Hunters’ Charities Department provide a comprehensive service covering all legal aspects for charities including their creation and regulation, business and property affairs, tax, fund raising, mergers and dissolution. Hunters has strong links with both the Charity Commission and the Privy Council, and also act for numerous clubs, societies, institutions and not for profit organisations.
Q What are the legal implications for charities?
A The legal implications for charities and not-for-profit organisations will be similar to businesses based in the UK. European law has been incorporated into and influenced many areas of life in the UK and law since the European Communities Act 1972 was enacted.
Any changes relating to the freedom of movement (assuming we also leave the EEA) will also be important. This will almost certainly have an impact on charities (including universities) that employ staff from other European countries and send their staff to Europe. This could also have an impact on the treatment of refugees and economic migrants on entering the UK, which will naturally have implications for charities working with these groups.
Q How will charities be affected by tax post Brexit?
A When leaving the EU, the Government will have the scope to set its own VAT regime which could benefit charities by replacing exempt supplies under the various social exemptions, with zero-rated or super-reduced rated supplies, in effect releasing VAT recovery on costs. To do this the Government would have to make changes to the law which could leave the Treasury out of pocket, which is therefore unlikely if the UK economy is placed in recession. Any such changes are likely to be slow to materialise.
European law has (having been incorporated into the Finance Act 2010) allowed British taxpayers to make donations to European charities while at the same time being able to claim any available UK tax relief. European charities have also been able to benefit from UK tax reliefs including Gift Aid provided they are registered with HMRC, a process easier said than done. Similarly, UK charities have to-date been able to benefit from donation made by European donors, in accordance with the relief available for charitable giving in the donor’s own country. Given that the result of the referendum was to leave the EU, the UK’s charities will at some point become ineligible to receive tax-relief donations directly from most EU-resident donors.
Q How will the political implications of Brexit affect charities?
A Unfortunately, charities (and any new policies on charity reform that are not already making their way through Parliament) are likely to be towards the bottom of the list of priorities for Ministers and Civil Servants for some time to come. Therefore it will be even more important for your charity to consider making representations and to carefully examine policy initiatives in the next budget as much may change, for example, a possible reduction in rate relief or gift aid.
Constitutionally, charities registered in England and Wales that also operate in Scotland will need to monitor developments very carefully. Scotland (along with Northern Ireland) voted overwhelmingly to remain in the EU. The Scottish Executive are considering a second referendum to leave the UK and are in the process of discussions with Brussels. A new referendum to leave the UK may have a very different outcome. There is also speculation as to whether the Scottish government will also seek to remain in the EU itself.
- Charities/voluntary organisations should review their fundraising strategy as well as their risk, financial management processes or any proposed major changes to the charity;
- If you haven’t already done so, if your charity depends upon income from an investment or property portfolio, you and your trustees ought to review your investment strategy (and any planned investments) with advisers on a more frequent basis to position yourselves as best you can to ride out the current turmoil;
- Review all sources of income and consider the impact that any loss of funding from the EU or those which currently come from the EU through a third party donor. If you are concerned about the loss of funding to your charity, there is still time to start researching potential new funders and funding streams and whether this would be possible through the acquisition of a European entity.
- Build strategies to cope with increased demand on your services and possible reform within the landscape in which your charity operates, for example, free movement of people, immigration and asylum. At the same time, review the strategic direction and governance of your charity. Is this an opportunity to consider greater collaboration or a possible merger with other charities in your sector?
- Review existing contracts in light of Brexit negotiations when they commence – how will these contracts be affected when the UK leaves the EU? Are you able to protect your position?
- What will the implications of Brexit be to any contracts that you may negotiate or seek to enter into in the coming months? For example, what will the likely impact be on any legislation that currently applies to these contracts? The applicable governing law or appropriate jurisdiction?
- What will any future restriction on the free movement of workers have on your employees or volunteers? If your charity does employ EU nationals or UK nationals working in the EU, you may need to review the implications of any changes to their right to free movement across the EU.
- Strengthen closer working relationships with Civil Service and/or local government Officials to voice any concerns and highlight any issues affecting your charity or the objects of the same;
- Keep an eye on the discussions between the Scottish Executive and Government. If there is to be a second Scottish referendum for independence from the UK (and possible continued membership of the EU), be prepared to prepare for and highlight the effect that this may have on your charity;
- Look out for any briefings on and be ready and prepared for the forthcoming Autumn Statement and budget by the Chancellor of the Exchequer;
- It is important that your charity continues to observe and comply with all of its existing legal obligations. Until any withdrawal agreement between the Government and EU comes into force, the UK together with all UK charities continue to be bound by all EU laws.
Dominik Opaliński – Partner
Dominik specialises in the strategic development, social enterprise and investment powers of charities and not-for-profit organizations. He has extensive knowledge and experience in establishing not-for-profit organizations including charities providing them with practical advice and guidance with a commercial steer.
Contact Dominik here.
This information is based on the law in force as at 26 July 2016. Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice. Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances.
If you have any further questions, please do not hesitate to contact our Solicitors, who will be able to assist you further.