Plus: Ilott and Mitson, warnings against the use of cash couriers, and tax relief for museums and galleries
HMRC has updated its guidance document on employee expenses and benefits for 2017, which explains the tax law relating to expenses payments and benefits received by directors and employees. The main change relates to the statutory exemption for trivial benefits in kind from 2016. Charities need to be alert to the fact that the word "directors" in the charity world is used more widely, and in a less well-defined way, than in this guidance. Trustees of charitable companies also need to remember that they are directors.
Museums and galleries
The Finance Bill 2017 will introduce a new tax relief for museums and galleries that develop new exhibitions, including those taken on tour. The relief – set at 25 per cent for touring exhibitions and 20 per cent for non-touring exhibitions – will allow museums and galleries to claim a credit worth up to £100,000 on exhibitions that are toured and £80,000 on non-touring exhibitions. The maximum credit allowable is £500,000, related to the maximum level of qualifying expenditure. The bill will also now include exhibitions that have a live performance as part of the exhibition, even if the live performance is not the main focus of the exhibition. The new rules come into force from 1 April 2017.
Fit and proper persons
Every trustee of a charity has to be a "fit and proper person" under tax legislation. Trustees should confirm this at the time of their appointment. HMRC has recently updated its fit-and-proper-persons declaration and accompanying help sheet. Two changes are worthy of note. First, it is now clear that anyone involved in a disputed tax-avoidance scheme could be caught by the rules. Second, the tax and the charity regulatory regime are synchronised, as the fit-and-proper guidance now bans any person who has been either removed or disqualified from acting as a charity trustee by a charity regulator. Trustees that have signed the old declaration do not need to submit an updated declaration.
Financial matters guidance
The Charity Commission has issued revised guidance for trustees on financial matters. Its Charity Governance, Finance and Resilience: 15 questions trustees should ask is a checklist that trustees are encouraged to think about together. Questions cover a wide range of topics, including strategy, resilience, impact, reserves, contracts, pensions, fraud, governance and value for money. Some more sophisticated charities might find it too basic, but it can still form a useful starting point to go back to basics.
The Charity Commission has also issued a strong warning against the use of cash couriers. According to a statement issued by the commission, over the past two years police have seized in the region of £4m at ports under the Proceeds of Crime Act 2002 and the Terrorism Act 2000, and continue to be very active in the detection and seizure of illicit cash. These totals include a number of seizures of cash being carried by representatives of charities, and people claiming that cash was charitable. The Charity Commission warned that moving cash around like this exposes a charity to money laundering, criminal activity and terrorist financing activities.
Ilott v Mitson
Charities that depend on legacy income will be relieved that the long-running legacy dispute of Ilott v Mitson has ended after a Supreme Court decision – the first time this court has had to make a decision on a claim under the Inheritance Act legislation. The result means that charities can now be more confident when receiving legacies that the estate will not be challenged, especially when charities might have had no previous expectation from an estate. Although every charity will carefully consider its legacy pipeline, this judgment should allow charities to recognise more income, rather than keep it off the balance sheet, and so speed up their expenditure on good causes.
This article was first published in Third Sector on 26 April 2017.