16 Nov 2017 12:40 PM

Revised guidance for charitable trustees on financial matters

Every trustee of a charity has to be a "fit and proper person" under tax legislation. Trustees should confirm this at the time of their appointment.

HMRC has recently updated its fit-and-proper-persons declaration and accompanying help sheet. Two changes are worthy of note.

First, it is now clear that anyone involved in a disputed tax-avoidance scheme could be caught by the rules.

Second, the tax and the charity regulatory regime are synchronised, as the fit-and-proper guidance now bans any person who has been either removed or disqualified from acting as a charity trustee by a charity regulator.

Trustees that have signed the old declaration do not need to submit an updated declaration.

Reporting considerations

Payment practices

New regulation requiring large organisations to report on payment practices came into force in April 2017, and will affect colleges and academy trusts which meet at least two of the following three criteria:

  • Annual income exceeds £36 million;
  • Balance sheet total exceeds £18 million; and
  • Over 250 employees.

Colleges and academy trusts caught by this legislation will be required to publish reports every six months on a Government website. These reports will include:

  • Descriptions of the college and academy trust’s payment policy as well as a number of statistics including the average time taken to pay invoices from the date of receipt;
  • Percentage of invoices which were paid in 30 days or less, between 31 and 60 days and over 60 days, and the percentage of invoices due within the reporting period which were not paid within the agreed terms.

Modern Slavery Act

The Modern Slavery Act is now in force and may affect colleges and academy trusts with an annual income in excess of £36m for periods ending on or after 31 March 2016. Those colleges or academy trusts caught by the legislation will be required to produce an annual statement that describes the action taken to eliminate slavery and human trafficking within its supply chain.               

Gender pay

New legislation on gender pay reporting came into effect in April 2017, and will affect colleges and academy trusts with over 250 employees.

Colleges and academy trusts which are caught by the legislation will be required to publish a report at 31 March each year on their website. The figures to be reported and published include:

  • Mean pay for men and women and the difference between the two;
  • Median pay for men and women and the difference between the two;
  • Mean and median bonus pay for men and women during the relevant pay period; and
  • The proportions of the relevant male and female employees in the lower, lower middle, upper middle and upper quartile pay bands.

Public Sector exit payments – capped at £95,000

From 1 February 2017 section 41 of the Enterprise Act 2016 came into force. This gave the Secretary of State the power to issue regulations preventing public sector office holders from receiving exit payments exceeding £95k.

Exit payments include:

  • Dismissal payment due to redundancy;
  • Payment as part of any voluntary exit from employment;
  • Any severance or ex gratia payment;
  • Payment in respect of outstanding entitlement;
  • Compensation under the terms of a contract;
  • Payment in lieu of notice.

Whilst this regulation does not apply to colleges it does for academies.

However, colleges have to be mindful of the regulations contained within its funding agreement with the funding body to ensure it attains value for money in respect of any settlements made.


PAYE and off-payroll workers

With effect from 6 April 2017, colleges and academy trusts and other public authority entities have become responsible for operating the off-payroll working rules (commonly known as IR35) to any individuals providing contract work to them via a personal service company.         

Colleges and academy trusts must review each contract held with personal service companies and inform the company of whether the IR35 rules apply to that contract.

Where the rules apply, the college or academy trust will be responsible for operating employment taxes under PAYE.

Prior to 6 April 2017, this was solely a responsibility of the personal service company itself.