Charity Commission gets powers to tackle tax abuse

The Charity Commission has been allocated £8m of new funding over the next three years to tackle financial abuse and mismanagement by charities, while the government has outlined proposed new legislation giving the regulator stronger enforcement powers.

The Commission says it will spend the £8m on technology and frontline operations, allowing it to streamline lower risk work and redeploy its resources to focus on identifying problem areas, including tax abuse and the promotion of terrorism. It has also been given an additional £1m in general funding for 2015-16, to fund immediate resource needs in investigations, monitoring and enforcement.

Its proposed digital services will allow self-service for simple transactions, and make the submission of accounts and required information more efficient.

The Draft Protection of Charities Bill makes significant changes to the ways individuals can be disqualified from acting as a charity trustee, including a ban on people with convictions for terrorism or money laundering.  It will give the Commission the power to require a charity to shut down if there has been misconduct or mismanagement and there is a risk to public trust and confidence in charities. 

It will also enable the Commission to issue an official warning to charities about which it has concerns, which the regulator says will allow it to take swift and proportionate action in situations where more forceful intervention would not be appropriate. The new regulations will  close several loopholes, including one which allows trustees to avoid Commission enforcement action by resigning. 

However, the Commission says it is disappointed that the proposed legislation does not include its proposal that people who are disqualified from trusteeship should also be banned from taking up other key roles in charities, such as treasurer or finance director.

In addition, the Charity Commission has announced changes to the annual return, following a consultation, which will apply when charities report on their financial years ending in 2015.

The annual return 2015 will include three new question areas. The first ask how much income came from contracts from central or local government to deliver services, or grants from central or local government. Charities will have to declare if they have a policy on paying staff, and whether the charity has reviewed its financial controls during the reporting period.

Plans to ask charities with incomes of between £10,000 and £500,000 for key financial information on the annual return have been abandoned on the grounds of cost, although the Commission is looking whether accounting software could be used to help with this. It is to review proposals to ask about charities’ campaigning expenditure when it considers changes to the annual return for 2016. 

Paula Sussex, chief executive of the Charity Commission said: ‘The public rightly expects charities to be accountable and transparent. They also expect us to regulate effectively and to use the tools at our disposal to do so. This additional information will help achieve both aims. I hope it will also encourage trustees to monitor their charity’s financial controls and carefully consider what they pay their staff.’

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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