Charity Law Update: Winter 2018/2019
Value-Added Tax (Refund of Tax) (Charities Compensation Scheme) Order 2018 (S.I. No.580 of 2018)
The Value-Added Tax (Refund of Tax) (Charities Compensation Scheme) Order 2018 (the “Order”) was signed into law on 18 December 2018. The Order gives effect to the promise announced in Budget 2018 that a VAT Compensation Scheme for Charities (the “Scheme”) would allow charities to reclaim a proportion of their VAT costs, based on the level of non-public funding they receive.
The Scheme applies to VAT paid on expenditure on or after 1 January 2018. Refunds will be paid one year in arrears and a capped fund of €5 million is available to the scheme in 2019 (the Scheme and this cap will be reviewed after three years). Where the total amount of claims in a given year exceeds the capped amount, charities will be paid on a pro rata basis. For administrative purposes, claims valued below €500 will not qualify for a refund.
In order to qualify for the Scheme, charities must be registered with the Charities Regulator, have tax clearance, and provide a set of audited accounts for the year in which the claim is being submitted. The charity making the claim is responsible for complying with the conditions of the Scheme. Where the secretary or trustee makes a claim on behalf of the charity, they are also responsible for complying with the conditions of the Scheme.
The facility to make claims under the Scheme is now available on Revenue’s Online Service and approved repayments are likely to issue in November in the year in which the claim is made.
The Charities Appeals Tribunal (the “Tribunal”) is a statutory body which was established with effect from 1 August 2016. The purpose of the Tribunal is to hear and adjudicate on appeals against certain decisions of the Charities Regulatory Authority (the “CRA”), under section 45 of the Charities Act 2009.
Notwithstanding its establishment in 2016, the Tribunal is operational from 4 July 2018, the date on which the Charity Appeals Tribunal Rules (S.I. 209 of 2018) (the “Rules”) commenced. The Tribunal is independent from the CRA in the performance of its statutory functions.
Decisions of the CRA which may be appealed to the Tribunal include:
- a refusal for application for registration;
- a decision of the CRA not to consent to a change in the name of a charitable organisation; and
- a decision to remove a charitable organisation from the register.
The Rules provide that appeals before the Tribunal shall be heard in public. However, where it considers it appropriate, the Tribunal may make an order directing that all, or one or more, of the parties to an appeal shall not be disclosed.
Charities Governance Code
On 7 November 2018, the CRA launched the Charities Governance Code (the “Code”) which sets the minimum standards that charity trustees should ensure their charity meets in order to effectively manage and control their organisations. The Code aims to be proportionate and compliance with the Code will largely depend on the income, complexity and number of employees of individual charities.
Comply or explain
The Code operates on a ‘comply or explain’ basis meaning that charities will be expected to comply with the Code or offer an acceptable explanation to the CRA as to why they are not complying with the Code. Valid reasons for non-compliance may include circumstances where a charity is in the process of winding up or the charity is newly established and needs more time to fully comply.
The Code sets out thirty-two core standards that all charities should meet.
Charities must complete a Compliance Record Form every year (available on the CRA website) and identify on the form the actions the charity took to meet the required standards set out in the Code. At a future date, the CRA will publicly display whether or not a charity complies with the Code.
Principles of the Code
The standards as set out in the Code are based around six principles of charity governance. The table below sets out the six principles and some of the ways in which each principle can be put into practice:
|Principle||Putting the principle into action|
|Advancing charitable purpose||Be clear about the purpose of the charity and be able to explain it in simple terms;
Consider whether a private benefit arises;
Set out an achievable plan for at least the next 12 months; and
Make sure the charity has the necessary resources for planned activities.
|Behaving with integrity||Agree the basic values of the charity and publicise them;
Decide on how to deal with conflicts of interest; and
Have a code of conduct for charity trustees.
|Leading people||Be clear about the roles of everyone working in and for the charity in relation to both paid employees and volunteers; and
Make sure there are arrangements in place for effective involvement of volunteers.
|Exercising control||Ensure the charity’s legal form and governing document are fit for purpose;
Find out the laws and regulatory requirements that are relevant to the charity and comply with them;
Make sure there are appropriate financial controls in place;
Identify any risks the charity may face and how to manage these risks; and
Make sure the charity has adequate insurance cover.
|Working effectively||Identify charity trustees with necessary skills;
Hold regular board meetings;
Consider introducing term limits for charity trustees, with a suggested maximum of nine years in total;
Recruit suitable new charity trustees as necessary; and
Review how the board operates from time to time.
|Being accountable and transparent||Make sure that the name and Registered Charity Number of the charity is displayed on all written materials including on the website, social media platforms and email communications;
Identify stakeholders and how to communicate with them;
Have procedures for dealing with comments, queries and complaints; and
Follow reporting requirements of all funders and donors.
The CRA expects more complex charities to meet seventeen ‘additional standards’ which are set out in relation to each principle outlined in the Code. Each charity must decide for itself whether it should meet the additional standards and base this decision on indicators such as: the charity’s income; the number of employees; and the complexity of the charity’s activities.
The Code sets out in its glossary what is meant by “out-of-pocket expenses” noting that expenses should be paid back based on receipts from the person who paid the expense and not on a flat-rate basis.
European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (S.I. No. 16 of 2019)
The European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (SI16/2019) (the “Regulations”) were signed into law on 29 January 2019. The Regulations transpose into Irish law the requirements of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “Fourth Money Laundering Directive”) regarding the creation and holding of beneficial ownership registers for trusts.
With immediate effect, trustees are now obliged to take all reasonable steps to obtain and hold adequate, accurate and current information in a beneficial ownership register (the “Register”) in respect of the trust’s beneficial owners. The Register must contain the following information in respect of each of the trust’s beneficial owners: name; date of birth; nationality; residential address; date on which he/she was entered into the register; and the date on which he/she ceased to be a beneficial owner. For the purposes of the Regulations, the beneficial owner means the natural person(s) who ultimately own or control the trust or on whose behalf a transaction or activity is being conducted.
For most charitable trusts, the charity trustees control the trust and accordingly the starting point for the analysis of persons to be considered as beneficial owners will in most cases will be the charity trustees and any direct beneficiaries of the charitable activities of the trust.
The Regulations apply to all express trusts whose trustees are resident in Ireland or which are administered in Ireland.