This newsletter addresses three key areas of importance for charities: saving on VAT costs, increasing donations through Gift Aid, and justifying reserves. It provides information on VAT exemptions charities can utilize to reduce costs. Regarding donations, it explains how Gift Aid can increase donations by 25% at no extra cost to donors. Finally, it discusses the importance of a reserves policy and regulations around justifying reserves levels in annual reports. Trustees are advised to review reserves and spending plans regularly.

1. March 2012 News and Views from Plummer Parsons
CHARITY
newsletter…
In a time of rising costs and shrinking funding, all charities are looking
for ways to save money. This Charity Newsletter addresses three key
areas which are of increasing importance. Please don’t hesitate to
contact us further about this or any other matter.
VAT and Cost-saving
Opportunities
One of the biggest financial burdens for charities is VAT, which can affect all charities whether
they are big or small. The variety and nature of charities’ income streams often means that VAT
compliance is harder for charities. However, there are ways to save or minimise VAT.
The Revenue has put in place specific exemptions Finally there are other ways to save costs: utilising
to help charities avoid VAT on certain expenditure your full 30 day credit period for payment of your
and charities need to be aware of these bills is one way your charity can improve its cash
exemptions so that they are not overcharged. flow over the short term; changing utility suppliers
In particular, your charity needs to be aware of the or negotiating better prices; shopping around for
VAT savings available if your activities involve any the best value with regards to insurance and other
of the following: building work; any fundraising costs; looking at your office needs and considering
involving advertising, collections or appeals; energy whether smaller premises would be an option;
saving improvements to buildings; provision of reviewing contracts on equipment hire and leases;
equipment to the disabled; purchases of minibuses leasing assets rather than purchasing them to
for the disabled; heating of residential spread the costs over several years; reviewing all
accommodation or charitable premises. the services you provide with a view to identifying
areas where services could be cut back without
Equally, if your charity is already registered for VAT
affecting the charity’s overall aims; seeking out
could you restructure your charity’s activities to
other charity partners with a view to sharing costs;
increase the amount of VAT you reclaim on
considering whether you are overstaffed (but
expenditure, perhaps by putting trading activities
beware employment law!); outsourcing of activities
through a separate company?
(but ensure any self-employment is genuine or
there are arm’s length contracts).
www.plummer-parsons.co.uk/charity

2. March 2012 News and Views from Plummer Parsons
CHARITY
Increase personal donations by 25%
Gift Aid donations are greatly beneficial to charities these days – as it can increase
the value of donations by 25% at no extra cost to the donor.
It is reckoned that Gift Aid is worth nearly £1 Along with gifts of money, it is also
billion a year to charities and their donors. possible to gift aid certain assets like
On making a monetary donation to a charity, shares and investments. Charity shops
the donor is required to complete a Gift Aid have started to claim the sale proceeds
declaration by indicating that he/she is a UK of donated goods also under Gift Aid
taxpayer and will pay sufficient tax equal to the and receiving substantial Income
tax reclaimed on the donation. The donor must Tax repayments.
therefore ensure that he/she has paid income Since 1 April 2011, the “substantial donor”
tax, otherwise he/she will have to pay it to legislation on charities has been lifted with
the Revenue. new rules in place to catch “tainted”
Gift Aid does not apply to:
➜ Gifts of money with conditions attaching
➜ Payments for goods or services
25% donations. This new legislation is for the
purpose of detecting donors (or those
connected to them) who have made a
charitable donation for the specific purpose
➜ Set participation fees of receiving an advantage from the charity.
➜ Payments made using charity vouchers
Gift Aid is such a valuable source of income
or cheques
to your charity. Make sure you are doing
➜ Loan waivers all that you can to maximise your claims
➜ Barter transactions and have considered all options available
➜ Gifts from companies to you.
Retaining Funds? Justify your Reserves
Reserves are that part of a charity’s funds reserves policy, the Regulations require this The Charities SORP requires trustees to include
which are freely available to spend on any fact to be stated in the annual report. in their annual report:
of the charity’s purposes (ie not restricted Future plans and budgets need to be ➜ a statement of their policy on reserves;
or endowment funds), excluding amounts considered, particularly any uncertainty over ➜ the level of reserves held and an
invested in tangible fixed assets held for future income or the risk of unexpected calls explanation of why they are held;
the charity’s use and any amounts on the charity’s funds. Future plans, projects or
designated for essential future spending. ➜ where material funds have been
other spending needs might be identified that
designated, the amount and the purpose
cannot be met from the income of a single
A reserves policy explains to existing and of the designation should be explained;
year’s budget alone and therefore the charity
potential funders, donors and other ➜ where designated funds are set aside for
may need to consider maintaining reserves.
stakeholders why a charity holds a particular future expenditure, the likely timing of
amount of reserves. A good reserves policy Trustees then need to think about how much
that expenditure.
gives confidence to stakeholders that the might be required and how much is currently
held as reserves: this is a charity’s reserves A charity with excess reserves should consider
charity’s finances are being well managed
policy. There is no single level or even a range whether these funds could be effectively spent
and can also provide an indicator of future
of reserves that is right for all charities. on the charity’s purposes. If a charity has more
funding needs.
Reserves policies should reflect the particular resources than it needs to fulfil all of all of its
The Charities SORP (Statement of purposes then the trustees should contact us to
needs of a charity and therefore it is essential
Recommended Practice) requires Trustees to discuss whether the purposes of the charity
that the trustees identify why funds are
state the charity’s reserves policy within their should be amended to enable the charity to
needed and how much is likely to be required
annual report. If a charity operates without a operate more effectively.
to meet these needs.
Have we missed anything? Please address all enquiries, responses and
other issues raised by this newsletter to:
Is there anything in this Newsletter that you were expecting or hoping
to read? Please do not hesitate to contact us direct as we will be more
charities@plummer-parsons.co.uk
than willing to provide you with extra information etc. Email us the details of others who
would like to receive this newsletter.
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