News

Employees

At this time, many charities provide essential services to vulnerable people in society and many charities face the challenge of how to pay staff wages during the COVID-19 crisis.

What support is available to pay employee wages?

Under the Coronavirus Job Retention Scheme, UK employers (including charities) may be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

Eligibility

All UK businesses are eligible including charities.

How to access the scheme

You will need to:

- Designate affected employees as ‘furloughed workers’

- Notify your employees of this change – please note changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on portal when available)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month plus the associated employers’ national insurance contributions on this amount and the minimum automatic enrolment employer pension contributions on that wage.

HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Charities can choose to top up the payment but are not required to do so.

What if our employees’ wages are funded?

Where employers receive public funding for staff costs, and that funding is continuing, the Government expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector and public sector employers who receive public funding for staff costs.

It is important to speak to your funder to confirm whether the funding will continue.

Where a charity is in receipt of ‘Core’ funding, it is important the charity review how such funding is allocated. Where salaries are supplemented by the charities’ own resources, it may be possible to claim under JRS for the element funded by the charity itself. This is subject to confirmation by HMRC and the funder, with the approach taken being fully documented, minuted and approved by those charged with Governance.

Can our employees volunteer?

The Government guidance states that a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

This means that furloughed employees of charities can undertake volunteer work however this cannot be for their employer.

Support for paying sick pay to employees

The government is bringing forward legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19 (up to a maximum of 2 weeks SSP per eligible employee).

Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.

Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.

Eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force.

The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

Eligibility

Your business is UK-based.

Your business is small or medium-sized and employs fewer than 250 employees as of 28 February 2020.

How to access the scheme

A rebate scheme is being developed. Further details will be provided once the legalisation has passed:
https://www.nibusinessinfo.co.uk/content/coronavirus-support-paying-sick-pay-employees

Finance

As will all sectors, charities are assessing the financial impact of COVID-19. It is important to understand the cashflow requirement over the next 3 to 6 months. We cannot stress enough the importance of your organisation projecting your cashflow both in terms of understanding your organisations position and in terms of applications for funding. Such cashflows should be managed and reviewed on a weekly basis.  

Projected income

Project income over the next 3 to 6 months:

- Speak to your funders to confirm the position on funding income

- It is likely that donations will decrease over the period, assess the potential reduction and what alternative fundraising opportunities that are available

- Project realistic incoming resources over the period

- Projected income could include income from Furloughed employees

Projected expenditure

Project expenditure over the next 3 to 6 months:

- Review projects to determine whether they should be cancelled or postponed

- Consider staffing level requirement (support available via Employee Retention Scheme)

- What overheads can be reduced? Check more material overheads. These could include for example rent costs. Can you renegotiate these with your landlord or freeze them for a number of months?

- Can you agree to defer some overhead payments. For example agree to pay 50% now , and 50% when your business is back up and running again?

- Determine affordability of repayment of current finance (see finance support available)

- Assess VAT liability if applicable (see VAT support below)

- Liaise with funders in terms of project deliverables and outcomes. Larger funders like Peace IV have stated they will look at each project on a case by case basis.

Can we use our cash reserves?

Many charities will have a reserves policy in place whereby 3 to 6 months expenditure is retained in reserve (possibly as a designated fund).

Cash reserves are generally intended for future unexpected need or to pursue an opportunity in line with the charities’ purposes.  Therefore, they can be used to support the charity during the COVID-19 crisis.

Any decisions in relation to the use of cash reserves should be undertaken in line with the Charities Articles of Association and fully documented by those charged with governance of the charity.

To assess your business cash position, examine your current cash position, and your  expected cash inflows and outflows on a regular basis, during COVD-19. Businesses, depending on their context, may want to draw up these cash flows daily, weekly, monthly.

Can we use restricted funds?

Restricted funds are those funds that the charity trustees are obliged to spend in a specific way or for a specific purpose as set out in a funding letter of offer or services contract, specified by grant maker, donor or in an appeal document.

In some instances, there may be ways to amend these restrictions, but accessing or releasing restricted funds should only be considered if in discussion and agreement with funders. The Charities Commission NI has stated that they encourage charities to also carefully consider the wider and longer-term impacts of making such a decision on your financial resilience and donor relationships.

The key point to re-iterate is to ensure there is clear and open communication with funders.

What other financial support is available?

There are a number of support packages available to charities and these are set out below.

The Charities Aid Foundation

The Charities Aid Foundation (CAF) has launched an emergency fund for small charities and organisations as they battle the effects of the coronavirus.

The CAF Coronavirus Emergency Fund will offer one-time grants of up to £10,000 to small charities, organisations and social enterprises that are struggling to survive.

Charities can apply for unrestricted funding for core costs, staffing, volunteer costs, supplies and equipment, communications or other critical charitable areas.  You must be able to describe how an emergency grant will improve the situation for your organisation and community.

Eligibility

Organisations with a charitable purpose and charitable activities, which had income of £1million or less in their last financial year including:

- UK registered charities

- Organisations registered with Companies House or the Public Mutuals Register, as a charitable or not-for-profit entity, eg Community Interest Companies, Companies Limited by Guarantee and others

- Unregistered entities and social enterprises

How to access the scheme

Further details on the grant are available from the CAF website:
https://www.cafonline.org/charities/grantmaking/caf-coronavirus-emergency-fund

The Community Foundation for Northern Ireland

The Community Foundation for Northern Ireland (CFNI) has opened a fund for charitable groups supporting older people and dealing with emerging issues from Coronavirus.

They anticipate those organisations who are providing small scale emergency support will require funding of around £1,000 to £2,500.  Those supporting need on a longer term basis, and/or who are significantly enhancing their services at this time, may require grants of up to £10,000.

The current focus is to support groups and organisations working with the following communities and issues and that are affected by coronavirus:

- Older people (aged over 50)

- Those at increased risk, particularly in relation to poor mental health and wellbeing  

-Vulnerable isolated people and families, particularly those living in rural areas, families where a parent/ both parents have lost their employment or where children are living in poverty

- Children and young people’s projects, particularly focusing on the voice of young people and connecting through creative mediums.

Eligibility

Constituted organisations based in Northern Ireland although there are a number of exceptions on the website.

How to access the scheme

Access via the website:  https://communityfoundationni.org/grants/coronavirus-community-fund/

The National Lottery Community Fund

The National Lottery Fund released a statement on 27^th March 2020 to say that all the funding decisions we make for the next six months (up to £300m of National Lottery funding) will be devoted to addressing the current crisis. In addition, they will accelerate the cash part of this funding as much as they can to get money to where it needs to be.

In order to reach those groups best placed to support their communities at this vital time, they will prioritise the following faster payments for existing grant holders and applicants using the following criteria:

- Activities specifically geared to supporting communities through this crisis

- Helping organisations overcome any liquidity issues caused by COVID-19

- Further details to be released
https://www.tnlcommunityfund.org.uk/about/covid-19-how-we-are-supporting-our-grant-holders-at-this-difficult-time

Department for Communities

The Department for Communities has released a number of funds for Northern Ireland:

- DfC Community Contingency Fund – Those organisations funded by DfC should have received correspondence from the Department to state support would be made available. Details of the nature of such support have yet to be released. Updates will be released
https://www.northernireland.gov.uk/node/43107

- DfC Sports Fund – Again details are to be released in respect of emergency funding to Sporting organisations in conjunction with Sport NI
https://www.communities-ni.gov.uk/news/minister-hargey-ensures-sports-sector-supported

- DfC Support for Artists, Performers and Creative Producers – Similarly funding is to be provided for those in the creative industries in conjunction with ACNI
https://www.communities-ni.gov.uk/news/communities-minister-announces-support-artists-performers-and-creative-producers-across-arts-and

Any organisation in receipt of government funding should ensure they check regularly their relevant Department’s website for any funding to be made available. We will endeavour to provide updates once received.

Small Business Grant

A grant of £10,000 will be provided to all small businesses who are eligible. At present it is not entirely clear whether charitable entities are eligible for the grant. The only clarification we have been provided is that Voluntary and Community group are not eligible.

However, those charities with trading subsidiaries (for example charity shops) may be eligible.

Eligibility

Businesses who are eligible for the Small Business Rate Relief Scheme.

The ratings system will be used as the mechanism to identify eligible businesses in Northern Ireland.

Last year’s rating list will be the basis for payment.

How to access the scheme

Payments will be made directly into the bank accounts of eligible businesses.

Apply via the following link https://www.covid-19smallbusinessgrants.economy-ni.gov.uk/

You will need you

- Your Ratepayer ID (shown on your rate bill)

- Your Occupancy ID (shown on your rate bill)

- Your sort code

- Your bank or building society account number

- Your e-mail address

Business rates

While most charities can avail of charitable rates relief, there are a number of activities that do not attract any exemption from a charity’s rates liability.

There will be a three-month rates holiday for all business ratepayers, excluding public sector and utilities.

This means that no rates will be charged for April, May and June 2020. This automatically reduces the 2020-21 annual rate bill for business ratepayers by 25 per cent. This amount does not need to be paid back.

Eligibility

All businesses excluding public sector and utilities.

How to access the scheme

This will happen automatically.

Hardship Rates Relief

Similarly, as above, whilst most charities can avail of charitable rates relief, the Hardship Rate Relief scheme is available for non-domestic ratepayers who have been affected by exceptional circumstances.

Hardship Rate relief is only available on rates that are overdue from as at March 2020 – therefore, it will not be possible to claim it for April May and June 2020.  However, if your business has been affected during February and March 2020, you can apply.

Following the Prime Minister’s announcement on 23 March 2020 about additional measures to limit the spread of COVID-19, Land & Property Services offices and phone lines will be closed from Tuesday 24 March until Wednesday 15 April. The closure will be kept under regular review and the dates will change in line with further Government announcements.

Eligibility

Most non-domestic properties, including those owned or used by voluntary organisations, will be eligible for Hardship Rate Relief if they meet certain condition

How to access the scheme

https://www.nibusinessinfo.co.uk/content/hardship-rate-relief

VAT

For those charities falling within partial exemption rules, the government will be automatically deferring business payments for Valued Added Tax (VAT).

The deferral will apply from 20 March 2020 until 30 June 2020.

Eligibility

All UK businesses are eligible.

How to access the scheme

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

Please note that if you pay your VAT by direct debit then you will have to cancel this or it will automatically be paid.

VAT refunds and reclaims will be paid by the government as normal.

https://www.nibusinessinfo.co.uk/content/coronavirus-deferred-vat-payments

Governance and Compliance

Annual reporting deadline

The Charities Commission NI have confirmed that no charity will be penalised for missing its annual reporting deadline.

Charities must however inform the Commission via email to admin@charitycommissionni.org.uk if they find themselves in this position.

Charity Registration

The Charity Commission has confirmed that registration will continue as normal, however, there may be delays in responding to correspondence, or making a final decision on applications.

If charities are concerned that they will not meet their submission deadline, they should contact the Commission as soon as possible via registration@charitycommissionni.org.uk to seek an extension.

You should include the name of the charity and the reason for the extension request and importantly print or save a copy of the application if you have already started to complete it.

Where applicants require more time to submit further information to support an application which has already been submitted the Commission will also treat these requests pragmatically.

Charity meetings

Some charities will have meetings planned, or required through the conditions of their governing document, over the coming weeks that will either have to be postponed or to be held virtually rather than in person.

Where meetings are postponed, it is recommended that a note is kept documenting the reason why the meeting has been postponed. CCNI has stated they will be pragmatic and reasonable and will not take any regulatory action where meetings are postponed as a result of these circumstances.

Where a meeting is held virtually to safeguard the health of trustees, this should be recorded in the minutes and will be considered a valid meeting, as long as it is quorate.   Some charities have clauses in their governing documents that allow them to meet virtually or to use telephone facilities. If your charity does not have this clause, the CCNI recommend that charity trustees check their governing document and see if they have the power to amend their governing document to facilitate changes as to how or when meetings are held.

Where your charity does not have the power to amend your governing document in this way or if your governing document prohibits the charity from meeting virtually and you decide to hold meetings over the phone or using digital solutions, you should record this decision and note that you have done this to demonstrate good governance of your charity and in keeping with the government’s advice.

Charity trustees who cannot hold an annual general meeting (AGM) must ensure that the decision is recorded by the charity. Any record of such decisions should record that the decision was taken in response to the current health advice, and that plans to hold the AGM will be implemented as soon as reasonably possible after government advice on holding meetings changes.

Serious incident reports

The Charities Commission NI has advised that charities should continue to issue serious incident reports for all matters where appropriate.

Should charity trustees decide they are temporarily closing their charity to manage this situation then there is no requirement to issue a serious incident report to the Commission.

Changing charity’s purposes to provide support during the pandemic

Many charities are considering whether they can help the effort to tackle COVID-19 and its severe impact on people right across the country.

Charities should first consider the terms of your charity’s existing charitable objects to determine whether they already all you to offer support.

If the existing objects do not allow you to help, you may be able to amend your governing document to change them. But consider carefully:

- whether there are other charities that may be better placed to respond than yours. You can find contact details for relevant local charities on our register

- the wider and longer-term impacts of changing your charity’s objects including on your existing beneficiaries.

If you want to change your charitable objects, you should check to see whether your trustees have the powers to amend them. If not, you may need permission from the CCNI.

Any changes proposed should be reasonable, consistent with what your charity does, and not undermine your existing objects.

Charities SORP

The control measures taken to contain the COVID-19 virus are likely to have an impact on charities’ operations and financial reporting. The SORP-making body’s advice makes suggestions regarding the trustees’ annual report, looks at the implications for going concern and sets out some suggested solutions where the going concern basis of accounts preparation may not be appropriate.

The key messages are:

- The measures being taken to contain COVID 19 will impact on charities in many different ways and it is important for charity trustees to understand the impact on the delivery of their activity and their governance including their finances.

- Where a charity is preparing a set of accounts and these have not yet been approved, trustees should consider whether information needs to be included to explain the impact of the COVID 19 situation on their charity. 

- There could be changes to the financial statements needed as a result of the COVID 19 situation and it is important that trustees understand and consider these.

- Charities should keep up to date with developing guidance from the relevant charity regulator in their jurisdiction.

Further information is available at:

https://www.charitysorp.org/about-the-sorp/covid-19/

Contact us

Should you need further guidance, please feel free to contact a member of our Audit, Charity and Regulated Sector Team.

Ryan Falls
Partner
ryan.falls@cavanaghkelly.com
028 8775 2990

Steven Lindsay
Director
steven.lindsay@cavanaghkelly.com
028 8775 2990