.91 2.2%
21-22 Year Old Rate £8.20 £8.36 2.0%
18-20 Year Old Rate £6.45 £6.56 1.7%
16-17 Year Old Rate £4.55 £4.62 1.5%
Apprentice Rate £4.15 £4.30 3.6%
Accommodation Offset £8.20 £8.36 2.0%

You can read the Low Pay Commission 2020 summary of findings here

The Legal Status of Volunteers

VolunteersYour charity could get into legal problems if you don’t clearly distinguish between its paid staff and volunteers.  It’s possible for volunteers to claim they have the same rights as employees, including claiming unfair dismissal for example.

A written role description for your volunteers can help make it clear what the boundaries and expectations are.  It’s important that the role description could not be confused with an employment contract or job description.  For example it must not require volunteers to work particular hours.

Insurance to cover volunteers

Make sure your charity’s insurance covers your volunteers.  Even if your charity doesn’t employ staff, you may still decide to take out employers’ liability cover for volunteers.

Check whether your insurance policy:

  • includes volunteers
  • covers the activities volunteers will be doing
  • states any age limits for volunteers

Expenses for volunteers

Volunteers aren’t paid for their time but should be paid for any out-of-pocket expenses. These expenses could include:

  • travel
  • postage and telephone costs if working from home
  • essential equipment, such as protective clothing

Volunteers should provide receipts for any expenses they incur.

If a volunteer receives any type of reward or payment other than expenses, they may see this as a salary and they could be classed as an employee or worker. This then gives them some employment rights.

Criminal records checks

If your volunteers will be working with children or vulnerable adults, by law you can get a Disclosure and Barring Service check (DBS, formerly the Criminal Records Bureau) on them.

The DBS will search police records to identify people who are unsuitable for certain types of work, especially work involving children and vulnerable adults.

DBS checks are free for volunteers.