Bovington - Charity Seminar 2016

Charity Seminar
The Tank Museum - Bovington 24th May 2016

Chairman’s Welcome
Nick Love

pkf-francisclark.co.uk
.
Housekeeping

.
Merger with PKF Francis Clark
• 1 April 2016 – merger with PKF Francis Clark
• PKF Francis Clark
• 58 Partners
• Over 580 staff
• 8 offices – Taunton, Exeter, Salisbury, Poole, New
Milton, Torquay, Plymouth and Truro

Why merge?
PKF Francis Clark offices
• Culture & Team
• Foundations
• Specialisms
• Corporate Finance
• Financial Planning
• Tax Consultancy
• Payroll
• Geography

.
International Network
• Previously Leading Edge Alliance
• Changed to PKF network
• International network of independent firms
• Over 450 offices, across 150 countries

Programme
Financial Reporting Update – Nick Love
VAT Update – Simon Anslow
Investments – David Clifton
Financial Controls – Nick Love
BREAK
Legal Update – Geoff Trobridge and Victoria Jones
Tax Update – Erin Davis
Cyber Fraud – Stewart King
LUNCH

Financial Reporting Update
Nick Love

Introduction
• Not another SORP 2015 talk! A brief recap
• Some thoughts on transition to SORP 2015
• Other matters, including re trading subsidiaries and
company secretarial and other filing matters

.
Background
• Dates – periods beginning on or after 1 January 2015
• Depending on the size of the charity you may have a
choice:
• FRS 102 SORP – all can
• FRSSE SORP – can if under small companies threshold
• Then within each SORP, the ‘larger’ charities will have a
separate list of additional requirements
• Larger charities are those with income over £500k not the
new audit threshold of £1m

.
Two SORPS please - summing up
• Choice of two SORPs – consult to agree which one to chose
• In very, very simple terms for many charities, I think the
additional burden of FRS102 SORP will be:
• cash-flow statement
• key management personnel disclosures will need consideration
• and so they will go for FRS 102 to avoid changing again
• A chance to improve your trustees’ report
• Number of presentational changes and anyone with longer
term financial assets or liabilities will need to think through

.
SOFA – other changes
• In addition to format changes, which are welcomed, the
following
• Comparatives for all columns – practical issues to resolve
• Income recognition – ‘probable’ rather than ‘virtually certain’
– SORP Module 5 covers and for some care will be needed
• Exceptional items now ‘material items’ and clarity on where
to put them in the SOFA
• Governance costs – no longer on the face but form part of
support costs and spread as appropriate across categories

.
Balance Sheet
• Financial Instruments
• rare for complex instruments (e.g. derivatives linked to loans, incl
swaps, caps and collars)
• But care re long term debtors and creditors and the time value of
money
• And care with lease incentives
• Holiday pay accrual
• Stocks of donated goods – fair value unless cannot be
established reliably – some common sense to apply here
• Defined benefit scheme actuarial assumptions

.
Disclosures in the notes
• Salary bandings – all charities now, small and large,
numbers earning > £60k in bands of £10k
• Trustees and staff remuneration
• Increased disclosure, more transparency, public interest
• Some scope for what is disclosed but FRS102 SORP users must
disclose remuneration of ‘key management personnel’ – Module 9

.
Transition – practical matters
• Rewrite prior year (say March 15) accounts under SORP
2015
• Transition balance sheet (say March 14) must:
• Recognise assets & liabilities required by SORP 2015
• Not recognise assets or liabilities where SORP 2015 doesn’t permit
• Reclassify items if a different category under SORP 2015
• Apply SORP 2015 in measuring all recognised assets & liabilities
• Adjustments to the transition balance sheet as a result of
changes in accounting policy will be recognised directly in
fund balances (‘reserves’)

.
• Adjust transition date balance sheet as though always
under new SORP 2015 but 4 mandatory exemptions where
retrospective application is forbidden:
1. Derecognition of Financial Assets and Liabilities
2. Accounting Estimates – this is the most relevant one to most entities
3. Discontinued operations
4. Minority interests
• And 20 optional choices, including connected to:
• Fair value/Revaluation as deemed cost
• Lease incentives

.
• Use table to track restatements
Disclosures:
• Reconciliation of balance sheets at transition and last year
• Restatement of last year’s SOFA
• Notes explaining the adjustments
Financial position 1 April 2014 31 March 2015
Group Charity Group Charity
£000 £000 £000 £000
Total reserves under previous SORP
Employee leave accrual
Lease incentives
Total effect of transition to FRS 102 and SORP 2015
Total reserves under SORP 2015

.
• Reconciliation of funds (‘equity’) at transition date
• Reconciliation of funds at comparative dates
• Reconciliation of SOFA for comparative year
• Cash flow statements (unless using FRSSE)
Transition – disclosures required

.
• ICAEW TECH 16/14 updated Feb 16
• Debt exists to charity – account for in both
• How do you tidy up?
• Offset against existing loan from charity
• Dividend up (but unlikely to have reserves for this)
• Capital reduction, converting shares into distributable reserves
• Waiver out of future distributable profits
• Tax
• Credit in company is not taxable
• Unlikely that HMRC will seek tax on past transactions
• What about future taxable profits?
Trading subsidiaries and illegal distributions

.
• Late filing of accounts at Charity Commission
• From 30 June 2016, company Annual Return being
replaced by the Confirmation Statement
• Check
• Update
• Confirm
• Pay
• People with Significant Control (PSC) – all companies. For
charitable companies:
• New register needed – usually will be members of the company
• But there might be e.g. a benefactor who pulls the strings
• Report when confirmation Statement done
Filing

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Agenda
• VAT and charities
• What’s new?
• Frequently Asked Questions

.
• Charities are subject to VAT in the same way as
commercial businesses
• However certain special rules for charities
• Zero-rating and exemption for some categories of income
• Zero-rating for some items of expenditure
• VAT refunds for certain categories
VAT and Charities

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• Extension of VAT refund scheme for museums and
galleries
• Open at least 30 hours a week
• Free entry
• Visitors do not have to make an appointment to visit
• Arts Council accredited
What’s New?

.
• Sveda case
• European Court held that VAT recoverable on construction of grant
funded recreational trail. Sveda had a mixture of business and non-
business activities
• Public had free access to the trail which linked to a shop and café
• The shop and café’s existence were dependent on the trail so there
was ‘a direct and immediate link’ to the taxable activities.
• Case referred back to the national court in Lithuania to consider
• Review capital expenditure in case protective claims can be made
What’s New?

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Question – Hospice client asked for advice following the
changes in 2015 on VAT recovery and partial exemption/non-
business split
• Advice provided on the operation of the new rules and recovery of VAT
on non-business expenditure
• Method of calculating non-business split reviewed to provide a more
favourable recovery of VAT
• Detailed review of income from exempt fund-raising activities showed
that donations were incorrectly being included with the exempt fund-
raising income leading to over-restriction of input VAT
Frequently Asked Questions

.
Question – charity running a group of care homes and welfare
related activities asked for recommendations on maximising
VAT recovery. One company in the group was already
registered for VAT
• Consider joint contracts of employment
• Suggested use of a VAT group to avoid VAT on internal management
charges between the companies
• VAT registered company to ensure that VAT bad debt relief claimed
where appropriate
• Ensure that zero-rating certificates provided for expenditure on buildings
e.g. ramps, WCs, lifts

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Question – Nursing home charity queried whether it was correct that
agencies add VAT on the total amount charged for temporary staff or
whether VAT should just be charged on the agent’s commission. As
the nursing home is not registered for VAT, the VAT charged
represents an additional cost
• There have been 2 contradicting cases on seemingly similar facts
• Reed Employment (2011) – held VAT only chargeable on Reed’s commission.
HMRC said the facts only relevant to Reed
• Adecco (2016) – held VAT should be accounted for on the full fee including
the element relating to staff wages
• Adecco decision likely to be appealed to a higher court
• Recommended the charity should consider submitting a protective claim
for the last 4 years

.
Question – Charity running an agricultural show queried
whether VAT should be charged on the pitch fee
• Provision of a specific space for a stand is land-related and exempt as
long as the charity has not made an option to tax on the land/building
• Provision with a space for a stand together with services is not land-
related and subject to VAT at the standard rate
• This is an area that HMRC has been looking at closely over the last 2
years, in some cases they are taking the view that the provision of space
for a trade stand could not be a mere supply of land as the event
organiser is usually providing marketing, organisation and expertise
• This is an area to watch

.
Question from a charity providing sailing as a means of
promoting mental health.
• Question 1 – Can VAT incurred before the date of registration be
recovered if the charity registered for VAT
• Goods – VAT can be recovered on goods purchased in the 4 years
prior to the date of registration. Goods must still be held at the date
of registration
• Services – VAT incurred in the 6 months prior to the date of
registration
• The goods and services must be used for taxable activities

.
Question from a charity providing sailing as a means of
promoting mental health.
• Question 2 – Can the charity purchase any vehicles free of VAT?
• Charities providing care or medical or surgical treatment can provide
zero-rating certificate on the purchase of vehicles adapted to carry a
disabled person in a wheelchair
• Zero-rating also applies to vehicles with more than 6 but less than 51
seats for charities providing care to blind, deaf, mentally ill or
terminally sick persons.

.
Question – a charity which provides education for special needs
students was planning a new building and asked whether the
construction costs of the new residential accommodation and
classrooms could be zero-rated for VAT purposes
• Residential accommodation – zero-rating is available for the construction
of residential accommodation to be used by students/pupils. The charity
must provide a certificate of zero-rating to confirm that it will use the
buildings for the relevant purpose
• Classrooms – This area is more complicated. Zero-rating is available for
the construction of buildings to be used by a charity for ‘relevant
charitable purpose’, this means for a non-business activity. If a charity
makes a charge for the provision of services (education) this is seen as
a business activity. In this case we were able to agree with HMRC that
the education activities were funded by grants only therefore a zero-
rating certificate could be provided

.
Question – a charity had undertaken a re-branding exercise and
asked whether the zero-rating for advertising would cover the costs of
rebranding
• The zero-rating for charity advertising only applies to advertising on a
third party’s medium. These costs would not therefore qualify for zero-
rating as they did not constitute advertising as such

Agenda
• The requirement for an Investment Policy
Statement
• The need for financial advice
• Finding income (and investment returns
generally) at this time
fcfp.co.uk

Investment Policy Statement
The need
• Charity commission wish to know if you have one
• Helpful process to define your investment objectives and
provides a framework for future investment decisions
• Legal requirement under Trustee Act 2000 if Trustees
delegate their asset management function (eg to
Discretionary Fund Manager).
• Trustees’ annual report should outline any investment
policies adopted

• Vary in layout, length etc - no set structure except it must be in
writing
• Cannot be delegated to Investment Manager, though can be
discussed with them
• Charity Investors’ Group published a guide with template statements
• If using an Investment Manager; it must include their responsibility
and remit, together with the principles they must follow.
Statements

It will often include:
• Scope of investment powers
• Investment objectives
• Attitude to risk
• Financial risks facing charity
• Timing and liquidity needs
• Any ethical concerns
• Benchmarks and targets
Content

Need for financial advice
Trustees’ duty of care
Always responsible for:
• Setting & regularly reviewing the investment policy
• Deciding who manages investments - & terms
• Reviewing suitability and performance of Investment Managers
(and ending appointments)
Trustees are not liable for the acts (or omissions) of an Investment
Manager unless they have failed to comply with this duty of care.

Charity commission observation
If trustees can demonstrate that they have considered the
relevant issues, taken advice where appropriate and reached
a reasonable decision, they are unlikely to be criticised for
their decisions, or for adopting a particular policy.

Trustees Act 2000
States that Trustees must obtain and consider proper advice from a
person reasonably qualified, by ability in and practical experience of
financial etc matters re proposed investment, when:
• Exercising power of investment
• Reviewing the investments
Except where the Trustees reasonably conclude that in all
the circumstances it is unnecessary or inappropriate

• Adding expertise to specialisms of Trustee Board
• Helping the Trustees make informed decisions
• Providing objectivity and impartiality
• Can assist with formulating Investment Policy Statement
• Explaining pros and cons of ethical investment
• Reviewing performance
• Maximizing returns
Benefits

Investment returns
• New world of low inflation, interest and returns
• Time to consider exposure to equities?
• Volatility continues eg Brexit and growth threats
• Alignment of Trustees’ and Charities’:
• Attitude to risk
• Timescale for investment
• Ethical/ mixed motive objectives
“most charities need money; and the more of it there is
available, the more the trustees can seek to accomplish”

Options
• Need for some cash (but real interest return may be negative)
• Total returns v income + capital gains
• Multi asset solutions
• Common Investment Funds
• Discretionary Fund Management
Investment returns

Investment returns
• Need for regular (at least annual) reviews
• Of investment performance,
• Investment managers performance
• Also investment policy
• With results considered by whole Trustee Board
Reviews

Investment returns
Five year performance
• Past performance is no guide to the future
• Date that you compare an index to has a massive
bearing on reported performance
• Benchmarking vital but care needed

No responsibility can be accepted for any action taken as a result of information contained in this presentation. We therefore strongly
recommend that no action should be taken before obtaining detailed professional advice.
Past performance is not a guide to future returns and the value of investments and income from them may go down as well as up and an
investor may not get back the amount invested.
PKF Francis Clark Financial planning and wealth management is a trading name of Francis Clark Financial Planning Ltd which is authorised
and regulated by the Financial Conduct Authority. Registered Office: Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF.
Registered in England No. 05413603.
Francis Clark Financial Planning Ltd is a member firm of the PKF International Limited network of legally independent firms and does not
accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Exeter | New Forest | Plymouth | Poole | Salisbury | Taunton | Torquay | Truro
Disclaimer & copyright
fcpp.co.uk

Financial Control: we're all in this together
Nick Love

In this session…
Trustee Board effectiveness: top down control
Charity Commission updated guidance
Key controls: what might an audit committee
look for?

Trustee Board effectiveness
• The right people
• Understanding board role and responsibilities
• Good chairing
• Clarity of vision and strategic priorities
• Accountability of executive
• Trust and good relations
• Challenging questions
• Confidence to be courageous

Managing a charity's finances:
planning, managing financial
difficulties and insolvency (CC12)

Important messages for trustees
• Recognise when charity is facing financial difficulties
• Regular, robust, up to date financial information
• Understand your income
• Understand your spending and whether you’re spending too
much
• Regularly review risk and reserves policies
• Take rescue action
• Understand the implications of winding up the charity
• Impact of difficulties/winding up on beneficiaries, staff and assets

Financial management and the role of trustees
Budgets and cash flow projections
Effective internal financial controls
Monitor results against budget
Analyse sources of income
Robust risk and reserves policies

Financial management and the role of trustees
Monitor and review
Deal with one-off risks
Merger opportunities
Understand funds
Understand balance sheet
Going concern indicators

Insolvency
• Unincorporated charities – trustees liable but principles same
• Deemed to be unable to pay debts – S123 of 1986 Act
• In simple terms, will there be enough cash?
• Establish the full position
• CC12 has some guidance
• Contact your accountant/ auditor

Charity reserves:
building resilience (CC19)

Charity reserves: building resilience (CC19)
• No single right answer
• Key to financial protection but still poorly understood
• Develop reserves policy
• Fully justifies and clearly explains
• Identifies plans for maintenance of essential services for beneficiaries
• Reflects the risks of unplanned closure
• Helps to address these risks – looking after beneficiaries (vulnerable),
staff and volunteers
• Publish reserves policy – not boiler plated
• Publish assessment of risks – not boiler plated

What are reserves?
Reserves are that part of a charity’s unrestricted funds that is freely
available to spend on any of the charity’s purposes. This definition
excludes restricted income funds and endowment funds, although
holding such funds may influence a charity’s reserves policy.
Reserves will also normally exclude tangible fixed assets such as
land, buildings and other assets held for the charity’s use. It also
excludes amounts designated for essential future spending.
• Impact of restricted funds
• Impact of designated funds
• Subsidiaries’ reserves

Why is policy important?
A
policy
will
Give confidence to funders
Demonstrate resilience
Explain why funding is required
Provide assurance to creditors
Assist in strategic planning
Inform the budget

How to develop a reserves policy
Nature of
funds
Uncertainties
Future
plans
Explain if
“zero
level”

Reserves – annual report
• SORP requires
• Statement of policy
• Level of reserves and why they are held
• Designated funds – amount and purpose
• Designated funds – likely timing of expenditure
• Insufficient (or zero) reserves – still need to explain why
• Reserves too high
• Avoid boiler-plated disclosures
• Spend it!
• Extend charity’s objects

Charity governance, finance & resilience: 15
questions
1. What effect is the current economic climate having on our charity and
its activities?
2. Are we financially strong enough to continue to provide services for
our beneficiaries?
3. Do we know what impact the social and/or economic climate is having
on our donors and support for our charity?
4. What is our policy on reserves?
5. Are we satisfied with our banking arrangements and our current and
future investment policy?
6. Have we reviewed our contractual commitments?
7. Have we reviewed any contracts to deliver public services?

Charity governance, finance & resilience: 15
questions
8. If we have a pension scheme, have we reviewed it recently?
9. How can we make best use of any permanent endowment
investments we hold?
10.Are we an effective trustee body?
11.Do we have adequate safeguards in place to prevent fraud?
12.Are we making the best use of the financial benefits we have as a
charity?
13.Are we making the best use of our staff and volunteers?
14.Have we considered collaborating with other charities?
15.Are we making the best use we can of our property?

Key controls:
what an audit committee would look for..
Risk
management
What could go
wrong?
How is it
managed?
Adequately
explained?
Proportionate

Risks - and controls
• Trustees’ knowledge
• Challenge figures
Financial
problems
not spotted
• Approval process
via trustees
Ineffective
budgeting
• Cash flow forecasts
• Reserves policy
Insufficient
liquid
reserves

Other risks to consider?
Long term
cash shortage
Control
procedures
not
documented
Cash theft
Spending
outside
charitable
purpose
Spending
outside
restricted
purpose
Poor financial
authorisation
Fraudulent
spending by
staff/
volunteers
Staff
expenses
fraud
Payroll fraud

Other risks to consider?
Inappropriate
payments to
connected
parties
Overspent
capital projects Loss of assets
Insufficient
insurance
IT and cyber
crime

Charities and
Reputational Risk
24th May 2016
Geoffrey Trobridge

2014 - 2015
“A time when the sky was black with
chickens coming home to roost”
Anon

Why?
The Cup Trust Aggressive Fundraising
Kids Company CEO’s Pay

How much “goes to
charity?”
Age Concern & EON
Political activity
CAGE
(Joseph Rowntree
Foundation)
Roddick Foundation

Common threads
Governance
Roles of Trustees
Financial pressures
Operating “on the edge”

Decision making
KYC (Know your Charity)
KYB (Know your Beneficiaries)
KYP (Know your Partners)

Be Prepared
Risk assessment
Disaster recovery
Serious incident reporting

Geoff Trobridge | Partner
Geoff advises charities, social enterprises,
voluntary organisations, clubs and associations
on all aspects of charity and company law.
01202 786138
07747 036055
geoff.trobridge@LA-law.com

Legacies and
Probate claims
24th May 2016
Victoria Jones

In 2014, legacy income rose to £2.2 billion, despite a 1%
decrease in the number of people that died during the same
period.
Remember a Charity
Why is legacy income important?

Contested wills/codicils
Claims under the Inheritance (Provision for Family & Dependants) Act 1975
Construction and rectification issues
Problem executors
Caveats
Missing assets
Ex Gratia payment requests
Obstacles to securing legacy income

Seek expert advice early on
Consider publicity, but don’t let it govern the
situation
Consider any court procedures/applications
available to you
Work together with other charitable beneficiaries
(where appropriate) to save costs and adopt a
joint approach
Resolving problems

Heather Ilott and her mother, Melita
Jackson were estranged for over 20 years
Mrs Illot was excluded from mother’s will
and issues claim for ‘reasonable financial
provision
2007 – Mrs Ilott awarded £50,000
2009 - Mrs Ilott and charitable beneficiaries
bring cross-appeals against this decision.
Charities’ appeal is upheld and Mrs Ilott’s
is dismissed and she receives nothing
Ilott v Mitson
2011 - Mrs Ilott brings a further appeal and
original £50,000 award is reinstated.
2015 – Mrs Ilott’s appeal against £50,000
successful – and is awarded £164,000 to
purchase her home and around £20,000 in
cash.
2016 – Charitable beneficiaries obtain
leave to appeal to Supreme Court

‘Disinheritance and the law: why you can’t leave your money to whoever you please’
The Guardian
‘Who are judges to tell us who we can leave our money to in our wills!’
The Daily Mail
‘Battle of the bequests: animal charities v disinherited relatives’
The Guardian
Headlines

Victoria Jones | Partner
Victoria Jones specialises in contested will, trust
and probate cases and she represents charities,
care homes, families and private clients in
contentious estate administration will and trust
disputes.
01202 786152
Victoria.Jones@LA-law.com
She co-wrote Remember a Charity’s ‘Guide to
Professional Advisors’ for drafting wills which
include charitable legacies.
Victoria also specialises in cases involving
vulnerable adults, the Mental Capacity Act 2005
and Court of Protection cases.

Charity tax update
• Gift aid declaration update
• Charity tax – risk areas
• Submissions to HMRC
• Inheritance tax

.
Gift Aid declarations
New information requirement from 6 April 2016
• New model gift aid declarations for single and multiple
donations
• Now must include ‘tax to cover’ statement:
• “ I am a UK taxpayer and understand that if I pay less Income
Tax and/or Capital Gains Tax in the current tax year than the
amount of Gift Aid claimed on all my donations it is my
responsibility to pay any difference.”
• Model forms at: https://www.gov.uk/guidance/gift-aid-
declarations-claiming-tax-back-on-donations#declaration-
formats
Are your
gift aid
forms up-
to-date?

.
Why are some people not paying tax?
• Personal allowance now £11,000 per person
• Interest income
• Savings starting rate of 0% on first £5,000
• New personal savings allowance from April 2016
Type of taxpayer Exempt interest income
Basic rate £1,000
Higher rate £500
Additional rate Nil
Are many
pensioners
paying
tax?

.
Why are some people not paying tax?
New dividend regime from April 2016
• Effective dividend rates all increasing by 7.5%
• First £5,000 of dividend income at 0%
• Abolishing ‘notional’ tax credits (10%)
2015/16 2016/17 Increase
Basic rate 0% 7.5% + 7.5%
Higher rate 25% 32.5% + 7.5%
Additional rate/trusts 30.6% 38.1% + 7.5%

.
Gift aid forms – are they taxpayers?
• New tax rules = many people at the lower
income levels will no longer pay tax
E.g. Someone with £17,000 income may pay no tax in
2016/17 (pension income £11,000, dividends £5,000
and interest £1,000)
• More gift aid claims could be made incorrectly
• Ensure charity staff understand the rules

.
Deduction of interest at source
• From April 2016 banks and buildings societies
will no longer deduct 20% tax at source
• No need to claim to receive interest gross or
claim tax back

.
Charity tax - risk areas
• Income and gains not applied for charitable purposes (non-
charitable expenditure)
• Notice to complete a tax return received periodically – easy
to miss if not annual
• Charities pay tax profits from developing land or property
• Trading exemptions not met (e.g. income > £50k and not
primary purpose)
• Consider trading subsidiary
• Can pay profits to charity within 9 months

.
Charity tax - risk areas
Letting as a trade
• When does letting of a premises become a trade?
• Let on a regular basis
• Provide additional services e.g. conference facilities, IT
equipment, support staff, catering, etc
• Often hard to determine whether trading – each case
will depend on facts

.
Charity tax - risk areas – letting rooms
Examples of services Rental Indifferent Trade factor
Cleaning & preparation of
rooms
P
Arrangement of furniture
P
Services of reception staff
P P
Cloakroom staff
P
Technical staff
P
Basic refreshments
P

.
Letting as a trade
• If trading – consider if covered by trading exemption
(often income of £50k covered)
• Consider running conference facilities through trading
subsidiary
• If utilising surplus rooms in a large building to generate
additional income – does any endowment (e.g. Royal
Charter or Act) restrict the use?

.
Charity tax – do I need to iXBRL tag?
• Charities liable to Corporation Tax must complete a tax
return if:
• HMRC issue a ‘notice to deliver’ or
• They have income or gains which are not covered by a relief or
exemption
• Tax returns required to be filed online < 12 months of year
end
• Accounts and computations must be filed in iXBRL-format
• Accounts in pdf allowed if:
• Smaller charity under Companies Act 2006 (income < £6.5m)
• Other unincorporated associations or incorporated if not under
Companies Act

.
Inheritance Tax
• Gifts to charity during lifetime are exempt
• Gifts to charity in will are exempt from IHT
• An estate will normally pay IHT at 40%
• If charitable legacies the rate of IHT may be lower:
• Reduced 36% rate if 10% or more of the ‘net value’ of the
estate is left to charity
• ‘Net value’ is after deducting debts & liabilities, reliefs,
exemptions and anything below nil rate band (£325,000)

.
Inheritance Tax – reduced rate of 36%
• Encourage donors to review their wills
• Consider charitable legacy worded to meet the 10% test
• Carefully word will to save continual revision
• Example at:
• https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-
manual/ihtm45008
• Some beneficiaries may benefit if already charitable donations

.
Inheritance Tax – deeds of variation - update
• Allow a beneficiary to re-direct all or part of an estate
• For IHT, a deed made within 2 years of a death is
treated as though variation made by deceased
• Consultation opened Summer 2015
• Conclusion in December 2015
• Ability to use deed of variation will continue
• No new restrictions
• Government will continue to monitor their use

.
Deed of variation – why used?
Source: HM Revenue & Customs – Review of Deeds of Variation for Tax Purposes – Call for Evidence – Summary of Responses – December 2015

.
Inheritance Tax – claims by dependants
• Cases hitting the national headlines e.g. Ilot
• Inheritance (Provision for Family and Dependants) Act
1975
• Consider whether any legacies could be contested
• Take care if paying beneficiaries
• May be treated as non-charitable expenditure & tax payable
• Consider tax-efficiency of options

Cyber Fraud &
Risks to Charities
Stewart King

Overview
• One of the biggest risks faced by
businesses and organisations
• Estimated cost of £21bn per year
• Frequent major breaches in the
press
• Look at Cyber and other types of
attack
• Risk, prevention and mitigation
• New costs through EU legislation
• Insurance options

Impact to Organisation
• Human impact (Staff & Customers)
• Time
• Disruption
• Reputation
• Financial Loss
• Future?

Cyber Risks
Who would want to compromise you, your organisation or
your data?

Cyber Risks
• 40% of all cyber-attacks
aimed at firms and
organisations with fewer
than 500 employees
• Source: National Cyber Security Alliance
Security Alliance

What are they after…….
• Money
• Business disruption
• Sensitive or personal
information
• Reputation or brand
damage
• Increased kudos and
notoriety

The average cost of a cyber attack
• Detection and escalation £14
• Response £17
• Notification £6
• Lost business £34
• Total direct loss from a data
breach per record in the UK -
£71
• Source: 2010 Annual Study: UK & US Cost of a Data
of a Data Breach by Ponemon

Fraud
Common examples
• Telephone scam
• Email scam
• Targeted CEO email
• Invoice fraud
• Overpayment

Organisational Approach
• Risk Management
• Prevention
• Insurance

Risk Management
• Prepare, prepare, prepare
• You know your organisation
• What is most important to you
• Where and how is your data
held, servers, pc’s, mobiles,
usb’s?
• Who has access – consider
restrictions

Prevention• Understand the risks
• Teach and train your staff
• Improve IT security
• Encrypt data
• Strengthen passwords
• Software up to date
• Anti virus and malware software
• Firewalls
• More controls (dual authorisation)

Risk Management and Prevention
• Government Guidance - Cyber Essentials Scheme - 10 step guide

EU GDPR
• EU General Data Protection Regulations
• Coming to UK within next couple of years
• Prescriptive timelines for reporting data breaches
• Significant Fines following breach

Cyber & Crime Insurance
• Replacement of lost funds
• Public Relations
• Crisis Management
• Forensics & Security Specialist Services
• Rectification Costs
• Liability to Customers
• Costs for Notification

Cyber & Crime Insurance
• Regulatory Fines
• Extortion
• Business Interruption
• Telephone Hacking

Case Study
• Scenario
• A firm of Accountants lost records of 77,000 former and current
employees of one of its clients
• Outcome
• Paid for identity theft protection and credit monitoring for all
• Reimbursed losses
• £60k in notifying individuals

Case Study
• An employee of a recruitment agency was hired by an identity fraud
ring to provide sensitive personal information regarding the agency's
clients.
• Outcome
• Paid for credit monitoring services for all affected and an IT
investigation to assess the extent of the breach
• Offered PR Support to help mitigate further reputational damage

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