3. • Conflicts of Interest
• Powers of Investment
• Protection of Charities Bill
• Charity Commission Investigatory Cases Round-Up
4. Conflicts of Interest
• Updated Charity Commission Guidance
• Conflicts of Interest a guide for charity trustees (cc29)
• Important to manage or can lead to decisions that are:
– not in best interests of charity
– invalid
– open to challenge
• Governing documents and Conflicts of Interest Policies
5. Conflicts of Interest
Any situation in which a trustee’s personal interests or
loyalties could, or could be seen to, prevent them from
making a decision only in the best interests of the charity.
Note Perception
• Identify conflicts of interest
• Prevent the conflict of interest from affecting the decision
• Record conflicts of interest
6. Identify Conflicts of Interest
• Trustee’s personal responsibility
• Conflicts of Interest Policy/systems in place to identify
• Scenarios
– trustee benefit
– connected persons
– conflicts of loyalty
• Register of Trustees’ Interests
7. Prevent the Conflict of Interest from
Affecting the Decision
• Eliminate any potential affect on decision-making
• Removal of conflict in serious cases
– not pursuing a course of action
– proceeding with the issue in a different way
– not appointing a particular trustee or securing a trustee’s
resignation
8. Prevent the Conflict of Interest from
Affecting the Decision
• Where removal of the conflict of interest not necessary
– follow procedural requirements to manage the conflict
• No specific provisions in governing document? Follow
Charity Commission guidance
• Update governing document where necessary
• Authority of the Charity Commission?
• Charities Act 2011 - trustee benefit
9. Record Conflicts of Interest
• Paper trail important
• Minutes
• Governing Documents and Conflicts of Interest Policy
• Register of Interests
• Disclosure of any trustee benefits in the charity’s
accounts
10. Failure to Manage Conflicts of Interest
• Charity Commission statutory enquiries
• Removal of one or more of the trustees
• Restitution - order trustees to repay unauthorised
benefits
• Public criticism
• Negative PR
• Impact upon ability to deliver charity’s aims and
successfully fundraise
11. Powers of Investment
• The Law Commission for England and Wales
• Social investment by charities
• Variety of investments justified by furthering charity’s
own mission
• Mixed motive investment (financial and mission-related)
• Social investment not a problem for most charities
• Uncertainty around charity trustees’ powers to invest and
to spend in furtherance of their charity’s purposes and
the combination of these powers and charity trustees’
duties
• The law relating to private benefit
12. Recommendations
• Statutory duty to ensure that social investment is in the
best interests of the charity
• Statutory duties to review and to consider obtaining
advice
• Statutory power to be available in respect of permanent
endowment, provided that charity trustees expect capital
preservation
• Revisions to Charity Commission guidance and HMRC
guidance and procedure
13. Draft Protection of Charities Bill
• Proposes giving the Charity Commission tougher powers to
tackle the abuse of charities
• Introduced in the light of Charity Commission’s budget cuts
• £9 million in new funding for the Charity Commission over the
next 3 years
• Extra powers including
– closure of charities in which mismanagement poses a threat to
public trust
– banning people with certain criminal convictions from being charity
trustees
– power to disqualify people from being trustees where it considers
them unfit
• Committee of MPs and Peers will scrutinise the Bill before it is
placed before Parliament
• A Report expected by the end of February 2015
14. Charity Commission Investigatory Case
Round-Up
Life Changing Ministries Church South Cheshire Trust
– Trustees forced to repay £100,000 to the charity
– Case opened in February 2012 following complaint that trustees
were personally benefiting from the charity’s funds
– Statutory enquiry discovered that a loft conversion at a property
owned by two of the trustees paid for from charity funds
– A property owned by the charity was sold to a trustee
– Payments totalling £72,000 to two trustees who were married
15. Charity Commission Investigatory Case
Round-Up
Life Changing Ministries Church South Cheshire Trust
– Enquiry concluded the trustees did not understand, identify or
properly manage the conflicts of interest (trustees disagreed)
– Charity funds being banked in personal accounts
– Failure to put in place proper financial controls
– Charity still in operation
16. Charity Commission Investigatory Case
Round-Up
Yoruba Language and Cultural Heritage
– Statutory enquiry opened in April 2014 after concerns raised by
two online platforms picking up on “suspicious donations”
process through their websites
– Charity’s aims to advance the education of the public in Yoruba
language, heritage and culture
– Charity Commission discovered that all of the money donated to
the charity between February 2013 and February 2014 was
“transferred from the charity’s account by way of cheques
payable to two of the trustees”
– No accounts filed by the charity to the Charity Commission
17. Charity Commission Investigatory Case
Round-Up
Yoruba Language and Cultural Heritage
– Statutory enquiry will examine whether the charity is operating
for the public benefit
– Will also investigate money paid out from the charity to the
trustees and whether the trustees have complied with and
fulfilled their duties and responsibilities
– Whether and to what extent there was mismanagement or
misconduct on the party of the charity’s trustees
– Await results
18. Charity Commission Investigatory Case
Round-Up
Village Hall Charity
– Chair of Trustees charged with offences relating to sexual assault
against a child (not related to the Chair’s role in the charity)
– Police investigation
– Charity Commission involvement to ensure the trustees dealing with
the incident appropriately, and had systems to protect the charity’s
beneficiaries from potential harm
– Concerned the trustees had not made a serious incident report
about the allegations
– Charity Commission discovered the Chair had not informed his
fellow trustees of the allegations against him when he was
appointed
– Trustees confirmed that when they became aware of the charges
against him they voted not to exclude him as a trustee
19. Charity Commission Investigatory Case
Round-Up
Village Hall Charity
– Safe-guarding policy fell short of the Charity Commission’s
guidance
– Charity Commission considered the trustees had not considered
the seriousness of the situation or dealt with the matter
appropriately, including considering suspending the trustee
pending the outcome of the criminal investigation
– Not acting with potentially placing other beneficiaries at risk
20. Charity Commission Investigatory Case
Round-Up
Village Hall Charity
– Concern that a conflict of interest relating to the position of the
accused was not being appropriately managed
– Charity Commission asked to see Conflicts of Interests Policy
and told the trustees to review their safe-guarding policies
– Accused convicted and sentenced to 7 years after admitting 2
offences of sexual activity with a child and two of meeting a child
following sexual grooming
– Will be following up with the trustees to ensure they have acted
on the Charity Commission’s regulatory guidance
22. Types of Gift
• Pecuniary Legacy: fixed sum of money
• Specific Gift: gift of specific item (e.g. property, jewellery)
• Residuary Gift: a percentage of the net Estate
23. Points to consider in Appeal Literature
Do:
• Use the correct terminology
• Encourage potential donors to seek legal advice:
– Regarding types of gift most suitable for them/the charity
– How best to ensure that their wishes are fulfilled
– Having their Will/Codicil drafted by a Solicitor (STEP member)
24. Points to consider in Appeal Literature
• There is no need to provide sample wording
– It might encourage DIY Wills which run the risk of
• The intended gift (or the whole Will) being invalid
• Expensive costs (and/or bad publicity) of rectifying the mistakes
• Do include the following information:
– Full charity name
– Charity address
– Registered charity number
25. Inheritance Tax (IHT) and Charitable
Gifts
• A gift to a qualifying charity is exempt from IHT
– The charity receives the entirety of the gift
– The IHT amount payable by the Estate is reduced
– Possible to eliminate IHT altogether
• Although reducing the IHT paid, a gift to charity affects
the amount received by other non-charitable
Beneficiaries
26. Points to consider in Appeal Literature
• The charity exemption appeals to many potential donors
– But ensure that explanation is not misleading
• Encourage potential donors to seek professional advice
on IHT
– Especially if there is a mixture of charitable and non-charitable
Beneficiaries
27. Inheritance Tax (IHT) – the “10%
reduced rate”
• Incentives for potential donors
– Tax rate reduced if charitable gift is 10% or more of net Estate
– IHT rate reduced from 40% to 36%
– Lower rate applies to testators who die on or after 6 April 2012
– The “10% test” components
28. The “10% test”
Gross Estate (assets in sole name) £500,000
Less Nil Rate Band -£325,000
Net estate for “10% test” £175,000
Gift to charity of £17,500 to qualify
10% might sound like a lot to potential donors but only 10% of net estate
Could encourage more people to give to charity to get the benefit of the rules
29. Potential advantages
• Encourages more people to make gifts
• Supporters may be encouraged to increase existing gifts
• Can lead to increased post-death variations
30. Woodland Trust
• “Double nil rate” legacy dispute
– Will left charity a gift “equal to the inheritance tax nil rate band”
– Law on nil rate band changed since Will made
– Son claimed spouse nil rate band in addition to the deceased
– Charity lost appeal, only received £30,000 from estate
31. Points to consider in Appeal Literature
• Ideal opportunity to raise awareness and to promote:
– Leaving a gift to charity by Will
– Reviewing any existing gifts
• Possible Deeds of Variation
32. Points to consider in Appeal Literature
• Technical points:
– Advantages of the current IHT charity exemption
– The “cost” to non-charitable Beneficiaries is reduced
– The “10% test” is based on the net Estate
– Increasing an existing gift might benefit charity and other
Beneficiaries
33. Take care
• Only for deaths on/after 6 April 2012
• Ensure that wording is not misleading
• Encourage potential donors to seek professional advice
34. In Summary
• Donating to charity in a Will has always been tax efficient
and the IHT rules are designed to encourage charitable
giving by increasing the tax benefits.
• Charities can look at taking advantage of these
opportunities to increase legacy income
36. What is volunteering?
• Definitions:
– “a person engaged in an activity which involves spending time,
unpaid (except for travel and other out of pocket expenses),
doing something which aims to benefit some third party other
than or in addition to a close relative”
– “an activity that involves spending time, unpaid, doing something
that aims to benefit the environment or individuals or groups
other than (or in addition to) close relatives”
37. Three categories of protected
individuals under employment law:
• Employees
• Workers
• Volunteers
38. Differences
• Employee
– Contract of service or apprenticeship
– Oral or in writing
– Personal service
– Mutuality of obligation (an obligation to pay work and undertake
work).
– Control over employee
• Worker
– Contract of employment or any other contract
– Oral or in writing
– Personal service
– Mutuality of obligation
– Less control
39. Key issue
• Whether there is a contractual obligation to provide work
and on the volunteer to carry it out
• Mutuality of obligations
40. How to reduce the risk of a legally
binding contract
• Avoid making payments except to cover actual expenses
(keep receipts)
• Reduce obligations on the volunteer
• Use “flexible language”
• Clear procedures for volunteers
41. Volunteers and National Minimum
Wage
• Volunteers are specifically excluded from the National
Minimum Wage if the following conditions are met:
– They receive no monetary payment other than reimbursement of
expenses actually incurred or reasonably estimated as likely to
have been incurred in the proper performance of their duties
– They receive no benefit in kind other than reasonable
subsistence or accommodation.
42. National Minimum Wage
£6.50 21 and over
£5.13 18 to 21
£3.79 Under 18
£2.73 Apprentice (age 16 to 18)
£0 Volunteers
44. Right/protection Employee Worker Self-employed Volunteer
Right not to be unfairly dismissed (after two
years’ service)
Yes No No No
Right to receive written statement of terms and
conditions
Yes No No No
Itemised payslip Yes No No No
Statutory minimum notice Yes No No No
Statutory redundancy pay (after two years’
service)
Yes No No No
Protection from discrimination in the workplace Yes Yes Yes Yes
National Minimum Wage Yes Yes No No
Protection from unlawful deduction from wages Yes Yes No No
Paid annual leave Yes Yes No No
Right to daily and weekly rest breaks Yes Yes No No
Pension auto-enrolment Yes Yes No No
45. Right/protection Employee Worker Self-employed Volunteer
Right to be accompanied at a disciplinary or
grievance hearing
Yes Yes No No
Rights under data protection legislation Yes Yes Yes No
Whistleblowing protection Yes Yes Yes No
Statutory Sick Pay Yes Yes No No
Statutory maternity, paternity, adoption leave and
pay
Yes No No No
Unpaid time off to care for dependants Yes No No No
Right to request flexible working Yes No No No
Time off for ante-natal care Yes No No No
Time off for trade union activities Yes No No No
Protection under the transfer of undertakings
legislation
Yes No No No
Health and safety in the workplace Yes Yes Yes No
47. Training
• Not a benefit in kind for National Minimum Wage
purposes if it is:
– Necessary to perform the duties of the voluntary worker
– For the sole or main purpose of improving the voluntary worker’s
ability to do the work
– Necessarily acquired in the course of the voluntary work
48. What should a Volunteer Agreement
contain?
• Role
• Induction and training
• Supervision and support
• Expenses
• Insurance
• Health and safety
• Confidentiality
• Leaving provision
• Disclaimer
49. Things to avoid
• Set hours
• Performance criteria
• Remuneration
• Notice provisions
• Mutuality of obligation
• Personal service
• Control
