Report on The Charities and Trustee Investment _Scotland_ Act 2005

Document Sample
Report on The Charities and Trustee Investment _Scotland_ Act 2005 Powered By Docstoc
					      quality assured professionals

Report on The Charities and Trustee Investment (Scotland) Act 2005
and The Charities Accounts (Scotland) Regulations 2006

Contents                                                                                                 1

Introduction to UK200 Charities Group                                                                    2

The Charities & Trustee Investment (Scotland) Act 2005                                                   3 – 12

The Charities Accounts (Scotland) Regulations 2006                                                      13 – 15

Cross-Border Charities                                                                                  16 – 17

Charity Bank Accounts – Services provided by Clydesdale Bank plc                                        18 – 19

UK200 Charities Group Members                                                                           20

Useful contacts

The following organisations are useful points of contact for readers wishing to obtain information or
clarification on issues covered in this report, either at the date of publication or in the future.

UK200 Charities Group                                             HM Revenue & Customs
3 Wesley Hall, Queens Road                                        St Johns House
Aldershot, Hants GU11 3NP                                         Merton Road, Bootle
Tel: 01252 401050                                                 Merseyside L69 9BB                                            Charities helpline number 08453 020203
                                                                  Clydesdale Bank
Office of the Scottish Charity Regulator (OSCR)                   Glasgow
2nd Floor, Quadrant House                                         Clydesdale Bank Exchange,
9 Riverside Drive, Dundee                                         Level 5, 20 Waterloo Street,
Scotland DD1 4NY                                                  Glasgow G2 6DB
Tel: 01382 220446                                                 Tel: 0141 242 4235 or 4238
Fax: 01382 220314                                                                                          Edinburgh
                                                                  Festival Square, 50 Lothian Road,
Turcan Connell                                                    Edinburgh EH3 9AN
Solicitors and Asset Managers                                     Tel: 0131 456 4444
Princes Exchange                                        
1 Earl Grey Street
Edinburgh EH3 9EE                                                 Aberdeen                                       1 Queen's Cross,                                             Aberdeen AB15 4XU
                                                                  Tel: 01224 811000
Charity Commission                                      
PO Box 1227
Liverpool L69 3UG                                                 Paisley
0845 3000218                                                      Chiron House, Linwood Road,
mini com 0845 3000219                                             Paisley PA1 2BH                                Tel: 0141 847 4766                            

                                                                                Introduction to UK200 Charities Group

    The last few years has seen a large overhaul in the accounting for and regulation of charities in Scotland following a series of high
    profile scandals affecting public confidence in this sector.

    The aim of this report is to set out the broad framework of The Charities and Trustee Investment (Scotland) Act 2005 and provide
    an overview of the accounting regulations brought in by The Charities Accounts (Scotland) Regulations 2006 emanating as a
    response to those scandals.

    UK200 Charities Group of quality assured accountants and business advisors, want to help Trustees’ discharge their responsibilities
    properly and for charities to understand the complexities of the Scottish legislation. We work closely with the Office of the Scottish
    Charity Regulator (OSCR) and the Charity Commission on the application of the Statement of Recommended Practice for
    Accounting and Reporting for Charities (the 2005 SORP) working through to the annual report and accounts. Not forgetting audits
    and independent examinations but also giving advice on VAT, Gift Aid procedures and investments.

    Services Provided by UK200 Charities Group members
    UK200Group is a global association of over 125 UK quality assured Chartered Accountant and Lawyer firms and 43 International
    Associate firms. Our Charities Group of specialist proactive accountants possess expert knowledge of the charity sector and help
    Trustees comply with the changing charity regulations. UK200 Charities Group provide training and professional networking for
    members. Charities Group products include client newsletters and a comprehensive charity risk matrix.

    Business planning services                    Sector specialisms                            Support services
    ●  Business planning                          ●  Arts and leisure                           ●  Corporate governance issues
    ●  Strategic reviews                          ●  Ecclesiastical charities                   ●  Financial control reviews
    ●  Systems reviews                            ●  Education                                  ●  IT support
                                                  ●  Grant making charities                     ●  Management accounting
    Compliance services                           ●  Healthcare                                 ●  Payroll services
    ● Audit                                       ●  Housing associations                       ●  Recruitment of personnel
    ● Accountancy                                 ●  Social welfare
    ● Independent examination                                                                   Taxation advice
    ● Internal audit                              Sourcing finance                              ●  Gift aid
    ● Registration                                ●  Budgets and cash flow projections          ●  Payroll giving
                                                  ●  Grant applications                         ●  Property transactions
    Cross Border Charities                        ●  Lottery applications                       ●  Tax planning for development
    ●  Advisory services                          ●  Raising finance                            ●  The implications of trading
    ●  Dual registration                                                                        ●  VAT planning

    Charities need access to a bank providing flexible solutions that not only meet their needs but provides them with ethical financial
    solutions. Clydesdale Bank plc, a UK200Group Prime Partner, summarises their products which have been specifically designed
    for charities.

    This UK200 Charities Group report is not intended as a definitive guide to all of the issues arising from these new Charity Laws as
    some issues, such as the public benefit test and its application in practice, merit separate detailed consideration in their own right.

    John Watkins
    Chairman – UK200 Charities Group
    Partner at Dickson Middleton, Chartered Accountants, Stirling.

    Version 1 – June 2006

The Charities and Trustee Investment (Scotland) Act 2005

The Charities and Trustee Investment              misconduct in the administration           will only be entered on the Register if the
(Scotland) Act 2005 (“the 2005 Act”)              of charities                               applicant charity meets the charity test
was granted Royal Assent on 14th July         ●   To take remedial or protective action      (see below).
2005. The greater part of the 2005 Act            where misconduct is discovered
was brought into force on 1st and 24th        ●   To provide information or advice to        Charities which, immediately prior to
April 2006 and further commencement               the Scottish Ministers and to make         enforcement of the 2005 Act, were
orders are expected between Autumn                proposals to the Scottish Ministers        entitled to describe themselves as a
2006 and 2007. The 2005 Act ver y                 on matters that relate to the              Scottish charity in terms of the Law
substantially amended the former law              functions of OSCR.                         Reform      (Miscellaneous   Provisions)
and practice of charities in Scotland.                                                       (Scotland) Act 1990 have been entered by
This part of the Report summarises its        In carrying out its duties, OSCR must          OSCR onto the Register and no further
main provisions and is based on the           encourage equal opportunities and have         application is required for such pre-
legislation in force in early June 2006. It   regard to the principles under which           existing charities.
is intended to be of a general nature         regulatory    activities   should     be
only and no liability will be accepted by     proportionate, accountable, consistent,        The Charity Test
UK200Group or Turcan Connell for any          transparent and targeted only at cases in
action taken or omitted to be taken in        which action is needed.                        To meet the charity test, a body must
reliance on it.                                                                              have purposes which consist only of one
                                              The Scottish Charity Register                  or more of the charitable purposes
The Act established a new regulatory                                                         defined in the Act. In addition, the body
system for Scottish charities, brought        It is essential for bodies to be entered       must provide public benefit in Scotland
the definition of “charitable purposes”       onto the Scottish Charity Register if they     or elsewhere.
up-to-date, introduced a new public           are to obtain charitable status in
benefit test, and made a number of            Scotland. OSCR is responsible for              The charitable purposes are 16 in
other far reaching changes in the law of      keeping the Register and must establish        number and expand greatly on the four
charities in Scotland                         a separate entry on the Register for each      heads of charitable purpose which
                                              charity. Each charity’s entry contains the     existed prior to the 2005 Act. The
Office of the Scottish Charity                charity’s name, its principal office (or the   original intention had been to provide a
Regulator                                     name and address of one of the charity         definition which matched that under
                                              trustees), the purposes of the charity         English charity legislation, but there are
The 2005 Act established a new Regulator      and whether or not any directions or           some small differences.
for the Scottish charity sector. The Office   notices have been given by OSCR in
of the Scottish Charity Regulator (OSCR)      relation to the charity. OSCR has powers       The 16 charitable purposes listed in the
is a body corporate, answerable to the        to remove directions or notices from a         Act are as follows:
Scottish Ministers to whom it reports on      charity’s entry where they have been
an annual basis. The Regulator is to have     complied with or where they no longer          ●   The prevention or relief of poverty
at least four members, appointed by the       have effect.                                   ●   The advancement of education
Scottish Ministers from people who                                                           ●   The advancement of religion
appear to have knowledge and skills           From time to time, OSCR must review            ●   The advancement of health
relevant to OSCR’s functions. The Scottish    each entry in the Register and must            ●   The saving of lives
Ministers are entitled to specify the         amend inaccuracies and notify the              ●   The advancement of citizenship or
period of office of each member of the        charity of the amendments it makes.                community development
Regulator.                                                                                   ●   The advancement of the arts,
                                              Applications                                       heritage, culture or science
The general functions of OSCR are:                                                           ●   The      advancement        of   public
                                              Applications for entry on the Scottish             participation in sport
●   To determine whether bodies are           Charity Register must be made to OSCR          ●   The provision of recreational facilities,
    charities                                 and must set out a number of statutory             or the organisation of recreational
●   To keep and maintain the public           items of information as well as any other          activities, with the object of
    register of charities                     information which OSCR may require or              improving the conditions of life for
●   To encourage, facilitate and monitor      request. A standard application form has           the persons for whom the facilities or
    compliance by charities with the          been devised by OSCR to assist proposed            activities are primarily intended
    provisions of the 2005 Act                charities in providing sufficient relevant     ●   The advancement of human rights,
●   To identify and investigate apparent      information for these purposes. A charity          conflict resolution or reconciliation

                                                    The Charities and Trustee Investment (Scotland) Act 2005

    ●   The promotion of religious or racial        public in that consequence.                      where there are two charities with
        harmony                                                                                      names which are too alike, OSCR must
    ●   The promotion of equality and               In addition, where a benefit is or is likely     direct either one or both of the charities
        diversity                                   to be provided to a section of the public        to change its name. Failure to comply
    ●   The advancement of environmental            only, regard must be had to whether any          with such a direction will result in
        protection or improvement                   condition on obtaining that benefit is           removal from the Register by OSCR.
    ●   The relief of those in need by reason       unduly restrictive. Any condition on
        of age, ill-health, disability, financial   obtaining a benefit includes any charge          References to Charitable Status
        hardship or other disadvantage              or fee payable to obtain the benefit.
    ●   The advancement of animal welfare                                                            Bodies which are entered in the Scottish
    ●   Any other purpose that may                  OSCR has issued initial guidance on              Charity Register may refer to themselves
        reasonably be regarded as analogous         meeting      the    charity     test   and       as one of the following:
        to any of the preceding purposes.           demonstrating public benefit.          The
                                                    guidance broadly reflects the position           ●   Charity
    Even if a body’s purposes consist of only       under current case law and follows               ●   Charitable body
    one or more of the defined charitable           interpretations applied by HM Revenue            ●   Registered charity
    purposes and the body provides public           & Customs in recognising charities in            ●   Charity registered in Scotland
    benefit in Scotland or elsewhere, the           Scotland under the pre-2005 Act
    body will not meet the charity test             regime. However, not all current case            Any body that does not appear on the
    unless it can also satisfy a further            law will continue to be binding and it is        Register may still refer to itself as a
    threefold test:                                 important to be aware that the law is in         charity if it is established under the law
                                                    a period of transition as far as the public      of another country where it is entitled to
    ●   The constitution of the body must           benefit test is concerned. OSCR expects          refer to itself as a charity; it is managed
        not permit distribution of its              to test public benefit in each individual        or controlled wholly or mainly outside
        property for any non-charitable             case by seeking from applicant charities         Scotland and it does not occupy any
        purposes;                                   a detailed business plan or other                land or premises in Scotland or carry out
    ●   The body must not have in its               statement of proposed activities.                activities in an office, shop or similar
        constitution provisions which permit                                                         premises in Scotland.
        direction or control of its activities by   Charity Names
        the Scottish Ministers or by a                                                               Changes
        Minister of the Crown; and                  OSCR may refuse to enter an applicant on
    ●   The body must not be a political            the Scottish Charity Register if the body        A number of changes that a charity may
        party or have as one of its purposes the    has an objectionable name. A name may            make to its administration or
        advancement of a political party.           be objectionable for a number of reasons:        organisation require the consent of
                                                                                                     OSCR. Those changes are:
    Public Benefit                                  ●   It may be the same as, or too like, the
                                                        name of a pre-existing charity;            ●   The amendment of a charity’s
    Public benefit is not to be presumed in         ●   It may be likely to mislead the public         constitution in so far as it relates to
    any of the defined charitable purposes              as to the true nature of the purposes          the purposes of the charity;
    and it must be demonstrated in each                 of the body or of its activities;          ●   The amalgamation of the charity
    and every case that a body provides             ●   It may be likely to give the impression        with another body;
    public benefit. In doing so, regard must            that the body is somehow connected         ●   The winding up or dissolution of a
    be had as to how any:                               to central or local government when it         charity; and
                                                        is not so connected;                                          ●        Applying to
    ●   benefit gained or likely to be gained           or                                                            the Court in relation
        by members of the body or any               ●   It may be offensive.
                                                                                    It is important to be aware       to any of these
        other persons (other than as
                                                                                   that the law is in a period of     actions.
        members of the public), and                 The consent of OSCR is
                                                                                   transition as far as the public
    ●   disbenefit incurred or likely to be         required for a change in
                                                                                  benefit test is concerned.             A charity must give
        incurred by the public,                     the name of any charity                                              OSCR 42 days’ notice
                                                    and 42 days’ notice                                                  of any proposed
    in consequence of the body exercising           must be given to OSCR of any proposal            action for which consent is required and,
    its functions compares with the benefit         to change a charity’s name. OSCR may             in the case of an amendment to a
    gained or likely to be gained by the            request a charity to review its name, and        charity’s constitution in so far as it relates

The Charities and Trustee Investment (Scotland) Act 2005

to its purposes, the charity must not       inspection at OSCR’s office in Dundee.          misleading information to OSCR or to
proceed unless and until OSCR has           Information may be requested in braille,        knowingly alter, conceal or destroy
given its consent. OSCR is also entitled    large print or other medium. OSCR may           information deliberately.
to receive notice of a number of other      charge a fee, limited to the cost of
changes including changes in the            supply, for providing information at            Supervision of Charities
principal office of the charity, a change   somewhere other than its principal
in any details set out in the charity’s     office.                                         ●   Inquiries
entry in the Register or the appointment
of a Receiver.                              ●   Power to Obtain Documents and               OSCR can make inquiries, either of its own
                                                Information                                 accord or if somebody asks them to do
Removal from Register                                                                       so, about charities, bodies controlled by
                                            OSCR can issue a notice to a charity            charities and those who hold themselves
A charity may apply for removal from        requesting documents or information             out as a charity, as well as persons who
the Scottish Charity Register. Within 28    needed for the Register. A charity can          act on behalf of such entities. During the
days of receipt of an application for       refuse to provide information if it could       inquiry period OSCR can direct any
removal, OSCR must remove the charity       do so on the grounds of confidentiality         body subject to an inquiry not to
from the Register and give the charity      in the Court of Session.                        undertake activities for a period of not
notice of the date on which it is                                                           more than six months. Such a direction
removed.                                    ●   Entitlement to be Given Information         can be revoked at any time or varied,
                                                by Charities                                but it cannot be extended.
Despite removal from the Register, any
body removed continues to be placed         A charity must provide, to anyone who           It is an offence to fail to comply with such
under duties in relation to the             makes a reasonable request, a copy of its       a direction without reasonable excuse.
application of its property and income,     constitution or latest statement of             The level of fine is level 4 (currently
in accordance with its existing purposes.   accounts in whatever reasonable format          £2,500), or imprisonment not exceeding
                                            is requested. A fee can be charged for          three months, or both. OSCR can require,
OSCR may apply to the Court of Session      complying with such a request, but it           by notice, any affected person to provide
for the approval of a scheme for the        must not be greater than the cost of            it with documents necessary for the
transfer of property or income from a       supplying the document or a maximum             inquiry, unless the charity (or
body removed from the Register to a         fee which might be set by the Scottish          appropriate individual or body) could
specified charity, and the Court may        Ministers. The Scottish Ministers may           refuse on the grounds of confidentiality
approve any such scheme where it is         make an order that exempts charities            in the Court of Session.
satisfied that the scheme is necessary or   from this duty if appropriate.
desirable for the purpose of protecting                                                     OSCR can send a notice requiring a
the property or income to which the         ●   Sharing Information                         person     to    produce      documents,
scheme relates, or where the relevant                                                       information or explanation for the
charitable purposes would be better         OSCR may disclose information to other          purposes of the inquiry. That person has
achieved by transferring the property       public bodies or office holders and they        a minimum of 14 days to produce the
and income to a charity.                    in turn can disclose information to             requested information. Failure to
                                            OSCR, provided it is for purposes               comply with such a notice, without
Co-operation and Information                connected with their respective                 reasonable excuse, is an offence. The
                                            functions. In some instances this               level of fine is set at level 4 (currently
OSCR is under a statutory duty to co-       exchange can be subject to secrecy              £2,500),      or    imprisonment      not
operate with other regulators. This is to   obligations. The secrecy obligation is          exceeding three months, or both.
ensure that where possible the burden       removed for exchanges between charity
of dual or multiple regulation is           trustees, whistle blowing auditors/             Any information or explanation under
minimised.                                  examiners and financial institutions            this procedure cannot be disclosed
                                            holding monies for apparently dormant           except for the purposes of the inquiry.
●   Public Access to the Register           charitable bodies.                              Reasonable expenses can be paid to the
                                                                                            person providing the information.
OSCR must make the Scottish Charity         It is an offence, with a penalty set at level
Register available for public inspection.   5 (currently £5,000) or imprisonment            ●   Removal from the Charity Register
OSCR’s website contains the charity         up to six months on summary
index and it is also available for public   conviction, to provide false or                 After inquiry, if OSCR believes a charity
                                                  The Charities and Trustee Investment (Scotland) Act 2005

    no longer meets the charity test, it              or not to part with it without OSCR’s      in the administration of a charity or of a
    must:-                                            consent.                                   body controlled by a charity, or where it
                                                      ●   direct that any transaction or         is necessary or desirable for the Court to
        ●   direct the charity to take, within        payment is subject to OSCR’s prior         act in order to protect the property of a
        a specified period, such steps as             consent.                                   charity or to secure its proper
        OSCR considers necessary for the                                                         application.
        purposes of meeting the charity test      The maximum period for which OSCR
        (including a reorganisation scheme)       can make directions, as detailed above,        The powers available to the Court of
        or                                        is six months. It is an offence to fail to     Session are:
        ●   remove the charity from the           comply with a direction. The maximum
        Register.                                 penalty on summary conviction is level 5       ●     To interdict a charity from such
                                                  (currently £5,000), or up to six months              action as the Court thinks fit or from
    If a charity fails to comply, OSCR must       imprisonment, or both.                               representing itself as a charity;
    remove the charity from the Register.                                                        ●     To appoint a Judicial Factor to
                                                  The power to suspend a person does                   manage the charity’s affairs;
    ●   Misconduct/Need to Protect Assets         not apply if OSCR considers the person         ●     To appoint a trustee or to suspend or
                                                  has acted honestly and reasonably                    remove any person concerned in the
    Following inquiries, if it appears:-          and ought fairly to be excused.                      management or control of the
        ●   there has been misconduct             Suspension cannot last for more than six       ●     To order any relevant financial
        (including mismanagement) in the          months, and it can be lifted or varied. A            institution not to part with property
        charity’s administration, or              copy of any notice of suspension or a                which the institution holds on behalf
        ●   it is necessary to act to protect a   direction to stop a person holding                   of the charity without the Court’s
        charity’s property or to ensure it is     themselves out as a charity must be                  consent;
        used for charitable purposes              given to the charity or body in question.      ●     To make an order restricting
                                                                                                       transactions which charities may
    then OSCR may:                                OSCR must prepare a report of the                    enter into; and
                                                  subject matter of the inquiry if as a result   ●     To grant certain other orders and
        ●   suspend any person involved in        it:-                                                 interdicts provided for in the Act.
        the management or control of the
        charity if they are privy to or have      ●   gives a direction or removes a charity     The Court of Session retains its powers in
        contributed to or facilitated or are          from the Register.                         relation to transfer schemes and in
        responsible for the misconduct. Being     ●   suspends a person.                         particular the Court has power to
        unable or unfit to perform the            ●   makes an order to safeguard/deal           approve schemes which have been
        functions can also lead to suspension.        with a charity’s assets.                   prepared by OSCR for the transfer of
        ●   restrict transactions or payments                                                    assets
        so they may only be made with             The reports must be sent to the person
        OSCR’s consent.                           affected and published in such manner          from: a charity,
        ●   direct a financial institution, or    as OSCR thinks fit.                                  a body controlled by a charity,
        person holding charity property, not to                                                        a body which is not a charity but
        part with it without OSCR’s consent.      OSCR cannot identify the name of any                 which has represented itself as a
                                                  person except those in respect of whom               charity,
    If OSCR is satisfied a person has been        the inquiry is made and it cannot
    claiming to act for or represent a charity    publish any particulars that can identify      to:      any recognised charity which
    it may:-                                      any such person, unless naming is                       appears on the Scottish Charity
                                                  required to avoid impairing the                         Register.
        ●   direct the person or body to stop     effectiveness of the report.
        representing itself as a charity or as                                                   The Court may approve such schemes
        acting on behalf of a charity.            Powers of the Court of Session                 where it is satisfied that there has been
        ●   direct them to pay to the charity                                                    misconduct in the administration of the
        any assets collected (less any sums       The Court of Session has a number of           charity or where it is necessary or
        due to the offending person).             powers which it can exercise on the            desirable to act in order to protect the
        ●   direct any financial institution to   application of OSCR where the Court is         property of the charity or to secure its
        pay money collected for the charity       satisfied that there has been misconduct       proper application, or where the
The Charities and Trustee Investment (Scotland) Act 2005

purposes of the charity would be better      OSCR may also, of its own accord or on       Designated Religious Charities
achieved by transferring its assets to       the application of a charity, apply to
another charity. The Court of Session        the Court of Session for approval of a       A short chapter in the 2005 Act gives
may also prevent financial institutions or   reorganisation scheme. The charity           OSCR power to designate a charity as a
other persons in Scotland parting            trustees may enter appearance as a           designated religious charity. This applies
with moveable property held on               party in any proceedings before the          where the charity has as its principal
behalf of English and Welsh charities,       Court of Session on such an application      purpose the advancement of religion
where the Charity Commissioners for          and OSCR must give 28 days’ notice to        and where its principal activity is the
England and Wales have informed              the charity of its intention                                      regular holding of
OSCR that such property is being held        to apply to the Court of                                          public worship. A
                                                                           Although      SCIOs are in
in Scotland.                                 Session in this way.                                              designated
                                                                             appearance      similar    to
                                                                                                               religious     charity
                                                                             companies, SCIOs will only be
Reorganisation of Charities                  The power of the Court of                                         must have been
                                                                             regulated by OSCR.
                                             Session to approve cy pres                                        established        in
OSCR has power under the Act to              schemes in relation to                                            Scotland for at least
approve      reorganisation   schemes        charities is not affected by the Act and     10 years and have an adult membership
proposed by charities, subject to one        the Privy Council’s powers in relation to    resident in Scotland of at least 3,000
of the reorganisation conditions being       charities constituted by Royal Charter or    persons.
satisfied in relation to the charity.        Royal Warrant are left intact.
The reorganisation conditions are                                                         There must be a degree of internal
that some or all of the purposes of          Scottish Charitable                          organisation such that one or more
the charity:                                 Incorporated Organisations                   authorities in Scotland exercise super-
                                                                                          visory and disciplinary functions in
●   have been fulfilled,                     The 2005 Act provides for charities to be    relation to the component elements of
●   have been adequately provided for        constituted as a new type of body            the charity, including requirements as to
    by other means,                          corporate known as a Scottish                the keeping of accounting records and
●   can no longer be given effect to,        Charitable Incorporated Organisation         the audit of accounts (for example,
    have ceased to be charitable             (SCIO). SCIOs may only exist for             individual congregations may form
    purposes, or                             charitable purposes and will have a          component elements of a particular
●   have ceased in any other way to          constitution, a principal office and a       denomination, in which case the whole
    provide a suitable and effective         body of members as well as of charity        denomination may be recognised as a
    method of using its property;            trustees. Although SCIOs are in              designated religious charity). The 2005
●   That the purposes of the charity         appearance similar to companies, SCIOs       Act makes provision for the amalgama-
    provide a use for only part of the       will only be regulated by OSCR.              tion of designated religious charities and
    charity’s property;                                                                   for the withdrawal of the designation.
●   That a provision within the              The 2005 Act makes general provisions
    constitution of the charity can no       in relation to the constitution and          Decisions: Notices, Reviews and
    longer be given effect to or is          powers of SCIOs and their names and          Appeals
    otherwise no longer desirable.           status.    Powers      of    conversion,
                                             amalgamation and transfer are also           A process is laid out which enables most
To meet with OSCR’s approval, OSCR           included in the 2005 Act, so it will be      of OSCR’s decisions to be challenged.
must consider that the proposed              possible for some existing charities to      The process is intended to be simple
reorganisation scheme will enable the        convert to a SCIO if desired, and it will    and more cheaply accessible to
application of the charity’s resources to    be possible later for SCIOs to merge to      charities than the former process
better effect for charitable purposes,       form a larger charity.                       w h i c h r e l i e d o n t h e c o u r t s . Any
consistently with the spirit of its                                                       decisions taken by OSCR must be
constitution, and having regard to           The Scottish Ministers are empowered         notified to the individual or charity
changes in social and economic               by the 2005 Act to make further              concerned. In most instances, notices of
conditions since the charity was             regulations in relation to SCIOs             decisions must set out the decision, the
constituted. Alternatively, OSCR may         including detailed provisions in relation    reasons for it and advice about when
consider     that     the       proposed     to conversion and amalgamation,              and how to seek a review. If requested
reorganisation scheme will enable the        administration, winding up, insolvency       OSCR must carry out an internal review
charity to be administered more              or dissolution. It is expected that SCIOs    of any decision and it must publish
effectively.                                 will be available from 2007 onwards.         procedures to set out how this will be
                                                  The Charities and Trustee Investment (Scotland) Act 2005

    conducted. OSCR’s decisions do not            can seek an interdict preventing                funds raised if there is a concern about
    take effect until the review period has       fundraising if it has been carried out          their application.
    expired.                                      without an agreement or with an                 Scottish Ministers may produce
                                                  agreement which is not in the                   regulations for the collection of goods
    The 2005 Act also contains a mechanism        prescribed format. An interdict can also        from the public. If taken up, it is likely
    for the Scottish Ministers to appoint         be obtained if it is believed that the          that local authorities will perform this
    individuals to serve on the Scottish          fund-raiser is not fit and proper to            licensing function.
    Charity Appeals Panel, to review OSCR’s       fundraise or if the benevolent body does
    decisions following an internal review.       not want to be associated with the              Duties of Charity Trustees
    The Panel may either confirm OSCR’s           venture or if there is doubt as to the
    action, ask it to review it, quash it or      methods used by the fundraiser. If there        The 2005 Act applies to “charity
    direct it to make another decision. The       is a breach then the fundraiser will not        trustees” who are defined as “the
    Panel cannot award expenses to any party.     be entitled to expenses unless properly         persons having the general control and
                                                  provided for in the agreement.                  management of the administration of a
    Panel decisions can, ultimately, be           Moreover the agreement can only be              charity.” This includes trustees of
    appealed to the Court of Session who          enforced in a Court.                            charitable trusts, directors of charitable
    may either confirm any decision                                                               companies and those in charge of
    appealed to it or quash it and direct         It will be possible for the regulations to      charities which are unincorporated
    OSCR to take another course of action.        include provisions so that the                  organisations. In addition to any
                                                  remuneration or amount of the                   requirements of the general law to
    The make up of the Panel is to be             donation that will go to the benevolent         which these trustees may already be
    determined by open advertising. The           body must be stated (this might be              subject (for example directors of
    number of panels will depend on the           extended to cover volunteers). They can         charitable companies are subject to the
    case load but it is expected that each        also cover the form of contract and             Companies Acts), the 2005 Act imposes
    panel will consist of three persons, and      circumstances under which donations             various new duties and liabilities.
    the chair at least must have been a           can be refunded.
    solicitor or advocate for a minimum of                                                        Trustees’ Duties
    five years.                                   The intention is to give self regulation
                                                  a chance, with the failsafe being a             1    General Duties
    Fundraising for Benevolent                    r egulation making power for the
    Bodies                                        Scottish Executive.                             The 2005 Act imposes the following
                                                                                                  general duties on charity trustees:-
    ●   Control of Fundraising                    ●   Regulation of Collections
                                                                                                  (a) Trustees must act in the interests of
    The 2005 Act seeks to regulate, in a          Organisers of public benevolent                     the charity, and in particular
    basic way, fundraising not just for           collections must apply to the relevant
    charities on the Scottish Register, but all   local authority to collect. Organisers are          ●   They must seek, in good faith, to
    bodies established for benevolent and         exempt if they are a designated national            ensure that the charity acts in a
    philanthropic purposes (e.g. bodies with      collector, if the collection is in a public         manner which is consistent with its
    charitable purposes, but which do not         meeting, takes place on the organiser’s             purposes.
    provide a sufficient level of public          own land or is by way of an unattended              ●   They must act with the care and
    benefit and so are not on the Register).      box in a public place. All this is similar to       diligence that is reasonable to expect
                                                  the existing regime. An organiser of a              of a person who is managing the
    Benevolent bodies are given greater           collection held without appropriate                 affairs of another person.
    control over those who fundraise on           consent is guilty of an offence subject to          ●   Where there is a potential conflict
    their    behalf.    Thus     professional     a fine not exceeding level 3 (£1,000).              of interest between the charity and a
    fundraisers and commercial entities                                                               person who appoints a charity
    (fundraisers) involved in promoting           Local authorities have to make                      trustee, the trustee must put the
    contributions to a benevolent body            appropriate enquiries before giving                 interests of the charity before those
    must have an agreement with the               permission (or not). Permission can be              of the person appointing him. If the
    benevolent organisation before fund-          withdrawn even if already granted.                  trustee is under some other duty
    raising. Regulations will set out what is     There are provisions for appealing                  which prevents him from doing this,
    to go in that agreement. Benevolent           against local authority decisions and               he must disclose his conflict of
    bodies (and OSCR on behalf of charities)      OSCR is also given powers to protect                interest to the charity and must not

The Charities and Trustee Investment (Scotland) Act 2005

   take part in any discussions or             charitable trust deed to give trustees            nominee is appropriate in the
   decisions of the trustees in relation to    power to remove one of their number               circumstances of the trust and that
   the    matter      in                                          and in the absence of          the proposed nominee has the
   question.                                                      an express power, the          requisite skills, knowledge and
                              Any breach of these duties will     trustees would have to         expertise to act as a nominee.
These duties largely          be treated as misconduct in the     petition the Court for     ●   The appointment must be in writing
reflect     the     legal     administration of the charity       the offending trustee          and the trustees must retain power
position prior to the         entitling OSCR to invoke its        to be removed. In the          to give directions to the nominee
2005 Act, although it is      powers under Section 31 of          case of charities which        and to revoke his appointment.
thought the standard          the 2005 Act.                       are not trusts, the        ●   The trustees must determine the
of care and diligence                                             procedure for removal          other terms of the appointment and
has been raised.                                                  will depend on the             their suitability as to remuneration
                                               charity’s constitution (e.g. the removal          and other matters.
(b) A trustee must ensure that the             of a director of a corporate trustee          ●   The terms of the nominee’s
    charity complies with the 2005 Act.        would be under the Companies Acts).               appointment may not permit the
    This duty is a strict one and there is                                                       nominee to appoint a substitute,
    no exoneration for minor breaches.          2 Duty to carr y out the terms of the            restrict the liability of the nominee or
                                                    t rust                                       of any substitute, or permit the
Any breach of these duties will be                                                               nominee or any substitute to act in
treated as misconduct in the                   The charity trustees must administer the          circumstances which could give rise
administration of the charity entitling        charity in accordance with its terms.             to a conflict of interest.
OSCR to invoke its powers under Section        They must familiarise themselves with
31 of the 2005 Act. These include power        the terms of the trust deed or other          Trustees must keep the nominee
to suspend the trustees, to direct the         constitutional document and must act in       arrangements under review and if
charity to cease representing itself as a      accordance with it in administering           appropriate, consider whether they need
charity or as a Scottish charity, to restrict  the charity.                                  to exercise their powers to give directions
the transactions which may be entered                                                        to the nominee or revoke his appoint-
into, or the nature or amount of               3 Duty to control the trust pro p e rt y      ment. The power to appoint a nominee
payments which may be made in the                                                            is subject to any contrary provision in
administration of the charity without          The charity trustees must take steps to       the trust deed or under any legislation.
OSCR’s consent, and to direct any third        establish full details of the charity’s
party holding property on behalf of the        property. In addition                                              4 Duty to keep
charity not to part with it without            the trustees must                                                  accounts
OSCR’s consent.                                keep the charity’s          Any action which OSCR may
                                               property under their        take must be proportionate to the      Trustees      have    a
OSCR is under a general duty to act            control. In the case        misconduct concerned.                  general duty to keep
proportionately in performing its              of charitable trusts                                               records and accounts
regulatory function and so any action          this means that trust                                              of the trust property
which OSCR may take must be                    assets must be held in the name of the        all as detailed in The Charities Accounts
proportionate to the misconduct                trustees or of a nominee permitted by         (Scotland) Regulations 2006 section of
concerned. OSCR cannot suspend a               the trust deed or by the 2005 Act. The        this report on pages 13-15.
charity trustee under these powers if it       2005 Act permits trustees of charitable
considers the trustee has acted honestly       trusts to hold property through               5 Duty to devote time to charity’s
and reasonably in relation to the mis-         nominees when exercising their                     a ff a i r s
conduct and ought fairly to be excused.        statutory power of investment under
                                               that Act. The power does not apply            The charity trustees must meet together
Where there has been a breach of any of        when exercising powers of investment          as often as is necessary for the proper
these duties the charity trustees must         expressly conferred in the trust deed or      administration of the charity, and give
take whatever steps are reasonably             other governing document. The                 such time to the charity’s affairs as is
practicable to ensure that the breach of       appointment of a nominee is subject to        required for its proper administration.
duty is corrected and not repeated, and        the following conditions:
that any trustee who has been in serious                                                     6 Duty to invest
or persistent breach of the duty is            ●   The trustees must reasonably believe
removed as a trustee. It is unusual for a          that the appointment of the               Charity trustees have a general duty to

                                                    The Charities and Trustee Investment (Scotland) Act 2005

     invest the charity’s funds, so far as they     applying the strictest screening criteria,   9 Duty to take advice
     are not required for carrying out the          which significantly reduces their            The trustees should take advice from a
     purposes of the charity. This is mainly        universe of suitable companies for           properly qualified person in matters on
     relevant to grant making charities, and        investment. Funds of a lighter shade of      which they are not themselves
     charities who are holding substantial          green usually have a broader remit,          competent to decide.
     funds for extended periods.                    concentrating on the most socially
                                                    responsible companies in a particular        10 Duty to obser v e t h e g e n e r a l l a w
     Trustees of charitable trusts will normally    sector.
     be given express powers of investment                                                       Charity trustees are subject to the
     in the trust deed. If there are no express     The fund universe has grown                  general law, and depending on the
     powers of investment, or if the powers         substantially over recent years with over    activities in which the charity are
     conferred by the deed are limited, the         100 equity and corporate bond funds          involved, they may be subject to
     trustees can rely on the statutory power       now investing on the basis of ethical or     employment law, health and safety
     of investment in the 2005 Act. If the          SRI criteria. Changes to the regulatory      legislation, law of delict, criminal law,
     trustees are using the statutory power of      environment are now also forcing             human rights legislation and so on.
     investment, they must have regard to           Trustees of both charities and pension
     the suitability to the charity of the          funds to include ethical considerations in   Remuneration of Trustees
     proposed investment, and also to the           their investment policy.
     need for diversification of investments of                                                  The 2005 Act permits charity trustees to
     the charity. The charity trustees must         There are strong arguments to suggest        be remunerated for services provided to
     also obtain and consider proper advice         that companies with good ethics also         the charity in certain circumstances. This
     when exercising the statutory power of         follow good business practices.              includes the provision of services of
     investment, and when reviewing the                                                          acting as a charity trustee and services
     trust    investments,       unless    they     7   Delegation of powers                     provided under a contract of
     reasonably conclude that in all the                                                         employment.
     circumstances it is unnecessary or             Trustees of charitable trusts are
     inappropriate to take advice.                  permitted by the 2005 Act to appoint a       Remuneration may be paid
                                                    discretionary investment manger to           ●  To a trustee who provides services to
     Charity trustees of other types of             manage the charity’s investments. This          a charity and
     charities, such as companies and               is subject to any restriction in the         ●  To a service provider connected with
     unincorporated      associations,   will       trust deed, or under other legislation.         a trustee where the charity trustee
     normally have full powers of investment.       Apart from this they may not delegate           may benefit from the remuneration
                                                    any of their powers or duties as trustees,      so paid.
     Ethical Investment                             unless the trust deed permits them to do
     Interest in ethical and socially responsible   so. They may appoint agents to               The conditions to be met are as follows:
     investment is moving into the mainstream.      carry out certain tasks on their behalf,
     Investment management professionals            such as appointing accountants               ●   The maximum amount of the
     are being asked more frequently to             to prepare accounts and lawyers to               remuneration must be set out in a
     consider such investments.                     prepare documents but may not                    written agreement between the
                                                    delegate their primary role of overall           service provider and the charity and
     Definitions vary as to exactly what these      responsibility for the administration            must be reasonable in the
     terms mean. Generally speaking, socially       of the trust.                                    circumstances.
     responsible investment (SRI) involves                                                       ●   Before entering into the agreement
     shareholders using their influence to          8   Conflicts of intere s t                      the charity trustees must satisfy
     lobby companies to improve their                                                                themselves that it is in the interests
     environmental or social policies to            Charity trustees should not act in a way         of the charity for the services to be
     promote industry best practice.                that brings them into conflict with the          provided by that provider for that
                                                    interests of the charity. The trustees           maximum amount.
     Ethical investment, on the other hand,         must not derive any personal profit from     ●   There must be fewer than half of the
     in addition to the act of lobbying,            the charity (although there are statutory        charity trustees who are party to a
     applies a number of positive and               provisions permitting remuneration of            written agreement for the provision
     negative      screening    criteria     to     trustees in certain circumstances); nor          of services to the charity which is still
     companies. Ethical funds are classified in     must a trustee as an individual enter into       in force; or are entitled to receive
     shades of green, with the darkest green        any transaction with the charity.                remuneration from the charity funds
The Charities and Trustee Investment (Scotland) Act 2005

    in some other way; or are connected        personally liable for any resultant costs        insurance using the trust funds,
    with someone in either of these two        or loss. They may also be liable to third        provided a suitable power is included in
    categories.                                parties in other ways, such as in delict if      the trust and provided the insurance
●   There must be nothing in the               a third party incurs loss or injury as a         does not cover liabilities arising from
    charity’s governing document which         result of the negligence of the trustees         breaches of trust committed by the
    prohibits the service provider from        or their employees; under Health and             trustees knowingly or recklessly.
    receiving remuneration.                    Safety legislation; under employment             However, a press release issued by OSCR
                                               law; and so on. If the liability arises          in the spring of 2006 makes clear that
These restrictions do not apply to a           through the trustees acting in breach            OSCR considers the purchase of trustee
payment under any provision of the             of      trust      they                                               indemnity insurance
charity’s governing document which             would normally be                                                     to     amount      to
                                                                           As the law presently stands it is
was in force on 15th November 2004, or         personally liable.                                                    remuneration, which
                                                                           possible for exemption clauses to
under any order made by the Court of                                                                                 on the face of it
                                                                           protect trustees against any degree
Session, or under any legislation.             The trust deed may                                                    would rule out the
                                                                           of fault other than fraud or gross
                                               contain an immunity                                                   possibility of any
If a charity trustee, or a person              clause in favour of                                                   more than a minority
connected to a charity trustee is              the trustees. An                                                      of trustees being
remunerated in contravention of these          immunity clause defines the limit of the         protected under such a policy. It is
rules, the charity may recover the             trustees' liability. For example it may say      understood that the Scottish Executive
amount of the remuneration and OSCR            that the trustees are not to be liable for       will consider what impact this may have
can insist on the charity taking               any loss unless they were acting                 on the charitable sector and further
proceedings for recovery.                      negligently or fraudulently. Such an             regulation or guidance may be
                                               immunity clause cannot completely                forthcoming.
Liability and Immunity of                      exempt the trustees from liability. As the
Trustees                                       law presently stands it is possible for          Disqualification
                                               exemption clauses to protect trustees
Trustees of charitable trusts (as opposed      against any degree of fault other than           It is a criminal offence under the 2005
to other types of charities) may only act      fraud or gross negligence. A trustee             Act for anyone to act as a charity trustee
in accordance with the powers                  seeking to rely on an exemption clause           while disqualified under that Act. A
conferred on them under the trust deed         will find that the Courts will interpret it      person who is convicted of this offence
or the general law. If the trustees act        very strictly. If the clause is ambiguous        is liable for a prison sentence of up to
outside of these powers and a loss             the trustee will not be given the benefit        two years, or a fine, or both. The
results to the trust they may be               of the doubt.                                    following persons are disqualified from
personally liable.                                                                              acting as charity trustees:
                                               Trustees’ Indemnity Insurance
Trustees may be liable to beneficiaries                                                       ●   Any person who has been convicted
for committing breaches of trust; and          The Charity Commissioners in England               of an offence involving dishonesty or
also to third parties. Breaches of trust do    permit trustees of charitable trusts               an offence under the 2005 Act.
not always result in a loss to the trust       to take out insurance policies to              ●   An undischarged bankrupt.
fund but if they do the trustees will          protect against claims for breach of trust     ●   Any person who has been removed
normally be personally liable to make          and liability to third parties, and to             from being concerned in the
good the loss.                                 pay the premiums from the trust fund,              management or control of a
                                               provided the trust deed contains an                charity under the Law Reform
Trustees may also be liable to third           appropriate       power.   The      power          (Miscellaneous Provisions) (Scotland)
parties. Trustees entering into contracts      commonly included in trust deeds                   Act 1990 or Section 34 of the 2005
are personally liable unless they              allowing trustees to be reimbursed                 Act.
specifically contract for their liability to   their reasonable expenses in the               ●   Any person who has been removed
be as trustees. Provided entering into         administration of the trust would be               from the office of charity trustee by
the contract is a proper exercise of their     sufficient to allow premiums from such             an Order made by the Charity
powers they are entitled to be                 policies to be paid from the trust.                Commissioners for England and
indemnified out of the trust fund for any                                                         Wales or the High Court of Justice in
costs they may incur. However if they          Although the position is less clear in             England on the grounds of
are acting beyond their powers they are        Scotland, recent case law suggests that            misconduct in the administration of
in breach of trust and will normally be        trustees may pay for indemnity                     a charity.
                                                 The Charities and Trustee Investment (Scotland) Act 2005

     ●   Any person who is subject to a          Report produced by:
         disqualification order under the
         Company Directors Disqualification      Alison Paul Partner with Turcan Connell
         Act 1986 (or the Company Directors      Solicitors, Edinburgh, Scotland, and
         Disqualification (Northern Ireland)     specialises in tax and estate planning and
         Order 2002).                            is involved in establishing and running a
                                                 number of grant-making charitable trusts.
     A person who has been convicted of an       Her expertise ranges across charity law,
     offence involving dishonesty or an          capital taxation, succession and asset
     offence under the 2005 Act is not           protection.
     disqualified if the conviction is spent
     under the Rehabilitation of Offenders       Alison is accredited as a trust law specialist
     Act 1974. A person who is disqualified      by the Law Society of Scotland, is an
     from acting as a charity trustee may        external examiner for the Law Society’s
     apply to OSCR for the disqualification to   Admissions Programme and runs Turcan
     be waived.                                  Connell’s trusts, charity and taxation
                                                 seminar programme. She is a member of
                                                 the STEP committee (Society of Trust and
                                                 Estate Practitioners) and Turcan Connell’s
                                                 in-house charity unit. Alison is on the
     Services Provided by
                                                 editorial board of the Scottish Chapter of
     Turcan Connell
                                                 Tolley’s Charities Manual and has served
                                                 as         a         charity         trustee.
     ●   Advising on the proper exercise of
         charity trustees’ powers and duties

     ●   Good governance for charities           Gavin McEwan is a Senior Associate,
                                                 Turcan Connell Solicitors, Edinburgh,
     ●   Charity Trustee Training packages       Scotland, and works principally in the
     ●   Formation and reconstruction of         fields of charity law, succession, trusts and
         charities                               asset protection and is a member of
                                                 Turcan Connell's Charity Unit.
     ●   Regulatory compliance and advice
                                                 Gavin's work in the area of charity law
     ●   Charity specific land and property
                                                 includes     the    establishment       and
                                                 reorganisation of charities, from major
     ●   Charity taxation                        public trusts and foundations to private
                                                 charitable bodies. He also advises a broad
     ●   Investment management                   range of charities and national institutions
                                                 on regulatory, contractual and governance
         TC Charity Office
     ●   Accounting, administration and grant
         making services                         He has been a guest speaker at a number
                                                 of conferences on the subject of charity law
     ●   Secretarial services for charitable
                                                 reform in Scotland and is on the editorial
                                                 board of the Scottish chapter of Tolley’s
     ●   Charity litigation                      Charities Manual and regularly contributes
                                                 to the Scottish Private Client Law Review.
     ●   Amalgamations, court variations and     He is also a non-executive director of
         winding up of charities                 several charities.

     ●   Employment law for charities

     ●   Contract advice including funding

The Charities Accounts (Scotland) Regulations 2006

The Charities Accounts (Scotland)             Register after 1st April 2006, its first        of £500,000 or more, then the charity
Regulations 2006 “the 2006                    accounting period must be at least six          must prepare consolidated accounts in
Regulations” were brought into                months but no more than eighteen                accordance with terms of the Statement
force on 17th May 2006. The 2006              months from the date of entry into the          Of     Recommended           Practice    for
Regulations first apply to all charities      Register, date of incorporation for             Accounting and Reporting for Charities
with a financial year which begins on or      companies or date or                                                 (Revised 2005) (“the
after 1st April 2006. This part of the        established     under                                                2005 SORP”). These
                                                                           All Scottish charities must keep
Report summarises the main provisions         foreign laws and end                                                 consolidated
                                                                           proper accounting records to show
of the 2006 Regulations as they stand in      with their accounting                                                accounts will have
                                                                           and explain its transactions, assets
early June 2006. It is intended to be of      reference date. For                                                  a        consolidated
                                                                           and liabilities.
a general nature only and no liability will   existing charities and                                               annual           report
be accepted by the UK200Group or              in subsequent years                                                  dealing with the
Dickson Middleton for any action taken        for new charities, the accounting               activities of the charity and its
or omitted to be taken in reliance on it.     reference date may be varied by                 consolidated subsidiary undertakings. A
                                              preparing accounts for a twelve to              subsidiary charity in this instance will not
Financial year                                eighteen month period subject to there          be required to make separate annual
                                              being less than three accounting periods        report disclosure, but will only need to
The first financial year for the 2006         of more than twelve months in any               disclose that a consolidated annual
Regulations applying to a charity is          consecutive five year period on the             report has been prepared and
determined when it enters the Scottish        Register. Where a charity is removed            where       that     report      can      be
Charity Register (“the Register”) that was    from the Register, its final accounting         obtained from.
established under The Charities and Trustee   period runs to the date of removal from
Investment (Scotland) Act 2005 (“the 2005     the Register.                                   When a charity fails to prepare accounts,
Act”) and can be summarised as follows:                                                       or provide copies if requested by a
                                              Accounting records                              member of the public, OSCR may
●   For existing charities, the 2006                                                          apply to the court for an order to
    Regulations apply from the day            As under the previous legislation, all          prevent the charity, and any person
    immediately after its previous year       Scottish charities must keep proper             engaged in its management or
    end to its normal year end                accounting records to show and explain          control, from carrying out further
    (accounting reference date) for:          its transactions, assets and liabilities.       specified activities until the failure has
    ●   those charities entered in the        The charity trustees are responsible for        been rectified.
    Register on 1st April 2006;               ensuring those accounting records
    ●   those companies incorporated on       disclose with reasonable accuracy at any        OSCR may also appoint a qualified
    or before 1st April 2006 and entered      time its financial position.                    person to prepare accounts if the
    in the Register after 1st April 2006;                                                     charity’s accounts are not filed within
    ●   those charities established under     Accounting records must be retained for         deadlines. The costs of this exercise will
    the laws of another country before        at least six years to comply with the           be passed to the charity trustees, who
    1st April 2006.                           requirements of the 2005 Act and a              will be jointly and severally liable under
                                              wide variety of other regulations (e.g.         the 2005 Act for those costs.
●   For new charities after 1st April         retention of gift aid declarations for six
    2006, the 2006 Regulations apply          years after the last gift aid claim was         Failure to comply with a request by a
    from the date of entry into the           made for an individual), but can make           person appointed to produce accounts
    Register, date of incorporation for       use of technology to ease storage issues.       by OSCR for information or access to
    companies or date established under                                                       books and records is an offence. If there
    foreign laws and end with their           Accounts                                        is no reasonable excuse, a fine not
    accounting reference date.                                                                exceeding level 3 (currently £1,000) can
                                              A charity must send a copy of its               be levied.
In future, the financial year of a charity    accounts to OSCR not more than nine
will normally run from the day after its      months after its accounting reference           Connected charities
previous year end to, subject to a seven      date or, where relevant, the date of its
day window of flexibility either side, its    removal from the Register.                      Connected charities may prepare
accounting reference date.                                                                    accounts combined into a single
                                              Where a charity and its subsidiary under-       document and send that to OSCR. This
For new charities entered into the            takings have a combined external income         will avoid the need for each charity to

                                                           The Charities Accounts (Scotland) Regulations 2006

     send a separate set of accounts to OSCR.     Audit                                         and Wales is passed into law, with the
     The combined accounts format and                                                           consequential      Company        Law
     audit requirement will be determined by      For a charity with gross income of            amendment, the existing company
     the regulations applicable to the charity    £500,000 or more in a financial year or       thresholds for audit exemption will
     with the highest gross income.               gross assets of more than £2,800,000,         apply to Scottish registered charity
                                                  there is a requirement under the 2006         companies.
     Fully accrued accounts                       Regulations for the accounts to be
                                                  audited by a qualified auditor or the       The independent examiner will set out
     For a charity with gross income of           Auditor General for Scotland.               in their report if the annual report by the
     £100,000 or more in a financial year,                                                    trustees is not consistent with the
     accounts based on the accruals concept       An audit requirement may also arise         accounts, if the charity has not kept
     will be required with the following key      from a decision of the charity trustees,    proper accounting records, if any
     components:                                  the constitution of the charity or any      material expenditure or action has been
                                                  other enactment.                                                 undertaken by the
     ●   Statement of financial activities;                                                                        charity which is
                                                                          The 2005 SORP best practice
     ●   Balance sheet;                           The     auditor      is                                          outwith its purposes
                                                                          requirements will apply for the
     ●   Cash flow statement, where               required to set out                                              or if they have
                                                                          accounts disclosure for charities
         appropriate;                             in their report if the  preparing fully accrued accounts.        not    received     all
     ●   Notes to the accounts; and               annual report by the                                             the information and
     ●   An annual report.                        trustees    is     not                                           explanations required
                                                  consistent with the accounts, if the        to conduct the examination.
     The balance sheet and annual report will     charity has not kept proper accounting
     be signed and dated as being approved        records or if they have not received all      Special case charities
     by one trustee on behalf of all the          the information and explanations
     charity trustees. The 2005 SORP best         required to conduct the audit.                A special case is made for further and
     practice requirements will apply for the                                                   higher education institutions and
     accounts disclosure for charities            Audit exemption                               registered social landlord charities. This
     preparing fully accrued accounts.                                                          exemption allows those charities to
                                                  For a charity with gross income of less       prepare      accounts      under       the
     Receipt and payments accounts                than £500,000 in a financial year and no      requirements of their own specialist
                                                  audit requirement, an independent             industry SORPs with the following key
     For a charity with gross income of less      examination is required to be                 components:
     than £100,000 in a financial year,           undertaken     by    an    independent
     accounts may be prepared on the receipts     examiner. There is a duty on the charity      ●   Income and expenditure account;
     and payments basis (i.e. cash basis) with    trustees to ensure this independent           ●   Balance sheet; and
     the following key components:                examiner is reasonably considered to          ●   Notes to the accounts.
                                                  have the requisite ability and practical
     ●   Receipts and payments account;           experience to carry out a competent           The     auditing    and    independent
     ●   Balance sheet;                           examination of the accounts.                  examination levels for these special case
     ●   Notes to the accounts; and                                                             charities follow those of other charities
     ●   An annual report.                        If the charity prepares fully accrued         under the 2006 Regulations.
                                                  accounts, then the independent examiner
     The balance sheet and annual report will     must be a member of a recognised              Duty to Whistle Blow
     be signed and dated as being approved        professional accountancy body such as
     by one trustee on behalf of all the          ICAS, a full member of the Association of     A requirement is introduced under the
     charity trustees.                            Charity Independent Examiners or the          2005 Act for auditors and independent
                                                  Auditor General for Scotland.                 examiners to report immediately to
     Should a decision of the charity trustees,                                                 OSCR anything which they consider
     the constitution of the charity or any       In the case of a company, an                  would lead OSCR to take regulatory
     other enactment require a fully accrued      accountant’s report under Companies           action. This duty extends to reporting
     set of accounts to be prepared, then         Act regulations will substitute for the       accountants of corporate charities and
     these accounts will follow the disclosure    independent examiners and auditors            also covers connected bodies (e.g. a
     requirements of fully accrued accounts,      report. However, until the current            trading subsidiary company). There is
     discussed above.                             revision of charity legislation in England    also a non mandatory power for those
The Charities Accounts (Scotland) Regulations 2006

persons to report anything which they       Report produced by:
feel may become a regulatory issue in
the future.                                 John Watkins is a Partner with Dickson
                                            Middleton, Chartered Accountants, Stirling
These duties are not annulled if the        and     is   currently   Chairman       of
auditor/independent examiner resigns        UK200Group’s specialist Charities Group
their position.                             of quality assured accountants. John
                                            qualified as an ICAS prize winning
Dormant accounts                            Chartered Accountant in 1995. Financial
                                            services audit experience with a large
Under the 2005 Act OSCR will be able,       multinational accountancy firm means he
after making suitable enquiries, to         can advise charity organisations through
redistribute money held in charity bank     the consideration and implementation of
accounts which has not been used for        investment     monitoring     and     risk
several years. Any such sums must           management procedures.
be applied for similar charitable
purposes or to a charity nominated by       John has experience of a broad range of
OSCR if the original purposes cannot be     charities spanning ecclesiastical, grant
ascertained.                                making, healthcare and social welfare. His
                                            expert knowledge of the complex UK
The 2005 SORP                               taxation system, including specific
                                            exceptions available to charities, means he
The aim of the 2005 SORP is to establish    can proactively identify for his charity
and improve the standard of reporting       clients significant expense savings. The
and accounting by charities to their        2005 SORP has required him to assist his
intended users. The 2005 revision to the    charity clients tackle the implementation
SORP built on its previous versions and     issues of this accounting standard and
moved the focus of charity reporting        tailor their reports to the charity’s
much more towards explaining:               particular needs. He is also a member of
                                            Round Table.
●   What charities aim to do;
●   How they have gone about it; and
●   What they have achieved.

This approach allows the charity to focus
on matching financial information with
the activities and outcomes in their
annual reports.

                                                                                                             Cross-Border Charities

     Prior to the Charities & Trustee                OSCR will hold a joint conference              must determine if they meet the charity
     Investment (Scotland) Act 2005 a                with the Charity Commission prior              test as set out in the new Act.
     charity registered in England & Wales           to September 2006 in order to issue            Consultations between the Scottish
     was under no obligation to apply to be          further guidance.                              Executive and the Home Office took
     recognised as a charity in Scotland.                                                           place in an attempt to avoid anomalies
     Under the provisions of the new Act, any        As a result of the requirements of the         in the final legislation in each jurisdiction
     charity          from                                               Act some charities will    and although there is a slight difference
     anywhere in the            It is possible that an English           now      be     subject    in the charity tests in each Act this is not
     world external to          charity will be required to register     to dual regulation; by     expected to cause any problems in
     Scotland owning or         with OSCR though exempt from             OSCR                 in    practice. Problems may arise as the
     occupying land or          registering with the Charity             Scotland and the           position in Scotland develops as a result
     premises            in     Commission.                              Charity Commission         of decisions of the Scottish Charity
     Scotland or carrying                                                in England & Wales.        Appeals Panel or the courts, which will
     out activities in any                                               Both         regulators    refine the charity test applied by OSCR.
     office, shop or similar premises in             realised at an early stage that this
     Scotland will have to register as a charity     could cause unnecessary administrative         The guidance makes it clear that
     with the Office of the Scottish Charity         burdens for charities and have been            regardless of how the law in Scotland
     Regulator (OSCR). In contrast, there are        working together to ensure the effects         develops, cross-border charities will
     currently no requirements for Scottish          of dual regulation are minimised as far        need to meet the charity test in both
     charities that operate in England &             as possible.                                   jurisdictions.
     Wales to register with the Charity
     Commission. (This report refers to              Joint Guidance                                 Accounting Regulations &
     charities operating in England and Wales                                                       Reporting Requirements
     as English Charities and is intended to be      In December 2005 OSCR and the
     of a general nature only. No liability will     Charity Commission issued joint                Following the introduction of The
     be accepted by UK200Group or Wylie &            guidance for cross-border charities            Charities        Accounts        (Scotland)
     Bisset for any action taken or omitted to       which can be obtained from either              Regulations 2006 it is mandatory for all
     be taken in reliance on it.)                    organisations website. The guidance            charities with an income in excess of
                                                     seeks to reassure charities who in future      £100,000, in both jurisdictions to
     Northern Ireland has its own unique             will be answerable to both regulators          prepare accounts in accordance with the
     situation regarding charity regulation.         and clarify the regulations in areas           Statement of Recommended Practice –
     Charities must register with HM Revenue         where the regimes in the two                   Accounting & Reporting by Charities
     and Customs and new legislation is              jurisdictions appear to be contradictory.      (SORP) issued in March 2005.
     currently under review for Northern
     Ireland.                                        For example, in England certain charities      OSCR have confirmed they will not insist
                                                     are exempt from the requirement to             on separate Scottish Accounts and will
     On 1 April 2006 all existing Scottish           register with the Charity Commission by        accept accounts that consolidate activities
     charities, i.e. those charities that had        virtue of their size and activities, others    north and south of the border. However
     registered in Scotland with the Inland          have been specifically excepted from the       they will expect charities operating in
     Revenue, were automatically entered             requirement to register. The Scottish Act      Scotland to include narrative on their
     onto the Scottish Charity Register by           contains no such exemptions or                 Scottish activities in the Trustees Annual
     OSCR. Any English charity that had              exceptions. It is possible that an English     Report. All charities registered with
     not previously registered in                    charity owning or                                                     OSCR      will      be
     Scotland, would not, therefore, be              occupying property          All charities registered with             required to submit
     automatically entered onto the                  in Scotland would be        OSCR will be required to submit           annual      accounts
     Register and will be required to                required to register        annual accounts together with a           together with a basic
     apply to OSCR for registration as a             with OSCR even              basic Annual Return within nine           Annual Return within
     Scottish charity. The Act does contain          though it were              months of their year end.                 nine months of their
     transitional provisions that allow such         exempt           from                                                 year end. Charities
     charities until April 2007 to complete          registering      with      the      Charity    with income in excess of £25,000 will
     their registration and OSCR have                Commission.                                    also be required to complete an annual
     indicated that they will seek registration                                                     monitoring form. These requirements
     from cross-border charities between             In determining whether or not to enter a       are additional to any existing reporting
     September and December 2006.                    charity on the Scottish register OSCR          responsibilities in England.

Cross-Border Charities

Other considerations                          Report produced by:

Scottish branches of an English charity       Jenny Simpson, manager of Wylie &
only need to register individually with       Bisset’s specialist charity team and is a
OSCR if they are autonomous.                  member of the UK200Group Charities
Otherwise, it is likely that the main         Committee and UK200 Charities Group of
English charity will need to register since   quality assured accountants. Jenny
the operations of the branches will           qualified as a chartered accountant in
probably fall within the criteria             England and specialised in charity
mentioned above.                              accounting under the rules in England &
                                              Wales before moving to Scotland in 2002.
The Act contains provisions covering          Jenny oversees the services provided to a
what an organisation operating in             wide range of charities from care homes
Scotland may call itself. Only charities      and welfare charities to education
which are established under Scottish law      institutions and economic development
or are managed from Scotland are              organisations, and has recently given a
permitted to use the terms Scottish           number of presentation on the new rules in
Charity or registered Scottish Charity.       Scotland. Jenny has been appointed to the
Regulations covering when and where a         Scottish Charity Appeals Panel.
charity is required to publish its
charitable status have yet to be finalised
but are expected to bring Scotland into
line with the existing requirements
south of the border.

The new legislation in Scotland includes
provisions covering circumstances under
which a charity must obtain consent
from OSCR in advance of a particular
action. These include changing the
charity’s name or its charitable purposes
but, as a whole, the regime is more
limited than that already in force in
England. At the time of writing there
are no safeguards against dual
regulation in this area; certain proposed
actions will require a cross-border
charity to obtain advance consent from
both      OSCR     and     the     Charity

The strengthening of charity regulation
in Scotland will undoubtedly increase
the regulatory burden on cross-border
charities. It is to be hoped that OSCR
and the Charity Commission continue to
work together to ensure that dual
regulation does not become an
unnecessary additional cost to these

                                         Charity Bank Accounts Services provided by Clydesdale Bank plc

     At Clydesdale Bank we understand that        solutions for investments, since its’                    Important Facts
     the needs of individual charities vary.      launch in December 2005, our Base Rate
     That’s why our charity customers enjoy       Tracker Plus account has been very                       I n t e rest rate
     the personal attention of a dedicated        popular.                                                 ●     Available on request from your
     relationship manager who works to                                                                           Business Partner
     ensure that charities have the most          B a s e R a t e Tr a c k e r P l u s A c c o u n t
     appropriate financial solutions to meet      is an account designed to maximise                       I n t e rest type
     existing and future needs.                   any significant surplus funds you                        ●     Credit interest applied to amounts in
                                                  hold. With a market-leading interest                           credit
     Through our experience of dealing with       rate, this savings product will offer
     charities over a number of years, we         you excellent returns on the monies                      How is interest calculated?
     have also developed three products           you hold.                                                ● Calculated daily and applied monthly
     that charity customers can benefit
     from. This means that whatever your          For all our accounts we have made our                    Minimum/Maximum balance
     financial requirements, we have a            account opening procedures as easy as                    ●  Accounts must be maintained in
     solution for you.                            possible. In addition, your dedicated                       credit – balances are unlimited
                                                  Business Partner will be on hand to
     Our Comprehensive Range of                   answer any questions you may have.                       Withdrawals
     Accounts                                                                                              ●  Unlimited - subject to available funds

     Every charity needs a simple, straight-      Business Choice Charities                                What it costs
     forward and reliable basis for managing      Account – earn competitive                               ● Refer to the relevant business tariff
     its day-to-day banking. To offer the best    interest on your everyday                                  guide for details on fees and
     flexibility possible, Clydesdale Bank has    banking                                                    charges – available from your
     two different styles of current account                                                                 Business Partner
     specifically designed for charities.         Benefits
                                                                                                           Te rms and conditions
     Business Choice Charities Account            ●   P e r s o n a l a t t e n t i o n – dedicated pro-   ●   These accounts are specifically for
     is a flexible, fully functional and user         active relationship management                           registered charities and are not
     friendly account for all registered              from someone who understands                             available to personal customers
     charities who maintain credit balances.          your charity and what you are                        ●   All terms and conditions are available
     The account offers highly competitive            looking to achieve                                       on request
     interest rates combined with the             ●   Easy to use - fully functional, day-to-
     efficient processing of payments and             day operative account                                W h e r e d o I g o f r o m h e r e?
     receipts with cheque book, paying in         ●   Fl ex ibil ity – day-to-day cash flow                ●  Talk to your local Business Partner
     book and regular statements – making             flexibility – offering instant access                ●  Visit
     things as simple as possible for you to          with no penalty
     manage your funds.                           ●   Competitive - pays credit interest at
                                                      a rate of 1% below base rate                         Basic Charities Account – no
     Basic Charities Account is designed                                                                   transactional fees on your
     for charities who do not usually             Features                                                 everyday banking
     maintain credit balances. This account
     again offers full functionality of a         ●   Unlimited deposits & withdrawals –                   Benefits
     current      account      however,      no       subject to available funds
     transactional charges are applied. This      ●   Choice of statements issued                          ●   P e r s o n a l a t t e n t i o n – dedicated
     allows you to process payments and               monthly, or more frequently on                           pro-active relationship management
     receipts efficiently without incurring any       request – please speak to your                           from someone who understands
     cost – helping you to maximise the               Business Partner for associated                          your charity and what you are
     monies you receive.                              charges                                                  looking to achieve
                                                  ●   Transparent fees & charging                          ●   Easy to use - fully functional, day-to-
     In addition to our current accounts we           schedule                                                 day operative account
     are also conscious that charities often      ●   Personal attention – dedicated                       ●   Fl ex ibil ity – day-to-day cash flow
     have surplus monies that they wish to            Business Partner empowered to                            flexibility – offering instant access
     invest. Whilst we have a number of               make fast decisions                                      with no penalty

Charity Bank Accounts Services provided by Clydesdale Bank plc

●   N o Tr a n s a c t i o n a l C h a r g e s * * –   ** Charges for ancillary services may be                How is interest calculated?
    allows you to efficiently manage                   applied.                                                ● Calculated daily and applied quarterly
    your money with no fees applied
                                                                                                               Minimum/Maximum balance
Features                                               Base Rate Tracker Plus – get a                          ●  Minimum opening balance is £1m.
                                                       market-leading rate and a better                        ●  Accounts must be maintained in
●   Unlimited deposits & withdrawals –                 r e t u rn on your funds                                   credit – balances are unlimited
    subject to available funds
●   Choice of statements issued monthly,               Benefits                                                Withdrawals
    or more frequently on request –                    ●  Ti e re d I n t e r e s t R a t e s – our tiered     ●  Unlimited - subject to available funds
    please speak to your Business Partner                 interest rates mean the more you
    for associated charges                                invest, the better the return                        What it costs
●   Fee-free transactional banking**                   ●  Flexibility – the account has no long-               ● Refer to the relevant business tariff
●   Personal attention – dedicated Business               term tie-in. You’ll have flexible access               guide for details on fees and charges
    Partner empowered to make fast                        to your funds, which can be with-                      – available from your Business
    decisions                                             drawn with only seven-days’ notice                     Partner
                                                       ●  No Tr a n s a c t i o n a l C h a rg e s – you
Important Facts                                           don’t pay extra for accessing your                   Te rms and conditions
                                                          own money so your deposits are                       ●   This account is not available to
I n t e rest rate                                         working harder for you                                   personal customers
●     Available on request from your                   ●  M a r k e t - L e a d i n g R a t e – if you have    ●   All terms and conditions are available
      Business Partner                                    deposits in excess of £1m, Base                          on request
                                                          Tracker Tracker Plus offers a market-
I n t e rest type                                         leading rate – helping you with your                 W h e r e d o I g o f r o m h e r e?
●     Credit interest applied to amounts in               planning and cashflow                                ●  Talk to your local Business Partner
      credit                                           ●  C H A P s Wi t h d r a w a l s – giving you          ●  Visit
                                                          fast and easy access to your money
How is interest calculated?                            ●  P e r s o n a l a t t e n t i o n – dedicated pro-
● Calculated daily and                   applied          active relationship management                       Clydesdale Bank PLC is authorised and
  monthly                                                 from someone who understands                         regulated by the Financial Services Authority.
                                                          your charity and what you are                        Credit facilities other than regulated mortgages
Minimum/Maximum balance                                   looking to achieve                                   are not regulated by the Financial Services
                                                                                                               Authority. Clydesdale Bank PLC. Registered in
   Accounts must be maintained in
                                                                                                               Scotland (Number SC1111). Registered Office:
   credit – balances are unlimited                     Features
                                                                                                               30 St Vincent Place, Glasgow G1 2HL

Withdrawals                                            ●   Unlimited deposits & withdrawals –
                                                                                                               Clydesdale Bank PLC is a member of the
●  Unlimited - subject to available funds                  subject to available funds                          Financial Services Compensation Scheme
                                                       ●   Choice of statements issued monthly,                established under the Financial Services and
What it costs                                              or more frequently on request –                     Markets Act 2000. You may be entitled to
● Refer to the relevant business tariff                    please speak to your Business Partner               compensation from the scheme if we cannot
  guide for details on fees and charges                    for associated charges                              meet our obligations. This depends upon the
  – available from your Business                       ●   Personal attention – dedicated                      type of business and circumstances of the claim.
  Partner                                                  Business Partner empowered to                       In respect of deposits with a UK office, payments
                                                           make fast decisions                                 under the scheme are limited to 100% of the
Te r ms and conditions                                                                                         first £2,000 of a depositor’s total credit
                                                                                                               balances with the Bank and 90% of the next
●    These accounts are specifically for               Important Facts
                                                                                                               £33,000, resulting in a maximum payment of
     registered charities and are not
                                                                                                               £31,700. Further details of the scheme are
     available to personal customers                   I n t e rest rate
                                                                                                               available from us on request or from the
●    All terms and conditions are available            ●     Available on request from your                    Financial Services Compensation Scheme:
     on request                                              Business Partner                               or    Financial     Services
                                                                                                               Compensation Scheme, 7th Floor, Lloyds
W h e r e d o I g o f r o m h e r e?                   I n t e rest type                                       Chambers, Portsoken Street, London, E1 8BN.
●  Talk to your local Business Partner                 ●     Credit interest applied to amounts in
●  Visit                                  credit

                                                                         Members of UK200 Charities Group

     Scotland                              HERTFORDSHIRE                          OXFORDSHIRE
                                           WATFORD – Hillier Hopkins LLP          OXFORD – Critchleys
     STIRLING – Dickson Middleton
                                           John Barker            01923 232 938   Robert Kirtland      01865 2611001
     John Watkins Chairman
     01786 474718            KENT                                   WITNEY – ReesRussell
                                           GRAVESEND – King & Taylor              Theresa Rees          01993 702418
     GLASGOW – Wylie & Bisset              Trevor Climpson      01474 569777
     Jenny Simpson Committee Member
     0141 566 7000
                                                                                  SHROPSHIRE                   CANTERBURY – Larkings                  SHREWSBURY
                                           Stephen Wren       01227 464991        Whittingham Riddell LLP
     England                                          Andrew Malpass Committee Member
     AVON                                                                         Graham Murphy      01743 273 273
     BRISTOL – Elliott Bunker                                           
                                           BOLTON – Bentleys
     David Bunker          0117 929 9931
                                           John Shaw           01204 388675                                                     SURREY
                                                                                  GUILDFORD – The GBC Partnership
     BUCKINGHAMSHIRE                                                              Lesley Paler        01483 575218
     GERRARDS CROSS – Keen Phillips                                     
                                           LONDON EC1 – FW Stephens
     Stephen Cox           01753 883315    James O’Brien                                                      GODALMING – Roffe Swayne
                                           Michael Procter Committee Member
                                                                                  John Fisher         01483 416232
                                           020 7251 4434
     MILTON KEYNES                                                      
     Howard Watson Smith
     Martin Wright   01908 376424          LONDON EC4 – Winters                   WEST MIDLANDS                       Clive Bailey                           SOLIHULL – Raftery & Co
                                           Geoff Hughes      020 7919 9100        Michael Williams    0121 711 2468
     Anderson Barrowcliff                  LONDON N3                              EDGBASTON – J W Hinks
     David Robertson    01642 660 300      Berg Kaprow Lewis LLP                  Robin Barnes      0121 456 0190        Brian Wolkind     020 8922 9222
     STOCKTON ON TEES                                                             WEST YORKSHIRE
     Baines Jewitt                         MERSEYSIDE                             LEEDS – Thomas Coombs
     Michael Firrman      01642 632032     LIVERPOOL – Bailey Page & Roper        Christopher Darwin 0113 244 9512                Michael Roper       0151 255 0558
     EAST SUSSEX                                                                  WILTSHIRE
     LEWES – Knill James                   NORFOLK                                SALISBURY – Fawcetts
     Susan Foster          01273 480480    NORWICH – Price Bailey LLP             Simon Ellingham     01722 420920                 Colin Long            01603 709330
     HULL – Smailes Goldie                 NORTH YORKSHIRE
     Mark Sharpley        01482 326916     SCARBOROUGH – Coulsons                 NEATH – Watkins Bradfield & Co               Adrian Allen       01723 364141        Philip Hunkin        01639 635555
     SOUTHAMPTON – Fiander Tovell LLP      YORK – Barron & Barron                 CARDIFF – Watts Gregory
     Mary Wallbank         023 8033 2733   Guy Ward           01904 628551        David Williams       029 2054 6600        
3 Wesley Hall
Queens Road
Hampshire GU11 3NP

Tel 01252 401050
Fax 01252 350733

This report has been prepared for general interest and it is
important to obtain professional advise on specific issues.
We believe the information contained in it to be correct.
While all possible care is taken in the preparation of this
report, no responsibility for loss occasioned by any person
acting or refraining from acting as a result of the material
contained herein can be accepted by the UK200Group, or
its member firms or the author.

Shared By: