The Coronavirus pandemic has presented the charity sector with enormous challenges. Many are facing an increase in demand for their services, whilst others are faced with an almost complete shut-down. Most are seeing a fall in income and many are seeing a fall in investment values as well. In addition to all of this, charities have difficult decisions to make as employers.
In this article, we look at some of the measures that the government has introduced that are of relevance to charities and those who work in the charity sector. Many measures, whilst not aimed specifically at charities, may support charities as employers and charities that operate as businesses. In addition, we highlight some of the guidance and support that is available from charity bodies.
Guidance from the Charity Commission
A key link to guidance for the sector from the Charity Commission can be found here. It includes details of the financial support available from the government, which has pledged £750 million to ensure the sector can continue its vital work supporting the country during the outbreak, including £200 million for the Coronavirus Community Support Fund and an additional £150 million from dormant bank and building society accounts.
Funding for specific sectors is being made available through the Arts Council England Emergency Response Package, the Historic England Emergency Relief Fund, the Sport England Community Emergency Fund and the National Heritage Lottery Fund Emergency Fund. Similar funding is available to charities through equivalent bodies in Scotland, Wales and Northern Ireland.
Other funding sources are modelled on schemes made available to businesses and include the Resilience & Recovery Loan Fund (RRLF), which is being run by Social Investment Business for social enterprises and charities who are experiencing disruption to their normal business model because of COIVD-19. It has been established to make an existing government scheme (the Coronavirus Business Interruption Loan Scheme, more of this below) more easily accessible to charities and social enterprises. The RRLF is intended for those organisations facing problems because expected income and activity has been delayed or disrupted, where a loan may help by providing working capital until normal business can commence again. It is important to note that the RRLF provides loans that will need to be repaid, not grants.
The issue of extreme financial difficulties may, sadly, make this guidance from the Charity Commission relevant to some charities. It reiterates that trustees must always consider the best interests of their charity and the challenging trade-off between reducing costs so they can continue to support users in future, and meeting the immediate needs of users now with the possibility that, at a later date, the charity will have to reduce its services or close entirely.
Such concerns are in addition to the need to safeguard users and protect them from harm and to ensure that any decisions made are in line with the charity’s purposes and any requirements in its governing document.
The Charity Commission’s guidance points out that: “We recognise that these decisions will often be difficult, that there may not be an obvious ‘right’ decision, and that charities will be exposed to higher levels of risk than in more normal times. We also recognise and will take account of the fact that things may go wrong despite the best efforts of trustees to act in their charity’s best interests”.
Guidance from OSCR
The Scottish Charity Regulator has similar guidance on charities and the coronavirus that includes FAQs covering such items as cancelling AGMs and events, changing charity purposes to use charity resources to help with the Coronavirus pandemic, the use of reserves to help charities through Covid-19, and reporting a notifiable event to OSCR where the current situation has a negative impact on a charity.
Unfortunately, crises can attract fraud and the Charity Commission and Fundraising Regulator have urged people to ‘give safely’ in response to the current crisis by giving to a registered, regulated charity, so that donors can have assurance that their funds will be accounted for in line with charity law.
The Coronavirus Job Retention Scheme (CJRS)
The CJRS will continue until the end of October 2020. From August, furloughed workers will be able to return to work part-time and employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute part of the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. In addition, the government will explore ways through which furloughed workers who wish to do additional training or learn new skills can be supported.
Business loan support
Various business loan support initiatives are available to charities but trustees will need to consider carefully the business case for taking on loans and the income projections that will enable them to be repaid. The Coronavirus Business Interruption Loan Scheme (CBILS) had an initial requirement that 50% of the applicant’s income must be derived from its trading activity. Following lobbying by the charity sector, the British Business Bank has confirmed that registered charities, many of which receive a large part of their income from donations, are excluded from the 50% trading income requirement and are in principle eligible for CBILS loans if they satisfy the other eligibility criteria of the Scheme. These include that the charity is based in the UK, has an annual income of up to £45 million and has been adversely impacted by the Coronavirus but would be viable were it not for the pandemic. The CBILS supports businesses, including eligible charities, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years.
The Bounce Back Loan Scheme, which aims to help small and medium-sized businesses to borrow between £2,000 and £50,000 (capped at 25% of turnover) through a 100% government guarantee and no fees or interest to pay for the first 12 months is also available to eligible charities.
New guidance from HMRC on Gift Aid on ticket refunds for cancelled events
Steps to help charities have been evolving over time, as new issues have emerged. One of these is Gift Aid and cancelled charity events.
To help reduce administrative burdens on charities, if a charity event is cancelled due to Covid-19, HM Revenue & Customs will accept that the charity no longer has to physically refund the ticket price for the individual to re-donate should the individual wish the charity to retain the refund as a donation.
This is a welcome relaxation but, as ever with Gift Aid, there is a record-keeping requirement. The charity must contact the individual who previously purchased the ticket of the cancelled event and explain that the individual is entitled to a refund but may wish to donate the cost of the ticket to the charity, making clear that the individual does not have to donate the refund but, if they choose to donate it, it is non-refundable and that they must pay sufficient tax to cover the tax that the charity will claim on the donation. The charity must ensure that there is a Gift Aid declaration in place for the individual and keep an audit trail, including evidence of the agreement from an individual agreeing to the donation of the cost of the ticket.
Covid-19 control measures and financial reporting by charities
A final comment to make is one regarding charity accounts. The SORP-making body has published guidance for trustees and preparers of charity accounts looking at the potential impact of the control measures to contain Covid-19 on financial reporting by charities. The guidance considers the implications for the trustees’ annual report, going concern and the alternative basis to going concern when preparing accounts under the SORP. Details can be found here.
The current situation is fast-moving and new guidance is being published regularly. We are updating our web page dedicated to charities and Covid-19 with these new announcements as and when they are made. Read more here.