CHARITY AND SOCIAL ENTERPRISE UPDATE SPRING 2020 2 IN BRIEF
In brief
Brexit is now a reality, although its impact remains unclear. Abbie Rumbold provides our predictions for charities and social Inside enterprises during the transition period and beyond (page 3). Brexit – what’s next? 3 We have a special focus on preventing charity fraud from the Charity Commission’s Head of Development, Counter Fraud and Cybercrime, Preventing charity fraud 6 Alan Bryce (page 6). Employee suspension 8
Lucy McLynn advises employers to be very cautious about suspending Children’s data 10 employees where there are concerns about their conduct (page 8). Transgender inclusion 11 Navigating the rules around protecting children’s data is not an easy task. Mairead O’Reilly outlines some of the headline rules (page 10). Modern Slavery Act 12 CLIENT FOCUS Mindy Jhittay provides the first in a series of articles about transgender inclusion and the questions we are most frequently Breadwinners 14 asked by our clients (page 11). Property life cycle 15 We review the impact of the Modern Slavery Act with an interview with two experts in the field –Andrew Wallis OBE and Dr Anjali FUNDRAISING FOCUS . and find out more (page 12). Mazumder Oliver Scutt Yvett Talas Fundraising complaints 16
In our regular client focus, we look at the work of Stephen Lloyd Overseas payments 17 Awards winner, Breadwinners (page 14). Charity structure 18 Amanda Gray from our Real Estate team takes a look at the key Behavioural insights 20 stages of your property life cycle (page 15). Post-Brexit VAT 21 In our fundraising focus, Emma Dowden-Teale and Charlotte Blackbourn remind charities how to deal with complaints in line with Charity Commission 22 the Code of Fundraising Practice (page 16).
We have seen a recent increase in the number of investigations being carried out by HMRC in relation to charities making payments overseas. Augustus Della-Porta and Stephanie Biden explain (page 17).
Follow us on: Lucy Rhodes highlights what’s involved when charities look to change @BatesWellsTweet from an unincorporated to an incorporated structure (page 18). @BatesWellsChaSE https://www.linkedin.com/ Our governance consultant, Tesse Akpeki, explains how best to put company/bates-wells-linkedin behaviour theory into practice within your organisation (page 20). Previous updates are available at: Bill Lewis writes to the prime minister with a post-Brexit VAT wish list www.bateswells.co.uk/insights for the sector (page 21). To update your contact details or mailing list preferences please And finally, there’s our usual Charity Commission round up from contact the Marketing Department at: [email protected] Claire Whittle, Emma Dowden-Teale, Danielle Mawer and Katy Sawyer (page 22). Front cover image provided by Breadwinners FEATURE 3
Brexit – what’s next?
On 31 January 2020, the United Kingdom’s membership of the European Union finally came to an end. So, what happens now?
The implementation of the European Data protection Abbie Rumbold explores Union (Withdrawal Agreement) Act 2020 Under regulations that came into effect on the certainties and (the Withdrawal Act) put the seal on the exit day, the EU General Data Protection United Kingdom’s departure from the uncertainties for charities Regulation (GDPR) is now known in the European Union on 31 January 2020. and social enterprises. UK as the ‘EU GDPR’. The regulations But what exactly has changed? And what’s have also generated a new ‘UK GDPR’ in store in 2020, and beyond? This article by making hundreds of changes (mainly explores the key dates and mechanisms unsubstantive) to the ‘EU GDPR’ text. and highlights some of the potential short- and long-term implications for charities However, during the transition period, and social enterprises. UK organisations are still bound by EU law. The UK GDPR will come into effect The legal mechanics at the end of the transition period.
The Withdrawal Act, which amended the Departure from the EU also has an Abbie Rumbold Partner European Union (Withdrawal) Act 2018 impact on data transfers where data is orchestrated the UK’s withdrawal from T: 020 7551 7750 transferred from the remaining 27 EU the EU on 31 January 2020 – ‘exit day’. [email protected] countries to the UK. During the transition Crucially, the legislation provides for a period, there is no change and there Abbie is recommended by ‘transition’ (or ‘implementation’) period Chambers UK as a leading is no immediate urgency to review until 11pm on 31 December 2020. During lawyer in the sector. She has a arrangements where personal data is particular focus and expertise this time, most EU law continues to apply being transferred from the EU to the UK. in social enterprises and was in the UK, even though the UK is no longer Whether or not organisations need to put one of the originators of the a party to the EU treaties. in place appropriate safeguards to protect CIC. data being transferred from the EU 27 to At the end of the transition period: the UK depends on how the discussions l EU law that has already been around the UK being awarded ‘adequacy’ incorporated into UK law will continue go in the transition period. to apply – unless it is changed by supplementary legislation. Much EU law In any event there will also be obligations is already embedded into UK law – for under the new UK GDPR, coming into example, the rules on advertising and effect at the end of the transition period, marketing contained in the EU Unfair for EU controllers offering services into the Commercial Practices Directive. UK to appoint a UK representative – and vice versa. l Other EU law will apply to the extent that it is incorporated into UK law during State Aid – or with effect from the end of – the transition period. Ministers have some During the transition period there will be powers to achieve this by secondary no change from a legal perspective. Clients legislation. who give or receive State Aid (or potential aid) will still need to carry out a legal Negotiations between the UK and EU assessment to ensure compliance. during the transition period will determine the extent to which UK law will mirror In the longer term there will be a possible – or diverge from – EU law once the reduction in EU-based grant funding, transition period ends. So, the nature of although the UK government may provide the UK’s trading relationship with the EU alternative sources of funding to replace remains uncertain, and the medium- and EU funds (see more on this below). The long-term future for charities and social State Aid regime (in its current form) enterprises requires a degree of crystal may well fall away in its entirety and be CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 ball gazing. We asked our colleagues in replaced by something quite different specialist areas for their predictions. that regulates UK state funding. 4 FEATURE
‘Many core employment Competition cancellation, if not at the end of the transition period, then over time. rights will not be affected There will be little or no impact during by Brexit as they arise the transition period. However, the UK VAT from domestic legislation. authorities may be less focused on During the transition period the UK These include rights to competition law enforcement during this period as they take on the EU authorities’ remains within the EU VAT regime, Single protection from unfair case load that has a UK element and get Market and Customs Union. There are dismissal; National Living to grips with how this will be managed unlikely to be major changes until 31 Wage; entitlement to post 2020. December 2020, but at that point the statutory redundancy UK will leave the EU VAT regime and Longer term, UK competition law may become a ‘third country’ for the purposes payments; and most of diverge from EU competition law, of EU VAT. our family-friendly rights.’ subject to what is agreed with the EU as part of the trade deal. But charities The EU and UK will seek to negotiate a and social enterprises should not think Free Trade Agreement during the transition competition law will diminish post Brexit. period covering future tariffs and customs Although based on EU law, the UK regime controls on the movements of goods. This is well established and will continue will not materially affect the post-2020 independently of it. VAT changes, which will be significant. Changes will include the ending of zero- Intellectual property and trade marks rated B2B intra-community supplies and the loss of Distance Selling thresholds for The provisions around trade marks and UK e-commerce sellers of goods to EU Brexit are complex. A key consideration consumers. UK businesses with a foreign is that, in principle, no trade mark owner VAT registration in the EU may need to should lose any rights that they held appoint a special VAT fiscal representative. before Brexit, although in some situations additional steps may be necessary to keep Please contact our VAT specialist Bill Lewis those rights in place. on [email protected] for more information on the likely changes. EU Trade Marks will cease to have effect in the UK at the end of the transition Social finance period. EU Trade Mark registrations will be automatically cloned onto the UK Register, Amonst other changes, new regulations free of charge, giving rise to two separate will amend retained EU law in relation to trade mark registrations (one covering the the European social entrepreneurship UK, the other the remaining EU states). EU funds, which aim to make it easier for Trade Mark applications will not be cloned social enterprises to raise funds across onto the UK Register. Europe, through a designation system and a passporting regime. One longer-term concern relates to the requirement for trade mark owners Many voluntary sector organisations rely FIND OUT MORE to show that their mark is in use in on European funding as part of their You can find a more detailed order to maintain their rights in force. income mix. Exactly what will replace version of this article, and If a registered (UK or EU) mark is not some of the major sources of European regular updates, in the used for a period of five years, then it funding once the transition period ‘Navigating Brexit’ area of our may be struck from the register upon ends remains unclear. For example, the website at https://bateswells. application by third parties. Where an government announced that it would co.uk/campaigns/navigating- organisation has an EU Trade Mark that create the UK Shared Prosperity Fund brexit. Your regular Bates Wells contact will, of course, is currently only (or primarily) used in the (UKSPF) to replace funding from the be happy to advise on any UK, there is a real risk that the surviving European Structural and Investment specific areas of concern. EU component of that registration will funds, which includes funding that goes to in due course become vulnerable to charities and social enterprises in the UK FEATURE 5
for projects to create jobs and support that is reached. If you are concerned Once the transition period has economic growth. This commitment about the possible impact of Brexit on finished, those EEA/Swiss nationals was repeated in the Queen’s Speech a particular contractual arrangement, resident in the UK before the end of in December 2019 and a consultation and particularly in relation to any the transition period who want to on its development, which has been governing law or jurisdiction clauses continue to lawfully work in the UK will expected for some time, is scheduled and the mechanisms for enforcing need to apply for status under the EU for 2020. rights or resolving any disputes that Settlement Scheme and will need to may arise, you should seek advice as do so by 30 June 2021. Those arriving Procurement early as possible. in the UK after the transition period ends will need to apply for leave under During the transition period the Employment a new immigration regime that is due existing procurement regulations to be in place from January 2021. continue to apply to the UK. The UK Brexit will not have an immediate also remains part of the Government effect on UK employment law. Procurement Agreement (despite not However, once the transition period Right to work checks being an EU member state) during ends the UK will cease to be bound All EEA/Swiss nationals can rely on this period. by any new judgment of the Court of their EEA/Swiss passports to prove Justice of the European Union (CJEU). their right to work until 31 December At the end of the transition period, Old judgments will remain in effect 2020. Any new EEA/Swiss national the relevant rules (including EU unless and until legislation is repealed hires joining an organisation between procurement directives and general or re-enacted. The UK courts may still 31 January 2020 and 30 June 2021 principles of EU law) will continue to elect to take account of new CJEU will be able to choose to provide apply, broadly speaking, to any public decisions that are relevant to the issue either their status under the EU procurement procedure launched under consideration. Settlement Scheme or their EEA/Swiss before the end of the transition period passport as evidence of their right which is not yet finalised, and any Many core employment rights will not to work: employers will not be able call off procedures under framework be affected by Brexit as they arise to demand to see the EU Settlement agreements where the procurement from domestic legislation. These Scheme status for new hires if they are of the framework agreement was include rights to protection from provided with an EEA/Swiss passport. launched before the end of the unfair dismissal; National Living Wage; transition period. entitlement to statutory redundancy From July 2021 it will be mandatory payments; and most of our family- for EEA/Swiss nationals to have an From the end of the transition period friendly rights. additional status to prove their right these regulations can be changed to to work in the UK. But right to work fit government policy. Fundamentally, Workers’ rights that derive from EU checks are not retrospective and although there may be some appetite legislation may be in line for repeal employers will not need to rerun for a simplification of the detail in the after the transition period. These checks on staff they have hired prior procurement regulations, the current include rights under the Working Time to 31 December 2020 on the basis UK government seems unwilling to Directive. We may see legislation of their EEA/Swiss passport. alter procurement regulations too far reversing some of the rulings about as the use of competitive, transparent entitlement to holiday pay that have It is also worth remembering that and fair processes is still considered to arisen from decisions of the CJEU. it is not necessarily just EEA/Swiss be a useful tool to secure best value nationals who will be affected. for public bodies (and the taxpayer) Immigration Employers may have non-EEA national and prevent corruption. employees who are working by virtue During the transition period, there will of being the family member of an be no change to EEA/Swiss nationals’ Cross-border disputes EEA/Swiss national. They may also and their family members’ right to have British employees who have There are no changes to the methods travel to, live and work in the UK under EEA/Swiss family members and are for serving proceedings on defendants free movement. EEA/Swiss nationals therefore interested to know what in EU countries, and rules for enforcing will continue to be able to enter the they should be doing in the future. judgments in the EU during the UK and evidence their right to work transition period. Changes after this by using their EEA/Swiss passport or period will depend on the deal (if any) national ID card. 6 FEATURE
Preventing charity fraud
Recent research shows that charities are increasingly aware of the risk of fraud and defences are improving, but some charities still have much to do.
Changing how charities think about fraud l A third (33%) think fraud is a greater risk In this guest article, is key to making the charity sector more to the charity sector than other sectors Alan Bryce, Head of resilient. The starting point is to accept (25% in 2009). that every charity will, at some point, be Development, Counter l In general, larger charities (particularly the victim of fraud. In the digital age, with Fraud and Cybercrime at those that have suffered fraud) are more some 70% of frauds now cyber enabled, the Charity Commission likely to acknowledge the risk of fraud. sadly, this is inevitable. What matters is that for England & Wales charities can demonstrate they have done reports on the work the However, there is still far more that everything they reasonably can to prevent charities can do to protect themselves: commission is doing to fraud and have arrangements in place to tackle fraud in the sector. identify and respond appropriately when l 85% of charities think they’re doing a fraud occurs. With all the guidance and everything they can to prevent fraud, good practice that is now available there is but almost half don’t have any good really no excuse for any charity not to play practice protections in place. an appropriate, proportionate role in the fight against fraud. l Less than a third (30%) of charities have a whistleblowing policy (18% in 2009).
Understanding the threat l Less than a tenth (9%) of charities have There has been relatively little sector a fraud awareness training programme specific research available to help (4% in 2009). Alan Bryce Head of understand the nature of the threat l Charities believe they are vulnerable Development, Counter facing charities. So, last year, the Charity to fraud because of a lack of fraud Fraud and Cybercrime at Commission – in partnership with the awareness training (28%), and over the Charity Commission for Fraud Advisory Panel – undertook the reliance on goodwill and trust (26%) England & Wales largest ever charity fraud survey in the and/or excessive trust in one or more https://www.gov.uk/ UK, and potentially worldwide. individuals (22%). government/organisations/ charity-commission We asked a representative sample of l Just under half (47%) think their charity 15,000 registered English and Welsh contributed in some way to the fraud charities to complete a voluntary fraud occurring, with nearly a third (30%) survey. This achieved an impressive 22% stating their charity was too trusting. response rate – reflecting the increasing l A third (33%) did not report the fraud to importance many charities now place on any external organisation, such as the tackling fraud and reducing the harm it police or Charity Commission. can cause. For the first time we now have statistically significant findings to inform Of greatest concern is that more than a our understanding of the fraud risk faced third (34%) of charities think they’re not by charities. It also provides a useful vulnerable to any of the most common comparison with a similar, although much types of charity fraud. Charities’ recognition smaller, survey undertaken by the Fraud of their potential vulnerability is an Advisory Panel in 2009. So, what were the important step towards ensuring that vital main findings? counter fraud defences are in place and operating effectively. Perceptions of fraud risk
Charities are increasingly aware of the About a third of charities have yet to risk of fraud. Acknowledging the threat of acknowledge the significant threat that fraud is the first step towards adoption of fraud now poses to the sector. And about effective fraud prevention defences: a third are unaware of the vulnerabilities common to charities that fraudsters seek l More than two thirds of charities (69%) to exploit and have yet to adopt the good CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 think fraud is a major risk to the charity practice arrangements needed to increase sector (51% in 2009). resilience. FEATURE 7
‘About a third of charities Guidance and assistance have yet to acknowledge the The full results of the survey can be significant threat that fraud found in the Charity Commission report now poses to the sector. And Preventing Charity Fraud, published in about a third are unaware October 2019 as part of International Charity Fraud Awareness Week. of the vulnerabilities common https://www.gov.uk/government/ to charities that fraudsters publications/preventing-charity-fraud- seek to exploit and have yet insights-and-action to adopt the good practice I would encourage charities to download arrangements needed.’ the report and complete the fraud prevention checklist. All charities, The good news is that this can be regardless of their size and type, can addressed easily. More than eight in demonstrate their commitment to tackling 10 frauds are identified as a result of fraud by adopting Tackling Charity Fraud: financial controls at the charity, by audit Eight Guiding Principles. A summary of or whistleblowing. So, rigorously applying the eight principles, endorsed by charity basic controls can make a huge difference regulators in Scotland, Northern Ireland, and can be implemented with little or no USA, Australia and New Zealand, can be additional cost. found in our report.
As part of our research we talked to There’s plenty of free information and three charities that had all adopted guidance available to help charities good-practice procedures, including fight fraud. The Charity Commission, enhanced fraud awareness training for together with the Fraud Advisory Panel staff and volunteers, a simplified reporting and partners from the Charities Against framework and better whistleblowing Fraud group, have produced a series of arrangements for staff to raise concerns. resources (including helpsheets, webinars, These resulted in an approximate three- videos and good practice guides) as part fold increase in the total number of fraud of International Charity Fraud Awareness reports in these charities over a five-year Week. These are available at: period. As a result, a significant number https://gateway.on24.com/wcc/ of frauds were uncovered that wouldn’t experience/elitebba/1917599/2071337/ otherwise have been identified. charity-fraud-awareness-hub
Analysing charity frauds Further guidance is also available at: l Mandate/Chief Executive Officer (CEO) https://www.gov.uk/guidance/protect- fraud is the most common type of fraud your-charity-from-fraud targeted against charities. This involves impersonation of either legitimate https://www.fraudadvisorypanel.org/ organisations the charity deals with, charity-fraud/resources or senior staff of the charity itself, usually conducted via hoax emails.
l More than half of charities (53%) knew FIND OUT MORE who committed the fraud. If you would like more information about l Nearly two-thirds (60%) of frauds how to protect your charity from fraud or occurred over a six-month period. to discuss a specific matter, please email [email protected] or call 020 7551 7777 and ask to speak to Rob Oakley or Mindy Jhittay. 8 FEATURE
Suspension: a bridge too far?
We are often asked to advise charities and social enterprises about whether they can or should suspend employees where there are concerns about their conduct.
Employers have needed to approach continued presence at work be Lucy McLynn advises suspension with caution ever since the prejudicial to a fair investigation? charity and social 2000 case of Gogay v Hertfordshire l Consider alternatives to suspension. County Council. In this case, a care worker enterprise employers to Could the concern that is giving rise was suspended following what was be very cautious when to consideration of suspension be understood to be an allegation of sexual considering suspension addressed in another way? Could the abuse of a child. In fact, the allegation of an employee. employee, for instance, be temporarily should not have been characterised in redeployed to a different role? that way and it was held by the Court of Appeal that the council had acted without l Be clear with the employee about the reasonable care in taking the decision contractual terms that apply during to suspend Ms Gogay. The council had suspension. Suspension is always going accordingly breached the implied term to need to be on full pay. of trust and confidence in its contract of employment with Ms Gogay, entitling l Ideally, have an express clause in your her to damages for loss of earnings and employment contracts setting out your clinical depression. right to suspend an employee from their duties. While this will still be subject Lucy McLynn Partner and Last year, the Court of Appeal slightly to an implied term of reasonableness, Head of Employment rowed back from this position in the it will remove any argument that the T: 020 7551 7806 case of London Borough of Lambeth v employer is contractually required to [email protected] Agoreyo. Here, a primary school teacher provide work for an employee. Lucy is recognised as a was suspended after allegations of having l If an employee provides a sick note leading employment lawyer used excessive force against two young and/or says that they are too sick to in both Chambers UK and pupils. The Court of Appeal held that the attend an investigatory or disciplinary the Legal 500 directories. employer had acted with ‘reasonable She has a particular interest meeting during suspension, consider and proper cause’ in taking the decision in employment issues whether it is appropriate to move to suspend to allow an investigation affecting charities and social them onto sick leave instead of into the allegations to be conducted enterprises, such as the status suspension. Depending on their sick of volunteers and issues fairly. This was the appropriate test in pay entitlements, this may result in around working time and establishing whether there was a breach a saving of the salary to which they holiday pay entitlement. of contract, rather than asking whether would otherwise be entitled throughout suspension was ‘necessary’. This is a suspension, and the employee can helpful development in the law around still be told that on the expiry of their suspension, making it more likely that a sick leave they may not return to suspension will be found to be lawful. work without prior notification to the employer (at which point suspension There are, however, still many pitfalls for could be reinstated). You cannot decide employers in suspending employees. retrospectively to treat a period of Below are our top tips on the appropriate suspension as sickness absence. handling of suspension of an employee. l Keep the period of suspension as short l Do not suspend as a ‘knee-jerk’ as is reasonably practicable. If the reaction. Always take time to consider employee is suspended in conjunction the appropriate course of action (even with a police investigation then if the employee needs to be temporarily consider particularly carefully whether removed from an immediate workplace the internal disciplinary process can situation in the meantime). be progressed separately and more l Be clear about the specific reason or speedily. Criminal investigations tend reasons for suspension in any particular to be very lengthy. In another recent case. Is it because of the seriousness suspension case last year, North West CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 of the allegation? Is there a risk of Anglia NHS Foundation Trust v Gregg, recurrence? Would the employee’s the Court of Appeal held that the FEATURE 9
trust had been entitled to commence disciplinary proceedings against a doctor in respect of patient deaths while a criminal investigation of the same issue was ongoing, as there was no evidence that the internal investigation would give rise to a danger of a miscarriage of justice. l Actively review the suspension periodically to be clear that there is still reasonable and proper cause for suspension. If, for instance, the reason for suspension was the seriousness of the allegation, and the subsequent investigation has demonstrated that the conduct was not in fact as serious as it had appeared (although still meriting a disciplinary hearing) it might be appropriate to lift the suspension ahead of concluding the disciplinary process. In a 2007 case (Camden and Islington Mental Health and Social Care Trust v Atkinson) the Employment The reality of most suspensions is that it Appeal Tribunal held that a failure by is a devastating situation for an employee the employer to review the period of and can have a long-term impact on an employee’s suspension and to lift their career and health. This is why it at the appropriate time was in itself suspension requires careful consideration sufficient to give rise to a successful and handling by an employer, and is not constructive dismissal claim by the something to be undertaken lightly. employee. l Communicate with the employee FIND OUT MORE throughout their suspension. Tell them when you have reviewed their Please get in touch with our employment suspension, and let them know that team if you are considering suspension and suspension needs to continue and why. we will be happy to advise you on the best course of action. https://bateswells.co.uk/ Keep them informed about the progress services/employment of the investigation and/or disciplinary process that is being undertaken and likely timescales and next steps. l Do not fall into the trap of regarding suspension as a ‘neutral act’. While suspension is, of course, not indicative of any predetermined outcome to a disciplinary process, it is far from neutral. The courts have specifically rejected a ‘neutral act’ as a proper description of suspension. (This was one of the points that arose in the Agoreyo case.) 10 FEATURE
Protecting children’s data
Navigating the rules around protecting children’s data is not an easy task as the law struggles to keep pace with the seismic advances in information sharing in today’s online world.
What does the General Data parental responsibility is needed for Mairead O’Reilly outlines Protection Regulation (GDPR) say? children who are under 16. Most online some of the headline services are caught by the definition of ISS, The GDPR does not say a lot about including online messaging services, sites rules that apply to the children’s data. However, a key message offering tickets to events and many online processing of children’s is that children ‘require specific protection news and educational websites. data in the UK. with regard to their personal data as they may be less aware of the risks, EU member states are permitted to vary the consequences and safeguards concerned age below which the consent of a parent and their rights in relation to the or someone with parental responsibility is processing of personal data…’ (Recital 38). needed: in the UK the relevant age is 13. However, if you are collecting personal data What are the rules around processing online about children in other EU countries, a child’s information? this age may vary. In most cases, the same rules apply to the processing of children’s data as those Of course, you won’t always need to get relating to adults. Organisations need to consent to process a child’s data online, so Mairead O’Reilly in most cases it will be easier to seek to rely Senior Associate be able to rely on a suitable lawful basis for processing. Each lawful basis needs to on an alternative legal basis for processing, T: 020 7551 7782 be considered in the context of the data such as legitimate interests. However, there [email protected] subject being a child. For instance, if you will be cases where consent is needed Mairead is a senior associate are seeking to rely on legitimate interests, – for instance when processing special in our Data Privacy team. She you need to give extra weight to children’s category data, dropping cookies or sending has been advising on data interests and need a more compelling electronic marketing messages. protection law for more than 10 years and enjoys working interest to justify any impact on a child’s If you are planning to use children’s with a wide range of clients in rights and freedoms. the charity, social enterprise personal data to offer an online service and commercial sector. What are the issues with consent? to a child you must do a Data Protection Impact Assessment. It is possible to rely on a child’s consent as your lawful basis for processing their Age Appropriate Design Code data. However, reaching the threshold Finally, if you are engaging with children for consent under the GDPR is not online, it is important to be aware of the straightforward – particularly when it Age Appropriate Design Code – a statutory comes to children. For instance, consent code of practice published by the ICO. needs to be informed and freely given. The code is aimed at providers of ISS and DATA PRIVACY If a child does not fully understand contains practical guidance about how the implications of their personal data Our Data Privacy team to ensure that online services safeguard being processed, it will be difficult understands that the right children’s personal data. approach to data privacy to demonstrate that their consent is can be a real asset to your informed. Similarly, there will often be a organisation. We also clear imbalance of power between a child FIND OUT MORE recognise the impact that and a controller where, in effect, a child good privacy practices can may feel that consent is not really optional ICO guidance on Data Protection Impact have on wider society. and therefore cannot be freely given. Assessments and the Age Appropriate Design Code are both available on the For more information and Information Commissioner’s website advice, please refer to Collecting children’s data online https://ico.org.uk our Data Privacy pages at https://bateswells.co.uk/ The GDPR is more specific when it comes services/data-privacy to the processing of children’s data online. Article 8 requires that if you are offering Information Society Services (ISS) directly CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 to a child and you are relying on consent, the consent of a parent or someone with FEATURE 11
Transgender inclusion
Charities are looking to the law for clarity on how to be inclusive and respectful of all their beneficiaries. Single sex charities and those whose beneficiaries, members or service users are young people often have queries about transgender inclusion.
What is gender identity? characteristic) – so a charity’s services In the first of a series should be open to all. However, the Gender identity is a person’s innate sense of articles on transgender Equality Act includes provisions permitting of their own gender, whether man/boy, the restriction of services or membership inclusion and the law, woman/girl or something else. Many of to individuals who share a protected Mindy Jhittay explains us never stop to think about this because characteristic, such as sex. some of the legal our gender identity matches our biological terminology and answers sex. For example, I am a woman and I am This means that a charity can restrict its the most frequent female. This means that I am ‘cis-gender’. membership to women only, and refuse an questions our clients ask. application from a man who wishes to join. For transgender (or ‘trans’) people, the It is not clear whether these provisions gender they were assigned at birth can be read widely to include transgender does not match their gender identity. women, who are biologically male. If they For example, a transgender man/boy is are, and a charity does allow a transgender biologically female and was therefore woman to join, it may find it more difficult assigned ‘girl’ at birth. to reject applications from other biological males. But if the charity interprets the Gender identity is different to gender, legislation more narrowly, and doesn’t a social construct under which people allow transgender women to join, it could are expected to behave in a masculine face claims of discrimination from them. Mindy Jhittay or feminine way according to their biological sex. Senior Associate Can transgender men and non-binary T: 020 7551 7853 people join a women-only charity? [email protected] Who is transgender in law? A transgender man is biologically female. Under section 7(1) Equality Act 2010 (the Mindy is a dispute resolution This means that he falls within the single lawyer and advises charities on Equality Act), a person has the protected sex exception in the Equality Act and can contentious matters relating characteristic of ‘gender reassignment’ if join even though he is a man. The same to their transgender inclusion the person: policies. applies to a non-binary person who is l is proposing to undergo; biologically female. l is undergoing; or A non-binary person who is biologically l has undergone male would not be included, unless a process (or part of a process) for the they are part way through a process purpose of reassigning the person’s which might result in them identifying sex by changing physiological or other as a woman (as per the definition in the FIND OUT MORE attributes of sex. Equality Act discussed above).
If you have any queries This is a wide definition. It means that Are there any other steps that about transgender inclusion in your charity, whether there is protection under the Equality Act charities can take? for a person who is aligning the outward legal or practical, please Yes. Under Section 193(a) of the Equality contact Mindy Jhittay on expression of their gender with their gender Act, charities are permitted to restrict [email protected] identity. Medical supervision is not required the provision of benefits to persons who or 020 7551 7853. and they may simply live permanently as share a protected characteristic if (among the opposite sex, without hormonal or Stonewall and Mermaids other things) the person acts in pursuance surgical therapy. This is sometimes referred are specialist charities of a charitable instrument that governs to as ‘self-identification’. which provide support for the charity. transgender people and practical resources on Can a transgender woman join a You may wish to review your constitution transgender inclusion. women-only charity? and consider whether you need to The starting point is that it is unlawful amend it to clarify the extent to which CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 to discriminate against someone on the transgender and non-binary people can basis of their sex (or any other protected join or benefit from your charity. 12 FEATURE
The Modern Slavery Act
The Modern Slavery Act 2015 has recently been the focus of an independent government review.
Oliver Scutt and Yvett Talas interviewed Andrew Wallis OBE (Chief Executive of leading anti-slavery charity Unseen) and Dr Anjali Mazumder (AI and Justice and Human Rights Theme Lead at The Alan Turing Institute), to find out what impact the Modern Slavery Act 2015 (the Act) has had to date and the key issues that require urgent attention.
Oliver Scutt Senior Associate Can you provide a brief overview effectively. However, the Act must evolve T: 020 7551 7689 of the work your organisations do as circumstances change. [email protected] in relation to modern slavery? Oliver is a senior associate Anjali: The Act raised awareness of the Andrew: Unseen focuses on five main in the Charity and Social issues of human rights violations across a Enterprise department and has areas. We work with survivors of modern range of typologies and highlighted that previously worked as internal slavery found in the UK providing help this is not only a problem for developing legal counsel for a private with accommodation, support, and equity fund and an investment countries. Now it is time to work on reintegration; with frontline agencies; and management firm. He has transparency and enforceability – there is with businesses to improve transparency experience in structured and currently insufficient evidence gathering, in supply chains. We also run the UK’s project finance, venture capital, and thus few prosecutions. private equity as well as general modern slavery helpline and work with corporate/commercial. the government on various anti-slavery Did the Act have a significant impact initiatives. on businesses?
Anjali: The Alan Turing Institute (the Andrew: It had an impact on businesses Turing) recognises modern slavery as a and on those who are pushing for more human rights and socio-economic issue, action to ensure consistent good practice. and a research priority. The Turing’s focus Out of approximately 17,000 companies is to empower government and frontline around 3,700 still have not complied with agencies and enable private sector action the legislation. The government must play by developing and applying data science/ its part by enforcing the provisions within Yvett Talas Paralegal AI methods to safeguard vulnerable the Act to ensure transparency reporting T: 020 7551 7924 people, disrupt exploitation and build is comprehensive. Unseen has worked [email protected] resilient institutions through multi-sector with a data analytics company to enable Yvett has experience in partnerships. ‘TISC Report‘, which is the world’s largest conducting legal research open data platform committed to ending in various areas of law, The Turing and Unseen are working in corruption, supply chain labour abuses interviewing clients, drafting collaboration on various modern slavery and modern slavery. advice, and providing legal and administrative support to fee issues, particularly opportunities to enable earners. multisector data sharing and exploring Anjali: It certainly led to an increased typology specific challenges such as number of businesses making modern exploring sexual exploitation. We are also slavery statements. However, the quality working in partnership with the Bingham and effectiveness of these statements Centre for the Rule of Law which leads is unclear, which may be due to poor the new Policy and Evidence Centre for transparency and disclosure from other Modern Slavery and Human Rights. businesses regarding possible violations.
How effective would you say the Act What role can artificial intelligence has been to date? (AI) play in tackling modern slavery?
Andrew: The Act has had a huge impact, Andrew: Data has a huge role to play in not least because primary legislation has combatting slavery and we need to look CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 enabled different anti-slavery stakeholders at how it can drive both information and to focus and deliver their work more practice. Much existing policy practice FEATURE 13
and funding is based on anecdotal Anjali: We are waiting to see what time. Experts believe that the real figure evidence, so we need to get better at the ASC will prioritise and how the could be 10 times this, so potentially gathering, sharing and analysing data government’s new Policy and Evidence the impact on the UK is between £30 to enhance our understanding of the Centre for Modern Slavery and billion–£40 billion per annum. We need narratives around modern slavery and Human Rights can support that work. to look at how much and how we are drive the quality of our interventions. The latter is an indication that the spending. We also need to make sure government sees it as a priority issue. that resources reach all parts of the The helpline enables us to gather world, recognising that, while it is much anonymised data and bring bigger What are the biggest challenges more expensive to tackle the issue data sets together. We are looking that lie ahead and the key issues in the developed world, the majority for the connections/gaps between that require attention? of funding is being directed to the an individual’s exploitation and their developing world. We don’t yet know where access to key services, which may Andrew: the baseline is in the UK, Europe represent a slavery threat rather Modern slavery has woven itself into and globally. We need to figure out than an opportunity. For example, the fabric of global society. Big issues how we can assess something that is in Uganda the university population such as polity, economic disparity, fundamentally hidden, look at what is particularly vulnerable due to the education and climate change must the data tells us and the preventive need to access the job market. also be addressed, as they will have work required – it is about both the biggest impact on whether an corporate and policy understanding. Anjali: AI gives us the opportunity individual will be trafficked. to interrogate existing data and Right now, it seems like all actions are reactive, so we need to get to a place identify gaps both in the data and Anjali: I am often asked whether AI in the UK where these practices are in our knowledge. AI also offers is the silver bullet. I don’t think there socially unacceptable – and we are the opportunity to make use of is one. There are several approaches nowhere near that level. multiple and typically non-traditional and each of them require trust, administrative data sources. Often collaboration and partnership. I Anjali: Modern slavery is a vast and NGOs and government agencies do do think that data and AI methods complex human rights challenge. not have the resources to harness the can open opportunities for better It includes those being sexually data and consider the legal, ethical, understanding and disrupting this exploited online, forced labour at social and computational challenges, human rights abuse. so we hope that the Turing and AI can sea and on land in both rural and start to fill this gap. urban areas. Different organisations are collecting data in different ways What has been the impact of and are often unable to draw upon the recent government review each other’s data. Data is sitting in of the Act? siloes and we do not know who has the different pieces of information. Andrew: There are three key takeaways We need to enable multisector data from the review. First, we need sharing and tools to best harness to provide better protection and the data in a way that respects legal, care support for victims. Second, Dr Anjali Andrew Wallis ethical and social considerations. Mazumder OBE the role of the independent Anti- This is a priority and a real challenge. Slavery Commissioner (ASC) needs to be clarified and its responsibilities What are the key priorities better delineated from those of going forward? FIND OUT MORE the government – this will raise key questions around the budget and Andrew: First, I would change the way The TISC report is at: overall capacity of the ASC’s role. Third, we gather and analyse data and then http://www.tiscreport.org provide proportionate and strategic transparency in supply chains must Unseen improve. We can upgrade legislation, funding to tackle the problem. The https://www.unseenuk.org but the key issue is not legislative reported annual costs to the UK change but the successful policy economy are between £3.3 billion–£4.3 The Alan Turing Institute implementation of any proposed billion, based on the government’s https://www.turing.ac.uk changes. figure of 10–13,000 victims at any one 14 CLIENT FOCUS
Breadwinners – supporting refugees one loaf of bread at a time WINNER
Breadwinners is a grassroots charity and ‘We believe refugees have social enterprise supporting refugees into extraordinary potential as work, training and mentoring opportunities entrepreneurs, employees and through selling artisan organic bread across London’s best markets. We invest members of local communities. funding to set up market stalls that sustain We sell the best artisan organic themselves from bread sales – and we are bread to support them to build able to provide newly-arrived refugees a fresh start, providing self- with their first jobs. employment, training, and The transition between seeking asylum, business opportunities – and gaining refugee status and finally earning to become an active part of a living is critical. Breadwinners plays two the community.’ important roles. Martin Cosarinsky Campos, Through our Risers Programme we provide Project Director at Breadwinners early intervention support for young people (16–24 years old) seeking asylum to build transferable skills, grow their networks, and progress through mentoring to double our team – adding a core so they are better integrated and prepared 2020 STEPHEN LLOYD member of the team doing finance and to gain employment when they receive AWARDS communications, and progressing one of refugee status. our Breadwinners to the role of market Have you stumbled upon a coordinator. SLA has also provided clever idea to solve an existing Through our Breadwinners Programme contacts who have supported us with social challenge? If so, apply we support refugees who already have handling photo consent and finding to the Stephen Lloyd Awards status and are struggling to find work. before 16 March and you could suitable insurance. Above all, SLA has become our next winner. We provide them with their first UK been instrumental in supporting the 15 Find out more by visiting employment, references, networks and refugees to secure their first jobs with www.stephenlloydawards.org opportunities to independently sustain Breadwinners, and the 40 young people themselves and progress. This takes, on seeking asylum to gain their first UK average, six months. experience, training and mentoring.
The Stephen Lloyd Awards By managing the market stalls, serving Written by Breadwinners were founded by the Bates customers, working the till, creating Wells Foundation (registered marketing campaigns, explaining our charity number 1150321) in mission and attending training and FIND OUT MORE memory of Stephen Lloyd, mentoring sessions, refugees gain the former senior partner transferable skills and feel proud and Anyone interested in supporting young and head of Charity and useful, contributing to their wellbeing and refugees can find out how to get involved Social Enterprise at Bates at https://www.breadwinners.org.uk/get- Wells. Each year, the awards integration as active members of society. involved continue Stephen’s passion As a wider benefit, partners, customers and of developing new ideas by volunteers gain understanding and feel Find out more about Breadwinners here: inviting applications from positive about contributing to an end to Video – https://vimeo.com/257109138/ early stage projects focused negative bias against refugees in the UK. on delivering systemic social 3831080013 change. Winning applicants Video – https://vimeo.com/377038987 receive funding of up to Support from the Stephen Lloyd £20,000, along with an Awards (SLA) Our Impact Leaflet –https://drive.google. opportunity to receive pro com/file/d/0B59cuoF2KQfAelBwREI4a3Y3 Up until June 2019 the Breadwinners team bono support from expert aW1XV1dPTE9YUzN2OWpHQTRv/view leaders in the charity and consisted of two people – the project And stories on our website at social enterprise sector. director and a part-time programme https://www.breadwinners.org.uk manager. The award has enabled us FEATURE 15
Life cycle of your property All charities and social enterprises have property requirements.
The beginning If you are considering breaking your lease, Real estate expert obtain professional advice well in advance First you should carry out an assessment Amanda Gray explains of serving the break notice as there are of your business needs and the location frequently conditions to be met. All break what to expect at each and type of property that would best conditions must be strictly complied with stage of your property’s support them. There are a number of and once a break notice is served, it is life cycle. advisers you may call upon to help, for irrevocable. example, commercial property agents. You may want to refurbish your offices Once you find a suitable property, you – turning a traditional office space with will need to agree terms of the letting or individual offices and boardrooms towards acquisition and carry out due diligence. a more open-plan styled layout to utilise Agents usually negotiate and agree the the space more efficiently. If you are a heads of terms. However, it would be leaseholder, you will need to check the advisable for solicitors to be involved at this terms of the lease to find out what types stage to provide a legal angle and assist the of alterations require landlord’s consent. agents to secure you the best deal possible. Amanda Gray The end Senior Associate Once you have agreed heads of terms, If your property is leasehold, your T: 020 7551 7833 the solicitors will carry out due diligence [email protected] lease may end due to the expiry of the in respect of the property. This consists of contractual term of the lease or via the Amanda is a senior associate title investigation, undertaking property exercise of a break right. in our Real Estate team with searches and raising pre-contract more than 14 years’ experience enquiries with the landlord’s or seller’s acting for a cross section At least six months before the end of your solicitor. The transactional documents will of commercial and charity lease, you should review the yielding up also be negotiated between the solicitors. clients, dealing with a wide clauses in the lease and any licences for range of commercial property alterations you may have. We recommend transactions. You will need to think about the design instructing a solicitor and a building strategy for your property. A space adviser to assist you in this process. planner/architect would be able to discuss your requirements on design, Open discussions with your landlord layout, storage and furniture solutions. If and ask them to serve a schedule of your property is leasehold, it is likely that dilapidations as soon as possible. This landlord’s consent is required for internal way you can work out whether you will be non-structural alterations. doing the works yourself or settle with the At this stage it is also important to landlord financially. A pre-action protocol establish exactly what your connectivity for dilapidations sets out the procedure and data needs are, as your chosen and what needs to be considered in order telecom provider may require a wayleave to encourage early settlement and avoid agreement giving them the necessary litigation. rights to install their equipment. This can take several months to negotiate. For freehold properties, the state and condition you leave the property in is usually The middle discussed and agreed with your buyer.
It is good practice to continually appraise your property requirements, so that you FIND OUT MORE are able to plan ahead in good time. Our real estate team is able to support If you have surplus space at your leasehold you at all stages of your property lifecycle. property you may want to consider options Please get in touch at https://bateswells. CHARITY AND SOCIAL ENTERPRISE co.uk/services/real-estate UPDATE | SPRING 2020 such as sharing, subletting, assigning or exercising a break right. 16 FUNDRAISING FOCUS
How to handle complaints
The Fundraising Regulator continues to emphasise the importance of proper complaints handling.
A clear and effective complaints policy So how do we comply with the code? Emma Dowden-Teale and is a must for charities in all fields and of In essence, to deal with complaints well, Charlotte Blackbourn all sizes. But charities also need to have you need a clear and effective policy, robust internal procedures to ensure the remind charities how backed up by internal procedures and policy is complied with. to deal with complaints well-trained staff. in line with the Code of Appropriate complaints handling means Fundraising Practice. not only that the individual complainant A good complaints policy should, at obtains a resolution, but also that the a minimum, include the following: charity can identify any issues and prevent l A clear definition of ‘complaint’. them occurring again in the future. This will usually be wide enough to encompass any expression of Spotlight on fundraising dissatisfaction about something While complaints may relate to any aspect the charity has done or failed to do. of a charity’s work, charities’ fundraising l An explanation of who can make a practices are often the subject of criticism. complaint, and how. Make sure you The Code of Fundraising Practice, revised provide more than one method for in October last year, requires charities to: Emma Dowden-Teale Partner making complaints and ensure that T: 020 7551 7890 l make sure that ‘complaints are the methods offered are accessible e.dowden-teale@bateswells. investigated thoroughly and fairly to (e.g. if you have an online complaints co.uk find out the facts of the case, avoiding form, also offer to take calls relating Emma is recognised as a unnecessary delay’; and to complaints). Key Lawyer in the Legal 500 l ‘respond to complaints fairly and l The steps that will be followed on directory. She advises on all receipt of the complaint, including aspects of regulatory and in a way that is in proportion to the public law, both contentious complaint’. clear timescales and possible and advisory. resolutions. This may also include The Fundraising Regulator now publishes signposting to other relevant decisions in all of its investigations into organisations, such as the Charity fundraising complaints (regardless of Commission, Fundraising Regulator, whether it found a breach of the code) and and/or Care Quality Commission. names the charities concerned. Recently published decisions show that the regulator is as concerned with ensuring FIND OUT MORE that the complaint itself is handled well as Our Public & Regulatory department has it is with investigating the actual subject a breadth of expertise in advising on all Charlotte Blackbourn matter of the complaint. For example, in Solicitor manner of complaints handling issues, a decision published in December 2019, including drafting complaints policies T: 020 7551 7667 the Salvation Army was found to have and procedures. Please get in touch via [email protected] breached the code by failing to investigate https://bateswells.co.uk/services/public- Charlotte is a solicitor in the and appropriately respond to complaints and-regulatory Public & Regulatory team. about its marketing requests for See also our article on dos and do nots for She advises a range of clients donations. In response to the regulator’s effective complaints handling at:https:// including public bodies, intervention, the charity reviewed its bateswells.co.uk/2019/03/how-to-handle- regulators and charities on complaints their legal and regulatory complaints procedure and retrained staff obligations. on complaints handling processes.
In other reported cases, there was no substance to the original complaint but the charity was criticised for its poor complaints handling. The regulator has even found CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 breaches of the code where the charity has not learned lessons from the complaint. FEATURE 17
Payments overseas – HMRC investigates
Over the past few months, we have seen an increase in the number of investigations being carried out by HMRC in relation to charities making payments overseas.
In our experience, HMRC carries out these agreements, correspondence, funding Augustus Della-Porta investigations to ensure charities are applications, project plans, trustee and Stephanie Biden making payments overseas in accordance decisions regarding the payments, due draw on their experience with its guidance on payments to overseas diligence checklists, project updates, of advising on HMRC bodies. Its key test is that ‘a charitable records of meetings or teleconferences investigations to explain payment made to a body outside the UK and financial records. Ordinarily, the will only be charitable expenditure for UK information must be provided in hard what is involved. tax purposes by the charity provided the copy within six weeks of the request, but charity can clearly demonstrate to HMRC HMRC will often require further details that it has taken steps that HMRC considers and the investigation may take over a are reasonable in the circumstances to year to conclude. ensure that the payment is applied for charitable purposes’. If a charity does not have particular wrecords it should consider what other HMRC goes on to state in its guidance that useful evidence it might have. For ‘if that condition isn’t met, the payment is example, instead of a monitoring report, treated as non-charitable expenditure by a trustee may have personally visited a the charity for UK tax purposes’. To put it project and reported back to the board. Augustus Della-Porta another way, the charity would receive a The minutes of that meeting could be Partner tax bill from HMRC on that amount. included in the response, together with a T: 020 7551 7607 paragraph explaining how the project was [email protected] HMRC may initiate an investigation as monitored and why it was done in this way. Augustus is recognised as a a matter of course, but this could also Key Lawyer in Legal 500 and come about due to concerns raised If you are funding projects overseas you leads on advising Muslim following regulatory action by the Charity should consider whether you would be charities and not-for-profits Commission. Charities will typically be able to provide this information if it was in the UK and overseas. required to provide information about ever requested and make sure that policies, payments made to overseas bodies over processes and documentation could stand a previous financial year including: up to scrutiny if needs be. You should ensure that you can clearly explain how l the amount of each payment, to whom, and why particular decisions have been when paid and on what basis; made and carefully document decision l details of the charity’s internal financial, making, due diligence, justification for management and decision-making expenditure and monitoring of how funds procedures and how they were applied have been spent. Doing this now could Stephanie Biden Partner in relation to the payment; help to avoid problems in the future. T: 020 7551 7730 l the charity’s relationship with the [email protected] payee, what research and due diligence FIND OUT MORE Stephanie is recognised as a was carried out and what risks were Leading Individual in Legal HMRC’s guidance on payments to taken into account before making the 500 and is the joint lead on overseas bodies is at https://www.gov. payment; all our work with faith-based uk/government/publications/charities- organisations. She also has a detailed-guidance-notes/annex-ii-non- l the terms of any agreement(s) put in particular interest in working charitable-expenditure#payments-to- with international NGOs. place with the recipient (or, if there is no overseas-bodies agreement, why none was put in place); See this article for more detail on l what monitoring work the charity the guidance: https://bateswells. carried out to confirm that the funds co.uk/2017/02/sending-funds-overseas were used for charitable purposes. We regularly advise charities operating overseas on these and other related issues. HMRC typically asks charities to provide a CHARITY AND SOCIAL ENTERPRISE Please contact Augustus Della-Porta or UPDATE | SPRING 2020 large volume of supporting documents with Stephanie Biden for further details. their response – including copies of 18 FEATURE
Changing your charity’s structure
We often advise clients seeking to change from an unincorporated structure into a corporate charity.
Under English law a charity can exist Choice of legal structure Lucy Rhodes explains in a number of legal structures, the Your first decision will be to choose a new what’s involved. most common being the trust, the un- legal structure for the charity. By far the incorporated association, the company most common charitable incorporated and the charitable incorporated structures are the company limited by organisation (CIO). guarantee and the CIO, but the activities, history and status of your charity may Although there are many charitable make it worth considering other options, trusts (which are unincorporated) and such as the community benefit society or unincorporated associations around, the Royal Charter body. it is unusual to set up a new charity with an unincorporated legal structure The main distinction between the today. The advantages of an incorporated company limited by guarantee and the CIO legal form – a distinct legal personality Lucy Rhodes Associate is that the company is subject to company and limiting the trustees’ exposure to T: 020 7551 7604 law as well as charity law, whereas a CIO personal liability in respect of liabilities to [email protected] is only subject to charity law. A CIO has a third parties – have made the company single regulator, the Charity Commission, Lucy is recognised as Key limited by guarantee and the CIO more Lawyer and rising star in whereas the company is subject to dual attractive options. Legal 500. She is a charity regulation by Companies House and the law specialist with a varied commission. practice, advising on a range Many existing unincorporated charities of legal issues that affect choose to change to one of these The company does have its advantages charities and not-for-profits incorporated structures to benefit from though, particularly if you are looking for of all sizes. these advantages. There is no magic a ‘tried and tested’ legal form that third button to press to bring about this parties, including overseas partners, will change. A new incorporated charity must be familiar with. It can also be set up in a be established and registered with the day, whereas a CIO is only established on Charity Commission. It is then a matter of registration with the Charity Commission. identifying the assets and liabilities of the The Charity Commission has been known existing charity through a due diligence to register charitable companies in the exercise and transferring them over to same timeframe, but this is not the norm. the newly-registered corporate charity. New layer of governance? Although this process can be technically complex and involve some time The internal governance structure of your commitment from trustees and staff (if charity may need to change if you change any) it does provide an opportunity for your legal structure. Companies and CIOs a ‘spring clean’ of the charity. In the due have two tiers of governance, with trustees diligence and transfer processes, knotty (who, in the case of a charitable company, legal, accounting and practical issues that are also directors of the company for the have not been considered for some time purposes of company law) and members. will often be untangled. The new charity will benefit not only from the advantages The trustees and members can be the of corporate status, but also from an same individuals (the ‘foundation model’). up-to-date constitution that facilitates This is often the simplest governance compliance with charity law and good model from an administrative perspective, governance practice. as only one group of individuals is involved, albeit making decisions wearing So, if you are embarking on this process, different ‘hats’. what are some of the key things that you should be thinking about? Alternatively, the members can be a wider CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 group of individuals (the ‘association model’), a sole individual or a sole FEATURE 19
corporate entity, providing an additional and liabilities from the unincorporated layer of scrutiny and accountability for charity to the incorporated charity. In most the trustees. cases a transfer agreement can be used, although certain arrangements require Legal authority bespoke documentation to be put in place.
Another early consideration will be For example, transfers of registered whether your unincorporated charity land must be in a prescribed form and has legal authority to make the change. submitted to the Land Registry for The first place to check is your governing registration, and contracts with third document, which may have an express parties may need to be transferred by power. If not, it may be possible to add a deed of novation. one through an amendment. Alternatively, small charities with annual income Consents and consultation below £10,000 may be able to rely on the statutory powers in the Charities Act It is essential to factor in plenty of time 2011, which require a degree of Charity to obtain any consents and carry out any Commission involvement. In some cases consultation that may be required. it may be necessary to seek a Charity Commission scheme to authorise the For instance, Charity Commission approval transfer if authority cannot be obtained will probably be needed if there is overlap elsewhere. in the trustees of the original charity and the trustees of the new charity. The What to do with the existing charity? charities may also need to obtain consents from third parties before transferring The tidiest option is to wind up and particular assets, for example, from a remove the existing charity from the lender that has a mortgage over land to Charity Commission’s register of charities be transferred or a landlord whose lease after the transfer to the new incorporated contains covenants against assignment. charity has taken place, but this is not And if the original charity has staff, the always advisable. For example, where Transfer of Undertakings (Protection of the unincorporated charity is likely to Employment) Regulations (TUPE) will receive legacy income, keeping the apply to the transfer process. Among other unincorporated charity as a shell charity things TUPE imposes duties on the charity on the register can prevent any legacy to inform and, if applicable, consult in left to the unincorporated charity being relation to the transfer. lost once the unincorporated charity ceases to exist. Charities that have valuable trust property that they wish to FIND OUT MORE protect (such as collections with historic or artistic value) may decide to keep the The Charity Commission has recently updated its guidance on changing your charitable trust alive to hold the property charity’s structure https://www.gov.uk/ and limit its availability to creditors of the guidance/change-your-charity-structure incorporated charity. Our Charity and Social Enterprise team has If the existing unincorporated charity is significant experience of advising charities retained, it is common for the incorporated on the pros, cons and process of change and would be happy to discuss your charity to be appointed as its sole trustee particular situation with you. to enable the individual trustees to retire.
Mechanisms to effect transfer
There are a number of mechanisms available to effect the transfer of assets 20 FEATURE
Behaviour matters
Understanding the emotional drivers behind behaviours can help chief executives and trustees to lead effectively and make good decisions.
Board-CEO relations can fray if not Pre-mortems help boards and senior Tesse Akpeki explains carefully nurtured. Despite their best managers to pre-empt project failure. intentions, executives and board members how best to put behaviour l Agree an approach for the chair to fall prey to cognitive and organisational theory into practice within follow if he or she needs to contact biases that get in the way of good your organisation. senior managers between meetings. decision-making and effective working. l Increase transparency about the The Behavioural Insights Team – also decision-making processes. known as the ‘Nudge Unit’ – a social l The chair and the CEO should keep on purpose company partly owned by the the lookout for ways to foster feelings Cabinet Office, draws on behavioural of ownership among board members. science studies to understand the choices These links can be strengthened with people make and how they behave in the access to peer support networks, real-world context. Indications are that coaching and mentoring schemes. poor outcomes are more likely to be due to bad processes rather than bad people. l Independent reviews increase Tesse Akpeki accountability. Facilitators encourage Lead Governance How much information do trustees open and honest conversations. Identify Consultant, Onboard need, from whom, by when and how is useful ways of regulating communication T: 020 7551 7702 it transmitted? Too little and they will and sharing information. A monthly [email protected] be misinformed; too much, they will be briefing paper provides a structure Tesse is a consultant, trainer, swamped by day-to-day operational issues. for keeping trustees informed. Build Centre for Effective Dispute leadership excellence through regular Resolution-accredited Listen to how board-savvy CEOs talk assessments, performance evaluations mediator and a non-practising about their boards and the governing solicitor. She has worked and reality checks of the board, chair extensively with third sector process. They spend 20–25% of their and the CEO. organisations nationally and time working on governance matters, l Provide board members with speaking internationally. Tesse is an developing agendas for committee and opportunities and opportunities to meet accredited coach, specialising board meetings, chairing executive-team with key stakeholders. Recognise their in governance development meetings and ensuring that materials and leadership. efforts for creativity and innovation. going to the board are high quality. l Board members could periodically Behavioural insights tell us that when attend quarterly management meetings stakeholders are separated from an in an observational capacity to better organisation’s operations, they are less understand the scenarios senior likely to fully understand and appreciate managers have to navigate. the value being created. This reduces l Employ tact, fairness and diplomacy satisfaction, trust and loyalty. to shape relationships and implement policies. Emotional and social Putting behaviour theory into intelligence cuts through testing practice situations while building trust and l Identify bias busters. Recognise when confidence. short-term tactical needs are prioritised over longer-term objectives. Incentives Celebrate successes and hope. The chair encourage a focus on the future. as chief governance officer and the CEO as chief board developer clarify the board’s l Apply techniques to reduce conformity. governing role, fine-tuning the board’s Make it easier to challenge existing governance structure and mapping out the views – overcoming power dynamics by processes and behaviours for involving the speaking up. board in its critical governing functions. l Anticipate what could go wrong by CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 imagining the initiative has already failed and asking – why did this happen? FEATURE 21
A VAT wish list
Brexit signals an end to the UK’s ties with the European Union VAT regime. Our tax expert Bill Lewis asks the prime minister to rationalise some of the VAT anomalies that beset UK charities.
Dear Prime Minister,
I know you are going to be a busy chap this year what with agreeing a trade deal with Brussels and Trump and your ambitious domestic agenda, but I would ask that you spare a thought for our wonderful charity sector and the many VAT travails they have to suffer. Once we’ve left the Customs Union – assuming we do – and have control of our VAT laws you can implement a cornucopia of changes for good.
Here are my top five requests.
1. The law around when a charity can construct a new building at the VAT zero rate is almost as complicated as a cryptic crossword – the chief problem is the new building has to be used for a ‘relevant charitable purpose’, which means otherwise than used for a business purpose. A single stroke of Mr. Sunak’s pen could remove the word ‘relevant’ from the statute book, meaning the property would only have to be used for a charitable purpose – much easier to satisfy. Also, could the relief be extended to Community Amateur Sports Clubs please? Mr Cameron got into a spot of bother with that when he was PM – you may recall he tried to help Eynsham Cricket club save VAT on their new club house only to be told they were not a charity and did not qualify.
2. If you buy a book or a newspaper it’s VAT zero rated. The same product bought electronically is subject to VAT because electronic publications did not exist when the VAT law around printed materials was created. For years HMRC has blamed the EU for not allowing a change in the rules – but some time ago the EU said if the paper product was zero rated the electronic product could be too. So, the UK law can be changed – an easy populist win.
3. In the same vein – did you know that audio books are subject to VAT? Braille books and paper books are VAT zero rated. Those who listen to audio books are mostly people with restricted vision. Another easy and popular move would be to extend the VAT zero rate to audio books as well.
4. Charity advertising is another easy win. The rules say that the recipient of the advert must not be ‘selected’ if it is to qualify for VAT zero rating. This was to prevent people being door stepped and phoned by charity agents VAT free. However, since the rules were created, we have seen the rise of electronic media, Facebook, Instagram et al which use clever algorithms to select the recipients so that those most likely to respond to the advert receive it. A brilliant idea. But because they are ‘selected’ the taxman says no to VAT zero rating. But surely an electronic advert is less intrusive than face-to-face marketing?
5. Finally, please can you align VAT law with direct tax law on areas such as advertising and sponsorship? The corporation tax man allows donors a little advertising in return for their donation; the VAT man allows none, meaning the smallest acknowledgement in return for a payment can lead to an unexpected VAT charge.
All of the above will be easier to do than many of the things on your to do list and will help many charities who could do with some good tax news in a year in which they are dealing with MTD and IR35.
Yours sincerely Bill Lewis [email protected] 22 ROUNDUP
What’s new at the Charity Commission?
Commission updates and broadens its safeguarding guidance
During the past two years, the Charity Secondly, there is greater focus on the role Commission has had an increased focus a charity’s culture plays in safeguarding. on safeguarding and people protection. The commission emphasises that all It expects that all charities – not just trustees must, in relation to their charity, those charities working with children and make sure that ‘protecting people from vulnerable adults – will take reasonable harm is central to its culture’ and that steps to protect their staff, volunteers, it ‘does not ignore harm or downplay beneficiaries and those they come into failures’. The guidance now refers to both Claire Whittle contact with. internal whistleblowing policies and Senior Associate the commission’s own whistleblowing T: 020 7551 7605 In October 2019, the commission updated procedure for charity staff and volunteers. [email protected] its safeguarding guidance Safeguarding Claire is an experienced public and protecting people for charities and Thirdly, the section on DBS checks has and regulatory lawyer. She trustees. Despite no advance public been expanded. It now emphasises that works with a diverse range of consultation or fanfare, the revised many posts are eligible for standard or clients including public and guidance requires a number of key changes enhanced level DBS checks, and provides Emmaprivate Knuckeysector bodies, Consultant charities, social enterprises and to safeguarding practices for charities. that trustees should risk assess all roles T: 020 7551 7790 individuals, and in a variety of to determine whether they are eligible for [email protected] sectors including education First, there’s now an even greater a check and that, where available, such and health and social care. Emma has been advising on emphasis on the importance of checks should be undertaken. It further charity law for more than 15 safeguarding and protecting people from recommends that trustees consider asking years. Following experience harm, with safeguarding described as ‘a DBS applicants to register with the DBS at the beginning of her career fundamental part of operating as a charity Update Service, or consider carrying out in private practice advising on for the public benefit’. While this is not a further DBS checks on a regular basis. charity law and private client great departure from previous guidance, matters, Emma spent seven years as an in-house lawyer the obligations on charities seem to be The guidance provides that a charity’s at the Charity Commission. increasingly onerous. partners should be made aware of the charity’s safeguarding policies and Emma Dowden-Teale Partner For example, there’s a new section indicates that this includes delivery on checking your charity’s policies, partners, trading subsidiaries of the charity T: 020 7551 7890 e.dowden-teale@bateswells. procedures and practice. The latest (including charity shops), organisations the co.uk iteration of the commission’s guidance charity funds, and connected charities. provides that all policies, procedures and Emma is recognised as a practice must be checked and challenged Finally, the updated guidance signposts Key Lawyer in the Legal 500 directory. She advises on all to ensure they’re fit for purpose. They charities to additional resources, for aspects of regulatory and should also be reviewed annually, if there example NCVO’s guidance on safeguarding public law, both contentious is a serious incident, and/or if there are and Bond’s governance guidance, both and advisory, including in any changes to how the charity operates of which were prepared with input from respect of equality duties, (such as the services it offers or the Bates Wells. human rights, safeguarding, settings it operates in). public procurement and inquests. In addition, the commission’s expectation FIND OUT MORE is that every trustee should have clear The updated safeguarding guidance oversight of how safeguarding and is at: https://www.gov.uk/guidance/ protecting people from harm are managed safeguarding-duties-for-charity-trustees within their charity. The guidance stipulates that this means monitoring See also this new online portal launched by the government to support charities performance, not just in statistical form, handling safeguarding concerns or but with qualitative reporting, and allegations – https://safeguarding.culture. suggests that this might include reviewing gov.uk a sample of past concerns, commissioning CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 external reviews or inspections and/or site visits to carry out checks. ROUNDUP 23
New Charity Commission guidance on reporting serious incidents involving partner organisations
In December 2019 the Charity Commission charity’s ‘brand’. This may be wider than published new supplementary guidance the previous focus on reputation. on reporting serious incidents involving 2. The second category has the potential partner organisations. This includes an to significantly widen the range of incident involving a charity’s delivery incidents that trustees must now partner, funding recipient or trading consider. subsidiary, or indeed any organisation using a charity’s brand. 3. There is a significant gap between an Danielle Mawer Associate incident which ‘could have a significant (Australian Qualified) The supplementary guidance elaborates impact on the charity’ (under the T: 020 7551 7756 on the existing serious incident reporting second category) and an incident which [email protected] guidance, and sets out the commission’s ‘has little or no impact’ (under the third Danielle works across a broad expectations for when a charity should category), creating a wide grey area. range of legal areas, from report incidents involving partners. The advising on international supplementary guidance reiterates that Helpfully, the guidance clarifies that in collaborations to navigating trustees must make a serious incident complex governance issues a federated structure, if an incident report if an incident materially affects the and assisting with restructures happens in one local charity, the and new ventures. She has a charity, its staff, operations, finances and/ commission would generally only expect particular interest in human or reputation. the local charity and the umbrella body rights, NGOs and organisations to consider whether to report. Other working overseas. Of note is that this guidance makes members of the federation will not a distinction between three different generally be expected to make a report. scenarios: The umbrella body may need to submit 1. An incident involving the charity’s a report, depending on the circumstances. funds, brand, people or an activity that it funds or is responsible for; Ultimately, it is the responsibility of the trustees to determine whether an 2. An incident that does not involve a incident is sufficiently serious to report. charity’s funds, brand or people, but We recommend that charities revisit Katy Sawyer Trainee Solicitor ‘could have a significant impact on their practices to ensure trustees are the charity’ – for example, if it causes considering all relevant incidents involving T: 020 7551 7869 material reputational damage to the [email protected] partners, if and when they arise, and are charity, raises material issues around documenting the reasons for decisions Katy is a first year trainee due diligence on the partner, or is a about whether to make a report about solicitor currently sitting in our trigger event in a funding agreement; Charity and Social Enterprise particular incidents or categories of and department. incidents. If a decision is made to not 3. An incident that does not involve the report an incident, charities should keep charity’s funds, brand or people and good records of the rationale for that ‘has little or no impact on the charity’. decision and be prepared to justify their approach to the commission if they are A report is more likely to be required ever challenged on this. for incidents falling within the first two categories, but this is always a decision for the trustees. A number of factors must be FIND OUT MORE considered in each case – including the The new supplementary guidance is at: charity’s relationship with the partner and https://www.gov.uk/guidance/reporting-a- the nature and severity of the incident. serious-incident-in-your-charity-when-it- involves-a-partner. The main guidance is at: This will likely remain a vexed area for https://www.gov.uk/guidance/how-to- report-a-serious-incident-in-your-charity charities to navigate, particularly because: CHARITY AND SOCIAL ENTERPRISE UPDATE | SPRING 2020 1. This guidance introduces a new focus on whether an incident impacts a IS 683389
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© Copyright Bates Wells & Braithwaite London LLP February 2020 The information in this update is necessarily of a general nature. Specific advice should be sought for specific situations.