NIC reliefs set for Freeports

NIC reliefs set for Freeports

Freeport operators will be able to take advantage of a zero rate of secondary national insurance contributions (NICs) for employees, the government has announced.

The National Insurance Contributions Bill 2021, which legislates reliefs for those operating in Freeports, has now been published.

The Bill confirms that from April 2022, organisations with employees spending 60% or more of their time in a Freeport site will be eligible for relief on secondary Class 1 NICs for 36 months. The relief will be available to new employees earning up to £25,000 per annum.

In 2020 the government consulted on proposals to create up to ten Freeports across the UK. A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a seaport, airport or rail port. East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.

The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

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Craig Walker

Tax Director, Sheffield

0114 266 7141

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Covid-19-related rent concessions

Covid-19-related rent concessions

The Financial Reporting Council (FRC) has issued amendments to FRS 102 and FRS 105 – Covid-19-related rent concessions beyond 30 June 2021

 

To help them through the pandemic, many businesses that lease property have been supported by their landlords and have been granted rent concessions.

Before the pandemic, FRS 102 and FRS105 didn’t explicitly specify how to account for changes in lease payments resulting from rent concessions. In order to avoid businesses interpreting FRS 102 in different ways, the FRC acted fast and issued an amendment to the standards in October 2020 looking specifically at COVID-19 related rent concessions.

Prior to this amendment, businesses may have looked to treat these rent concessions in the same way as lease incentives, such as rent-free periods at the beginning of a lease, and spread the benefit over the remaining life of the lease.

This amendment changes this treatment. These concessions were specifically to help businesses out during the pandemic period, and are temporary in nature, and so should be recognised in the P&L in the period that the concession is intended to compensate – so effectively you recognise the reduction in the rent charge as it happens.

There are certain conditions to apply this treatment

  • the change has to be a reduction in rent
  • there has to be no other change to the terms of the lease – otherwise the rent concession could be due to those changes rather than just COVID-19
  • the original amendment only applies to payments which were due on or before 30 June 2021. However, in June 2021, the FRC issued further amendments to the standards, such that the revised requirements now apply to rent concessions that reduce lease payments originally due on or before 30 June 2022.

The revised standards require disclosure of the change in lease payments in the financial statements.

The effective date is periods commencing on or after 1 January 2020, but early application is permitted, and Hawsons would recommend that such early application is adopted.

Here is a link to a video of our Technical Director Paul Hutchings discussing the revision to the standards.

Free initial meeting

Craig Burton, Partner

Craig Burton

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The Charities Bill

The Charities Bill

What is it?

The Charities Bill was drawn up to simplify a number of processes to assist charities needing to consolidate and/or restructure. The Bill will implement the majority of recommendations made by the Law Commission in its report published in 2017. It will do so primarily by making amendments to the Charities Act 2011. It is anticipated that this Bill will deliver cost savings for charities in excess of £28m over a ten-year period.

Main measures of the bill

Governing documents

The amendment mechanisms for incorporated and unincorporated charities are aligned to reduce previous inconsistencies. There is also a new, clearer statutory power for unincorporated charities to amend their governing documents by resolution. Finally, there are more consistent criteria for the Charity Commission to consider before agreeing to a change of purpose for a charity.

Permanent endowment

There is a new definition of permanent endowment along with a new power to borrow from permanent endowment as an alternative to existing rules.

Incorporations and mergers

The Bill has a provision for allowing legacies in wills to be transferred to a merged charity, reducing the need for ‘shell charities’. Corporate charities are automatically given ‘trust corporation status’ if they administer charitable trusts.

Some other measures

The circumstances in which funds from a failed fundraising appeal can be applied to other purposes of the charity have been expanded as long as there is adequate oversight from the Charity Commission.

In an alignment of the provisions available for the supply of services by trustees, goods can also now be provided to a charity, subject to appropriate safeguards being in place. This creates consistency and will allow charities to access goods on potentially more favourable terms.

Charities will be able to make small ex gratia payments without seeking Charity Commission permission.

The Charity Commission will also be able to ratify a trustee’s appointment or election which could potentially be invalid.

Conclusion

It should be noted that these measures apply only to England and Wales. The changes should help streamline processes which will allow trustees to better focus on running their charity whilst also allowing flexibility for strong oversight. We should see a reduction in regulatory pressure and bureaucracy without any impact on the level of governance.

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Simon Bladen

Partner, Sheffield

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How to ensure your charity remains sustainable?

How to ensure your charity remains sustainable?

Introduction

The Oxford English Dictionary describes the term sustainability as; ‘able to be maintained at a certain rate or level’.

For a charity, being sustainable involves a great deal of forward planning and preparation for the future. One of the core fundamentals of remaining sustainable for a charity is being able to continue operating when a core element of funding is suddenly removed or something unexpected occurs.

 

How do I know if my charity is sustainable?

There are many factors that contribute towards sustainability, these can include:

  • Diversified funding
  • Cashflow and cost control
  • Impact, strategy, and planning

 

Diversified funding

Charities that have an overreliance on one particular source of funding could find themselves vulnerable if that funding is suddenly taken away or significantly reduced. In an ideal world, charities should never have more than 20% of their income from a singular source. This is of course far easier said than done and it isn’t one-size-fits-all, some income streams will always be more robust than others and will have varying levels of control that the charity can exert over them.

If you feel that you are overly reliant on one income source then you should aim to come up with a contingency plan in case this source of funding dries up or is significantly reduced. The more control the charity has the better. The assessment can be covered as part of the risk assessment for the charity to demonstrate that the trustees have considered it. As mentioned above, some funding sources are always going to be at greater risk of being cut at short notice than others.

Cashflow and cost control

Cashflow is normally the largest cause of organisation failure, and for charities, the risks are just as high if not properly managed. You should always monitor your cashflow on a regular basis. Implementing a financial plan that is monitored and reviewed regularly will make your cashflow management a far easier task. This should be fluid so that forecasts can be updated for unforeseen eventualities.

It should go without saying that cost control is vitally important and needs to monitored regularly. If your income unexpectedly falls you will need to find a way to manage associated costs. This could mean making cost-cutting decisions in key areas in order to ensure the charity is not at risk. Always keep in mind that the trustees have a duty to ensure the charitable funds are protected and used for the right reasons.

Impact, strategy, and planning

It is always important to remember why you are part of this charity, what impact do you want it to make? It can be very easy to become distracted by finances but it is important to consider whether your charity is achieving its objectives. Without achieving a tangible impact, it is very unlikely you will be able to sustain a regular income to fund charitable activities in the long term.

In order for your charity to be successful, you will need to have a strategy in place. In your strategy, you should establish what impact you want your charity to have on the particular cause for which it was set up to help. It is just as important to focus on what you will not be doing, as this gives your charity a focus so your team does not get distracted. Don’t fall into the trap of spreading the charity too thin and always ensure the primary purpose objectives of the charity.

Once you have identified your impact and strategy you can look to create a business plan. The plan should set out how you will implement the strategy. Once again this is a fluid document and should be revisited by trustees and the executive team regularly.

Conclusion

Ensuring you are running a sustainable charity depends on many factors, of which we have only covered a handful in this article. The importance of frequent communication between the executive team and trustees cannot be overstated. Having a clear picture of where the charity is heading and how it will aim to get there whilst planning for unforeseen circumstances will help ensure sustainability and relevance in the long term.

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Simon Bladen

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0114 266 7141

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How can charities maintain public trust?

How can charities maintain public trust?

In recent years charities have often found themselves featuring in negative headlines on a somewhat regular basis. Unfortunately, it’s very easy for charities to all be tarred with the same brush. These negative stories often result in individuals losing faith or becoming less trustworthy of charities generally – unfair you may say, so how can charities prepare for these sorts of sudden eventualities?

Individuals hold charities to a higher standard

Public trust is key to the success of any charity. One of the key issues charities face is that rightly or wrongly the public holds charities to a higher moral and ethical standard than businesses. Individuals that donate often want to know exactly what their money is going towards and how it is going to impact a cause close to their heart. This added emotional connection can have a huge impact on charitable giving when negative headlines about the sector surface.

Communication is key

If and when a negative story does develop it is important that the charity in question responds to the story in a quick and effective manner. History has taught us that attempting to cover up wrongdoings is not only a morally poor choice, but also rarely works. Failing to communicate clearly will only harm public trust more in the long term. News headlines will often take the situation out of context. One of the most effective ways to regain public trust is to publish communications that fully explain the details of a situation in context and what the charity is planning to do moving forward to ensure adverse events do not reoccur.

Public trust

Gaining an understanding of public opinion incorporates many factors including background information and current circumstances. The Charity Commission carried out an interesting survey in 2020 which considered the state of the charity sector in the eyes of the general public.

At the beginning of the last decade trust levels in charities were at a mean trust level of 6.6 out of 10. However, in the last five years trust levels began to decrease to 5.7 in 2016 and a low of 5.5 in 2018 before increasing to 6.2 in 2020 (data from Charity Commission for England and Wales). The 2016 data cited that media coverage affected the majority of people whose trust in charities decreased. This further demonstrates the importance of managing public perception when responding to adverse news stories regarding the sector.

How can we help?

At Hawsons we have a dedicated team of charity and not-for-profit accountants at our offices in Sheffield, Doncaster, and Northampton. Our dedicated team fully understands the complex, ever-changing regulatory requirements of the charity and not-for-profit sector. Irrespective of your size we wish to support you to maximise the benefits you could achieve through our specialist professional advice.

Charities & not-for-profit organisations are currently facing extensive changes in their regulatory and legal framework. Given the additional pressures on fundraising, complex tax regimes, internal risk exposure and stakeholder demands, it has never been more important to obtain specialist professional advice.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141

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