Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charities Update – What’s New “What you need to know about Charities now – 2019” Adrienne Airlie, Director, Gavin Curr, Associate Director and Iain Johnston, VAT Specialist
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Introductions
Adrienne Airlie
Senior Charity Director
Gavin Curr
Associate Director Iain Johnston
VAT Specialist
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Accounting, tax, corporate finance
and business advisers.
Key markets
Food, Drink & Hospitality, Manufacturing &
Engineering, Medical & Dental, Residential
& Commercial Property, Construction,
Professional Services, Charity & NFP and
Private Clients.
Who we work with
Start-up, early growth stage,
expanding/maturing, business owners
looking to exit & private investors.
Advice & services
Accounting, tax, corporate finance,
business advisory, financial services.
Cloud & digital accounting.
Founded in 1897 & based in Glasgow
Grown organically and through strategic
acquisitions and mergers.
Tax Investment, allowances,
reliefs & compliance
Corporate Finance
Financial Management
& Control
Virtual Finance Director
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Our Charity Expertise
• Charity experience beyond audit: governance, risk
management, financial systems (cloud & desktop),
capital expenditure, corporation tax, tax reliefs and
exemptions, payroll and providing VAT Vigilance and
timely advice.
• Advising on the charity SORP and impacts on the
financial statements, grants, restricted and unrestricted
funds.
• Advising on issues such as reserve policies, property
valuations and OSCR reporting and Governance.
• Experience of using cloud accounting to facilitate
effective reporting within charities.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Agenda
1. Charity governance
2. Charity pensions update
• LGPS & MEDB
3. Accounting, auditing and independent examination update
4. Benefits of Cloud Accounting
5. Making Tax Digital
6. VAT Update
7. Q&A
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charity Governance
Adrienne Airlie, Senior Charity Director, Martin Aitken & Co
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charity Governance
Organisational Purpose
Leadership
Integrity
Decision-making ,risk & control
Board Effectiveness
Diversity
Openness & Accountability
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charity Governance - Finance
‘Public money: directly or indirectly
Classic’ financial controls
Management of Risk
The Committee Structure
The “Financial” Trustee
Beyond the money: reputational risk
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Financial Controls & Risk
Management
Strategy
Budget and Business Plan
Internal Controls
Audit (assurance mapping)/ IE
Risk
• Reputational
• Financial
• Strategic
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Committee Structure
Board (“Trustees”)
Finance/Audit/Remuneration
Meeting Quarterly
Principles:
• Regular meetings
• Finance, risk, KPIs
• Communication/ Knowledge
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Objectivity
• Decision Making
• Trustee challenge
• Skills mix
• Dominant founding trustees / Chair/ CE
• Lack of information
• What and How?
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charity Pension Update
Adrienne Airlie, Senior Charity Director, Martin Aitken & Co
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Agenda
• Recent changes
• Multi-employer defined benefit schemes
• LGPS
• Auto-enrolment
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Multi-employer Defined Benefit
Schemes
• Many charities participate in these arrangements via LGPS
and/or multi-employer schemes
• Charities have built considerable on-going deficits and material
exit / cessation deficits
• Many face rising contribution costs
• Structure of these schemes makes managing these deficits
more problematic than in stand-alone or segmented schemes –
can’t close to future accrual without triggering a cessation debt
• Low gilt yields = high cessation debt
• Unaffordable contributions or unaffordable exit debt !
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Recent developments
Campaigning for many years
• Increasing recognition of the problem
Recent changes – MEDBS
Introduction of ‘Deferred Debt Arrangement’ (DDA) – April 2018
• Providing arrangement does not adversely affect security of
members benefits
• Contributions can be on an ‘on-going’ basis
Recent changes – LGPS
• Return of ‘surplus’ regulation in England/Wales & Scotland
• ‘Introduction of ‘Suspension’ agreement in Scotland from June 2018 -
similar to DDA
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
In practice - LGPS
• Organisations need to understand
• Their admission terms
• Calculation of their exit debt
• Ownership of any legacy liabilities
• Affordability
• What flexibility will Funds offer - Wide range of
practice
• Need a strategy to manage
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Auto-enrolment
Re-enrolled every 3 years
Update to contribution levels
Date Employer minimum
contribution
Total minimum
contribution
Employer’s staging date to
05/04/18
1% 2% (including 1% staff
contribution)
06/04/18 – 05/04/19 2% 5% (including 3% staff
contribution)
06/04/19 onwards 3% 8% (including 5% staff
contribution)
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Accounting, Auditing and Independent Examination update
Gavin Curr, Associate Director, Martin Aitken & Co Ltd
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Topics
1. FRS102 SORP - Update Bulletins
2. Audit related matters
3. FRC - proposed revision to ISA (UK) 540
4. Matters of Material Significance & Notifiable Events
5. Future developments
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Update Bulletin 2
FRS 102 SORP Bulletin 2 arrived 5/10/18
• Most changes will apply for periods commencing on or after 1 January 2019
• Amendments being implemented following triannual review of FRS 102
• Amendments include a number of “clarifications”
• No early adoption permitted for Scottish Charities for category 2 and 3 amendments
• The Charities SORP (FRS102) - SORP + Update Bulletin 1 + Update Bulletin 2
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Update Bulletin 2
The purpose of Update Bulletin 2 is to provide:
1. Clarifying amendments (category 1) (to ensure consistency with
the original intention of FRS 102)
2. Amendments arising from changes to FRS 102 (categories 2
and 3)
Category 1 - Clarifying amendments
1. Comparative information
2. Removal of the undue cost and effort exemption
3. Post year-end payments by subsidiaries to their charitable
parents that qualify for gift aid.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Update Bulletin 2
Definition of a deed of covenant
“A deed of covenant is a legally binding agreement that is written down
and agreed between 2 people stating that one person agrees to pay
the other an agreed amount of money without receiving any benefit in
return.”
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Deed of Covenant - Example
Donations to parent charities
If a deed of covenant is in place, a trading subsidiary can claim the
deduction against accounting profits and taxable profits for accrued
donations provided they are paid within 9 months.
If no deed of covenant is in place, a trading subsidiary can only
claim the deduction against taxable profits if the accrued donation
is paid over within 9 months. This donation would then be deducted
from accounting profits in the subsequent year.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Update Bulletin 2
Amendments arising from changes to FRS 102 SORP include;
Category 2 – significant amendments
1. Investment properties rented to group entities
2. Removes cost of stocks recognised as an expense disclosure
3. Cash flow statement
4. Transfer of an activity to a subsidiary
Category 3 – less significant amendments
1. Definition of financial institution
2. Financial instruments
3. Assets held at amortised cost
4. Immaterial subsidiaries
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Audit criteria & exemption
A Scottish charity must be subject to audit if in any financial year;
• Gross income exceeds £500k, or
• Gross assets at the end of the year exceeds £3.26m or
• Required by the constitution (or other enactment) or
• Required by instruction of the trustees
The recommendation is that charitable companies being audited should always be audited under BOTH company law and Scottish charity law, regardless whether the company law audit exemption could apply
Current news: Revisions to ISA 540 – Accounting Estimates
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Matters of Material Significance &
Notifiable Events
OSCR and CC have published a guide for auditors and independent examiners on;
“Matters of material significance reportable to UK charity regulators”
• Matters requiring reporting – auditors and independent examiners
• Notifiable events - trustees
• Process for reporting
• Guidance
• Duty of auditors/independent examiners
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Matters of Material Significance &
Notifiable Events
Matters of Material Significance Notifiable Events
Dishonesty and fraud Fraud and theft
Internal controls and governance Substantial financial loss
Money laundering and criminal activity Abuse or mistreatment of vulnerable
beneficiaries
Support of terrorism Lack of a board quorum
Risk to charity beneficiaries Criminal or other regulatory investigation
Breaches of law or the charity’s trusts Significant donations from unknown source
Breach of an charity regulator order Suspicion of assets being used to fund
criminal activity
Conflicts of interest and related party
transactions
Charity trustee operating while disqualified
Modified audit opinion or qualified IE report
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Future developments
Governance review by 4 UK regulators
• Charities SORP Committee
• Charities SORP-making process
• Recommendations expected first half of 2019
Second edition of the Charity SORP
• Changes in company and charity law in all 4 jurisdictions
• Expected after the governance review
• No changes anticipated from amendments to FRS 102
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Benefits of Cloud Accounting
Gavin Curr, Associate Director, Martin Aitken & Co
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Benefits of cloud accounting
• MTD ready
• Automate bookkeeping
Bank feeds, invoicing scanning, rules,
recurring invoices
• Unlimited access
• Real time information
Dashboard overview, customisable reports
• Clear visibility
• App integration
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
• Upgrade to Sage MTD compliant software
• Version 24.2 or above
• Speak with provider
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Tailoring your cloud accounting system
to suit your requirement: business apps
• 700 + options and growing
• Direct link to accounting software
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
• Easy automation for collecting,
processing and publishing
receipts and invoices
• Helps you work smarter, faster,
enabling more efficiency and
business time
• Simple three step process: Add
items, review inbox and publish
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Making Tax Digital
Iain Johnston, VAT Specialist, Martin Aitken & Co
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
What is Making Tax Digital (MTD)?
• HMRC online reporting method / system
upgrade – records maintained “digitally”
with a “digital link” between records and
VR submission
• Aims to reduce tax gap (VAT tax gap
£11.7bn in 2016-17)
• Digital portal / Application Programming
Interface (API)
• Phased implementation (for all taxes) to
2022
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Application - size
• VAT registered and UK taxable turnover > VAT
threshold (£85,000pa > taxable supplies)
• General exemption – voluntary VAT registration
• Specific exemptions ‘digitally excluded’
• Religious beliefs (no computers)
• Not reasonably practical for reasons of
disability, age, remoteness of location or
other reasons (HMRC consider each case on
merits)
• VAT helpline for exemptions and appeals
(case by case)
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Application - timing
• First period commencing from 1st April
2019
• Deferred businesses 1st October 2019
• Trusts
• VAT Groups
• Government departments, local
authorities and public corporations
• Traders based overseas
• Traders required to make POAs
• Annual accounting scheme clients
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
MTD for VAT The first VAT return period after 1 April 2019
Return Period Start End Filing Date*
Month 1 April 2019 30 April 2019 7 June 2019
Quarter 1 April 2019 30 June 2019 7 August 2019
Quarter 1 May 2019 31 July 2019 7 September 2019
Quarter 1 June 2019 31 August 2019 7 October 2019
*except large organisations whose filing date is the end of the month after the return period.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Requirements
• Keep digital records – all transactions, timings,
VAT effect
• File VAT returns via API enabled software –
calculations won’t change!
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
MACO solutions 1. If currently using Sage
• Upgrade to Sage 50 Cloud or Sage Business Cloud
• Monthly subscription
• Promotional discounts
2. Cloud software e.g. Xero, Quickbooks,
• User friendly records / use of apps and automated bank
feeds
• Import historical transactions from SAGE or Quickbooks
using MoveMyBooks
• Monthly subscription
• Promotional discounts
• Conversions, implementations, training
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
MACO solutions
3. Bespoke software
• Speak to providers – charges?
• Link in with API
4. Spreadsheets
• Use bridging software
• Interim solution
• Eg. IRIS VAT filer, BTC software
• Clearbooks Micro
• Simple online spreadsheet
• Requires an approved HMRC agent (your
accountant) to submit VAT returns.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Recap
• MTD commences 1st April 2019
• VAT registered and above threshold
• Exemptions
• Deferred to 1st October 2019
• Digital records
• API enabled software
• SAGE 50 Cloud
• Cloud based software eg. Xero,
Clearbooks, Kashflow
• Bridging software
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
VAT Update
Iain Johnston, VAT Specialist, Martin Aitken & Co
21 February 2019
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Reduced rating & zero rating
Books/magazines – zero rated
Children’s clothing – zero rated
Rent for buildings used for charitable purposes
(excl office function) – zero rated
Most food (where not heated/prepared/served) –
zero rated
Construction services for disabled people (where
conditions met) – zero rated
Mobility aids for the elderly – reduced rated at 5%
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charity income streams & VAT
Income type Standard
(20%)
Zero (0%) Exempt Outside
Scope
Grants – freely
given
X
Donations – freely
given
X
Contract for
services
X
Vocational
training
X
Café/coffee shop X
Books/magazines X
Sale of donated
goods
X
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
VAT on property – Option to tax
• Rental and sale of property is by default EXEMPT from VAT – no VAT
charged on sale or rental
• Generally, can’t reclaim VAT on expenses connected with exempt income
• However – possible to exercise “Option to Tax” on property which means
VAT must be charged on any rental or sale of that property, but will allow
reclaim of VAT on expenditure. ONLY commercial property, NOT
residential. Done via Notification Form sent to HMRC
• Applies for 20 years. Need to consider carefully. Impact on eventual
sale/rent marketability? Yes if buyer/renter not VAT reg’d. After 20 years
can be revoked.
• Consider Capital Goods Scheme – change of use / subsequent disposal
without VAT chg’d in 10 yrs could result in clawback
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Recent VAT cases of Interest
Greenisland Football Club – TC 06321 (UKFTT – Feb 2018)
New clubhouse zero-rated on basis would be used for charitable
purposes. HMRC challenged that should have been standard rated. FTT
accepted charitable use – factors that supported this included fact the
club was used by many local groups with no preference to the football
club itself; any cash generated was put back into the maintenance, & the
local community benefited from extensive use.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Recent VAT cases of Interest
Yorkshire Agricultural Society - TC 06263 (UKFTT – Dec 2017)
YAS ran two events, free to attend, in pursuant to their charitable
objects. Very small income resulted from caterers. YAS claimed this
income meant the events were business rather than charitable and
thus allowed reclaim of VAT on costs. Tribunal found that event free
and designed to educate about agricultural issues, with no economic
objective despite the income, and ruled that an income stream was
not enough to make an event a business one. VAT claim on costs
disallowed.
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Recent VAT cases of Interest
Loughborough Students Union & others TC 6571 (UKFTT – June
2018)
Student union social events that make a profit, not qualifying as
“fundraising” – event must be not only intended to make a surplus but
“primary purpose is raising of money” and must also be promoted as
fundraising. Thus ticket sales VATable.
Needs to be something distinctive that makes it fundraising – can’t
simply be on basis it may make a profit. Two tests – primary purpose
(to raise funds – not to entertain students, as in this case) and
promotion (all materials to refer to fundraising)
www.maco.co.uk www.maco.co.uk/cloud www.mafsltd.co.uk
Charities Update – What’s New “What you need to know about Charities now – 2019” Adrienne Airlie, Director, Gavin Curr, Associate Director and Iain Johnston, VAT Specialist
21 February 2019
Thank you for listening.
Any questions, queries or observations?