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Association of Church   Accountants and TreasurersTOPICAL ISSUES IN PCC FINANCE Lincoln Diocesan Treasurers’ Conference   ...
OBJECTIVESTo provide a topical update on:•   Legal and financial overview for PCCs•   The role of the Treasurer•   Princip...
LEGAL OVERVIEW•   A PCC has charitable status - the members      are trustees•   A District Church Council is not a separa...
LEGAL OVERVIEW (cont)•   Trustees are responsible for      - keeping proper accounting records      - preparing annual acc...
REGISTRATION WITH CHARITY    COMMISSION (ENGLAND & WALES)•    PCCs with receipts above £100,000 pa        required to regi...
PRINCIPLES OF ACCOUNTSFinancial years ending AFTER 31 March 2009:•    Annual receipts exceed £250,000 -             ACCRUA...
FUNDSFundamental concept for charity accounts•   Endowment funds      Usually capital funds where only the income         ...
ENDOWMENT FUNDS•   The Charities Act 2006 simplified the process      whereby charities could expend      endowment funds•...
RESTRICTED FUNDS•   Do not necessarily need separate bank     accounts for each fund        • need proper controls        ...
ANNUAL REPORT•   Key document•   Demonstrates public benefit – for an      individual church and within the charity      s...
ANNUAL REPORT• Purpose     • Celebrate              • Inform              • Point Forward              • Public Relations•...
ANNUAL REPORT                   MAIN SECTIONS•   Objectives and activities•   Achievements and performance•   Financial re...
ANNUAL REPORT - PLANNING      CHURCH
ANNUAL REPORT - PLANNING                 Home                groups Worship                            Local              ...
ANNUAL REPORT - PLANNING   Mid-   week                               School                          Home          A      ...
INDEPENDENT EXAMINATIONIndependent Examination• Gross income below £500,000 except when gross      assets exceed £3.26 mil...
INDEPENDENT EXAMINATIONThe Examiner“ an independent person who is reasonably       believed by the charity trustees to hav...
INDEPENDENT EXAMINATIONThe Examiner (continued)• Not connected to the Trustees• Should be formally appointed by the truste...
GIFT AIDScheme from 01 April 2000•   Separate schemes for covenants and Gift Aid       replaced by ONE Gift Aid procedure•...
GIFT AID (cont)General principles•   Applies only to those who pay tax•   Either Income Tax or Capital Gains Tax•   Must p...
GIFT AID (cont)General principles (continued)• Higher rate taxpayers can claim back their      marginal rate (minimum 20%)...
GIFT AID (cont)Current topics•   Tax rate reduced from 22% to 20% from 6        April 2008•   3 year transitional scheme t...
GIFT AID (cont)Current topics continued (2011 Budget)•   From April 2013, charities able to claim gift aid        on cash ...
BUDGET – 23 MARCH 2011KEY FEATURES FOR CHURCHES•   Gift Aid (see earlier slide)•   Inheritance tax – from 6 April 2012 rat...
VALUE ADDED TAX•   In general VAT cannot be reclaimed•   Improvements or alterations to a listed       Church - ZERO rate ...
VALUE ADDED TAX            (cont)•   Construction work for disabled access /       facilities can be ZERO rated for ALL   ...
VAT – LISTED PLACES OF       WORSHIP GRANT SCHEME•   ONLY applies to LISTED churches•   VAT paid to the contractor – refun...
VAT – LISTED PLACES OF      WORSHIP GRANT SCHEME              With effect from 01.04.11•   There will be a quarterly fixed...
VAT – REPAIRS GRANT SCHEME                (cont)• Principally relates to the FABRIC of the building(walls, roof, floor, do...
VAT – REPAIRS GRANT         SCHEME (cont)Excludes –•   floor covering•   non-fixed pews•   external work (paving, boundary...
EMPLOYMENT ISSUES• Is the person an employee or self-employed?       • Control over the work?       • Ability to delegate?...
EMPLOYMENT (cont)When person is confirmed as an employee:• Who is the employer? May not be straight-      forward, e.g. ec...
EMPLOYMENT (cont)     PAYE/NI for Local Religious Centres (LRCs)•   Only applicable to churches not already       register...
EMPLOYMENT (cont)                  EXAMPLEFunding a Youth Worker for 3 years      Salary £18,000 pa x 3 = £54,000What abou...
EMPLOYMENT (cont)              EXAMPLE (continued)• Recruitment costs (e.g. Church Press)• Employers National Insurance   ...
EMPLOYMENT (cont)              EXAMPLE (continued)Employers pension contributions  • NOT compulsory at present. Scheduled ...
EMPLOYMENT (cont)EXPENSES IN YEAR 1                   £Travelling                            400Training                  ...
EMPLOYMENT (cont)Allow for potential statutory redundancy paye.g.   Employee under 41 years of age – 1.0       week’s pay ...
EMPLOYMENT (cont)                 Year 1   Year 2   Year 3   TOTAL                   £        £        £        £Gross    ...
THE FUTURE OF CHEQUES?•   The Payments Council has indicated it will make       a decision in 2016 to end the present syst...
REVIEWReviewed•   Legal and financial overview for PCCs•   The role of the Treasurer•   Principles of accounts•   Annual R...
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Acat presentation 15.10.11

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Acat presentation 15.10.11

  1. 1. Association of Church Accountants and TreasurersTOPICAL ISSUES IN PCC FINANCE Lincoln Diocesan Treasurers’ Conference 15th October 2011
  2. 2. OBJECTIVESTo provide a topical update on:• Legal and financial overview for PCCs• The role of the Treasurer• Principles of accounts• Annual Report• Independent examination• Gift Aid• VAT• Employment• The future of cheques?
  3. 3. LEGAL OVERVIEW• A PCC has charitable status - the members are trustees• A District Church Council is not a separate charity• Trustees can be liable for church debts (must act responsibly)• 4 key tests for trustees - Honesty Acting reasonably Prudency Business-like
  4. 4. LEGAL OVERVIEW (cont)• Trustees are responsible for - keeping proper accounting records - preparing annual accounts - arranging examination• MUST aggregate the accounts for funds/activities under the PCC’s CONTROL• Trustees CANNOT delegate RESPONSIBILITY• Therefore, a Treasurer should not feel isolated!
  5. 5. REGISTRATION WITH CHARITY COMMISSION (ENGLAND & WALES)• PCCs with receipts above £100,000 pa required to register with the Charity Commission (CC)• Dispensation may be granted where threshold exceeded by an exceptional item – e.g. a legacy or building grant• Registration does not affect trustees’ responsibilities and accounting requirements• PCC must submit an Annual Return to the CC• PCC must quote the charity number on letterheads etc• If not registered, PCC is an EXCEPTED charity
  6. 6. PRINCIPLES OF ACCOUNTSFinancial years ending AFTER 31 March 2009:• Annual receipts exceed £250,000 - ACCRUALS ACCOUNTS• Annual receipts less than £250,000 - can be RECEIPTS AND PAYMENTS ACCOUNTS (accruals are optional)• Previous threshold - £100,000
  7. 7. FUNDSFundamental concept for charity accounts• Endowment funds Usually capital funds where only the income can be spent (can be examples of expendable endowment)• Restricted funds Purpose specified by the donor or the charity at the time of receipt• Unrestricted funds Available for general charitable purposes• Designated funds Set aside for specific purpose(s) – remain unrestricted
  8. 8. ENDOWMENT FUNDS• The Charities Act 2006 simplified the process whereby charities could expend endowment funds• Where a fund has a capital value less than £10,000 per annum and annual income less than £1,000, the PCC can pass a resolution to expend the capital• Where a fund has a value in excess of £10,000 or annual income above £1,000, the PCC must seek Charity Commission consent in order to expend the capital
  9. 9. RESTRICTED FUNDS• Do not necessarily need separate bank accounts for each fund • need proper controls • avoid too many bank accounts!!• Where a church is seeking funding for a project, suggested clause for inclusion: “any surplus monies will be applied for the general purposes of the church”
  10. 10. ANNUAL REPORT• Key document• Demonstrates public benefit – for an individual church and within the charity sector
  11. 11. ANNUAL REPORT• Purpose • Celebrate • Inform • Point Forward • Public Relations• Format • Easy to read • Words, Charts, Pictures • Group reports in appendix• Content • A positive view of church life • Provide a clear vision
  12. 12. ANNUAL REPORT MAIN SECTIONS• Objectives and activities• Achievements and performance• Financial review (inc Reserves policy)• Funds held as custodian trustee• Structure, governance and management• Reference and administration
  13. 13. ANNUAL REPORT - PLANNING CHURCH
  14. 14. ANNUAL REPORT - PLANNING Home groups Worship Local CHURCH schoolsChildren’s group Community Youth hall group
  15. 15. ANNUAL REPORT - PLANNING Mid- week School Home A groups School Worship BSunday Local am CHURCH schools Visits to Church Children’s group Community Youth hall group
  16. 16. INDEPENDENT EXAMINATIONIndependent Examination• Gross income below £500,000 except when gross assets exceed £3.26 million and income exceeds £250,000Audit• Gross income above £500,000; or• Gross assets above £3.26 million and gross income above £250,000
  17. 17. INDEPENDENT EXAMINATIONThe Examiner“ an independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts” Charities Act 1993 (section 43(3)(a))
  18. 18. INDEPENDENT EXAMINATIONThe Examiner (continued)• Not connected to the Trustees• Should be formally appointed by the trustees• Need not be a qualified accountant, but possess relevant knowledge• Where gross income exceeds £250,000 must be member of a listed body (see 1993 Act). Some professional bodies (e.g. ICAEW AND ACCA) prohibit members who do not hold a practising certificate• Can be paid a reasonable fee
  19. 19. GIFT AIDScheme from 01 April 2000• Separate schemes for covenants and Gift Aid replaced by ONE Gift Aid procedure• An individual makes a declaration to - “treat ALL the donations I make from this date, and any I have made over the last four years, as gift aid donations until I notify you otherwise.”
  20. 20. GIFT AID (cont)General principles• Applies only to those who pay tax• Either Income Tax or Capital Gains Tax• Must pay sufficient tax in the relevant year to cover the tax reclaimed• Interim claims can be made during year• From April 2010 time limit of 4 years to make a claim (previously 6 yrs). 2 year limit for transitional assistance.• Donations must be freely given money gifts (cash, cheques, bank transfers etc)
  21. 21. GIFT AID (cont)General principles (continued)• Higher rate taxpayers can claim back their marginal rate (minimum 20%) thereby able to increase their donation• Make the most of occasional services (weddings, baptisms, funerals) and visitors• Keep envelopes (and pens) available• Try to give time at beginning of service to complete details
  22. 22. GIFT AID (cont)Current topics• Tax rate reduced from 22% to 20% from 6 April 2008• 3 year transitional scheme to pay the difference. Claim at the rate of 20% tax rate – HMRC to add the difference (to 22%). Transitional relief ended 5 April 2011• Donations £10 and under can be aggregated up to a total of £500
  23. 23. GIFT AID (cont)Current topics continued (2011 Budget)• From April 2013, charities able to claim gift aid on cash donations up to a total of £5,000 per annum WITHOUT any evidence that the donors are taxpayers• Intelligent electronic forms to be introduced for claims (check arithmetic etc)• On-line facility for claims from 2012/13• Develop an on-line database for Gift Aid declarations
  24. 24. BUDGET – 23 MARCH 2011KEY FEATURES FOR CHURCHES• Gift Aid (see earlier slide)• Inheritance tax – from 6 April 2012 rate of 40% to be reduced to 36% where a minimum of 10% of the estate has been left to charity• Approved mileage allowance on first 10,000 miles per annum increased from 40p to 45p per mile from 6 April 2011.
  25. 25. VALUE ADDED TAX• In general VAT cannot be reclaimed• Improvements or alterations to a listed Church - ZERO rate for VAT• New build work for ALL churches is ZERO rated• Listed Places of Worship Grant Scheme (see later slide)
  26. 26. VALUE ADDED TAX (cont)• Construction work for disabled access / facilities can be ZERO rated for ALL charities• ALL charities - 5% VAT on gas and electricity, and insulation materials• ALL charities– all advertising should be ZERO rated
  27. 27. VAT – LISTED PLACES OF WORSHIP GRANT SCHEME• ONLY applies to LISTED churches• VAT paid to the contractor – refunded by grant• Net 5% VAT rate – 01.04.01 to 31.03.04• ZERO VAT – from 01.04.04 to 31.03.11 (i.e. FULL VAT refund)• Scheme extended until 31.03.15 – see next slide
  28. 28. VAT – LISTED PLACES OF WORSHIP GRANT SCHEME With effect from 01.04.11• There will be a quarterly fixed budget.• Payments will be made once per quarter and the rate payable will depend on the value of eligible claims in that quarter, with each claim attracting a pro-rata payment.• First payment under new scheme will be in September 2011.• Supporting invoices cannot be more than one year old.• Estimated £24 m claimed in 2010/11• Indication of £12 m available for 2011/12
  29. 29. VAT – REPAIRS GRANT SCHEME (cont)• Principally relates to the FABRIC of the building(walls, roof, floor, doors, windows)• Includes services RELATING to repair works (e.g.plumbing, electrical)•For work after 22.03.06 and until 31.12.10 thescheme included: pipe organ clocks fitted pews investigative works bell frames, bells & professional fees ropes Claims for these must have been by 31.12.10
  30. 30. VAT – REPAIRS GRANT SCHEME (cont)Excludes –• floor covering• non-fixed pews• external work (paving, boundary walls etc)• categories on previous slide PRIOR to 22.03.06 AND after 31.12.10
  31. 31. EMPLOYMENT ISSUES• Is the person an employee or self-employed? • Control over the work? • Ability to delegate? • Mutuality of obligation?• Guidance on employment status – see www.hmrc.gov.uk• Must consider need for – Contract of Employment Job Description
  32. 32. EMPLOYMENT (cont)When person is confirmed as an employee:• Who is the employer? May not be straight- forward, e.g. ecumenical partnership• Churches with employees must register with Inland Revenue• Payroll bureau may be appropriate• Minimum wage - £6.08 per hour (from 1 Oct 2011) – aged 21 and over• Recommended “living wage” (Church Action on Poverty) - £7.60 per hour (outside London)
  33. 33. EMPLOYMENT (cont) PAYE/NI for Local Religious Centres (LRCs)• Only applicable to churches not already registered for PAYE. If registered, queries must be directed to its tax office• Lower earnings limit for NI and PAYE - £110 per week in 2010/11 (annual review)• Usually no tax charge for expenses• However, travel to and from the LRC is not an allowable expense if paid with a fee
  34. 34. EMPLOYMENT (cont) EXAMPLEFunding a Youth Worker for 3 years Salary £18,000 pa x 3 = £54,000What about extra costs?
  35. 35. EMPLOYMENT (cont) EXAMPLE (continued)• Recruitment costs (e.g. Church Press)• Employers National Insurance (from 06.04.11 = 13.8% of earnings above £136 per week) On £18,000 pa = £1,508 per annum
  36. 36. EMPLOYMENT (cont) EXAMPLE (continued)Employers pension contributions • NOT compulsory at present. Scheduled to change with the National Employment Savings Trust (NEST). Phased implementation from 2012 – minimum employer’s contribution likely to be 3% of Gross Pay (employee’s 4%) • Traditional defined benefit schemes are very expensive • Church may elect to pay, say, 5% of Gross Pay:- £900 p.a. in Year 1 in this example
  37. 37. EMPLOYMENT (cont)EXPENSES IN YEAR 1 £Travelling 400Training 360Equipment 600Stationery, telephone etc 720 2,080Assume 3% pa increases in Years 2 and 3Avoid “round sum” allowances
  38. 38. EMPLOYMENT (cont)Allow for potential statutory redundancy paye.g. Employee under 41 years of age – 1.0 week’s pay for each year of service Employee over 41 years of age – 1.5 week’s pay In this example – over 41 years of age = £1,800 (4.5 wks x £400*) * Current maximum Statutory Redundancy Pay per week
  39. 39. EMPLOYMENT (cont) Year 1 Year 2 Year 3 TOTAL £ £ £ £Gross 18,000 18,540 19,096 55,636NI 1,508 1,553 1,600 4,661Recruitment 1,000 0 0 1,000Pension 900 927 955 2,782Expenses 2,080 2,142 2,206 6,428Potentialredundancy pay 0 0 0 1,800TOTAL 23,488 23,162 25,657 72,307
  40. 40. THE FUTURE OF CHEQUES?• The Payments Council has indicated it will make a decision in 2016 to end the present system of cheque clearing in 2018 if there is an acceptable alternative system in place.• On 15 June 2011 Mark Hoban (Financial Secretary to the Treasury) said that he did not believe that there is a credible and coherent case for abolishing cheques.• More discussions to follow ………………
  41. 41. REVIEWReviewed• Legal and financial overview for PCCs• The role of the Treasurer• Principles of accounts• Annual Report• Independent examination• Gift Aid• VAT• Employment• The future of cheques

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