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Charity News
Helping you to keep up to
date with developments in
the charity sector
Spring 2018
Transparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
Introduction
Given the public interest in fundraising and the Other tax matters covered in this issue include
impact financial malpractice can have on public a reminder on the potential application of
We are delighted to bring you sentiment, we are glad to include an article on Relevant Contracts Tax (which can be very
our latest edition of Charity ethical fundraising and how we can learn from costly if not properly managed) and a number Teresa McColgan
News, in which we look at the UK experience in this area. We also consider of updates for employers.
Firmwide Head of PwC not-for-profit Team
some of the current matters of how an organisation can align its fundraising
strategy with its communication strategy. Finally, we consider investments and the
interest to many charities and responsibilities of management and trustees
not-for-profit organisations. With publication of financial statements by in relation to goverance of their organisations’
the Charities Regulatory Authority imminent, investment portfolios.
we consider the key likely areas of interest Aisling Fitzgerald
for readers of accounts and how the key We hope that this issue provides some Head of PwC not-for-profit Assurance Team
messages in your trustees’ report should be useful guidance, and we wish you and your
communicated to create value for your reader organisation every success in the year ahead.
and ensure transparency for all relevant
stakeholders.
Following on from the announcement of the
VAT compensation scheme in Budget 2018,
we highlight what you can do to maximise the
recovery of VAT on costs incurred.
1 PwC | Charity News Introduction
Transparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
Ethical fundraising
Winning hearts and minds with ethical fundraising
Many people join the not- Case study from the UK: events leading to regulatory changes in fundraising
for-profit sector “to make a A number of interconnected events has led to significant changes in the UK charity fundraising environment, summarised as follows:
difference” (see our last edition’s
feature on key talent). Yet
a common challenge is best
summarised by the headline: • Media coverage (2015): The • Industry and regulatory • New UK Fundraising Regulator
‘People don’t trust charities but unfortunate death of a pensioner who investigation (2016): The industry- (2017): The Fundraising Regulator
still expect them to perform took her own life received extensive media funded Fundraising Regulatory replaced the previous Fundraising
miracles’ (The Times, 2017). coverage in light of indications that she Standards Board (FRSB) investigated Regulatory Standards Board (FRSB),
was feeling pressured by “begging letters” four charities and a fundraising telephone bringing with it ‘teeth’. The Regulator
from several charities. agency which featured in the media gained ownership of the Fundraising
coverage. The Information Commissioner Code of Practice, previously owned by the
This may not come as a surprise to many of (UK equivalent of the Data Protection Institute of Fundraising, which works on a
you. From the mishandling of some charities’ Commission) issued total fines in excess of comply or explain basis. The Regulator is
finances, to fraudulent door to door collections, £180,000 to thirteen charities for misusing non-statutory but is able to escalate cases
fundraising scandals are driving public • Political scrutiny (2015):
supporters’ personal data. to the Charity Commission. The Charity
sentiment. In carrying out its research for the Parliamentarians responded by calling
Commission has the power to investigate,
Charities Institute of Ireland (‘CII’) report, for ‘Olive’s Law’ to protect vulnerable
facilitate the removal of trustees and strip
Charities 2037, Amárach found that one in two individuals from aggressive fundraising.
away charitable status. The Regulator is
people in Ireland do not trust charities. Unmet This brought about a cross-party
funded by a voluntary levy on charities
expectations are expressed in the withdrawal parliamentary inquiry into fundraising • Charities announce ‘opt-in’ model
spending £100k or more on fundraising
of financial giving and in escalated complaints. practices in the charity sector. The of fundraising (2016/7): Three
each year.
Unethical fundraising practices by a small parliamentary committee later published large UK charities committed to contacting
number of charities can give rise to additional a report: The 2015 charity fundraising only supporters who have consented to
regulatory oversight of the entire sector. In this controversy; lessons for trustees, the Charity marketing. They will no longer assume
article, we describe a case study from the UK Commission, and regulators. supporters are happy to receive fundraising
from which we highlight three lessons to be communications unless they have such
learned about ethical fundraising. consent.
2 PwC | Charity News Ethical fundraising
Transparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
1. Manage fundraising risks
Ethical fundraising - Three lessons learned Reputational impact Regulation is complex and demanding.
Dedicated resources need to be allocated to
Reputation is a charity’s lifeblood. It enables
interpret and understand these regulations so
people to entrust their donations, time
that the required actions can be encapsulated
and support to your organisation. Senior
within the “rules of engagement” referred to
management should recognise the significance
previously.
of reputational implications by setting the
Fundraising risks need to be managed compliance agenda for your fundraising Operational impact
activities. These “rules of engagement”
should ensure clarity, transparency and A hidden impact of unethical fundraising
appropriate governance and oversight of all is having to divert scarce resources to deal
fundraising activities. Any non-compliance or with the fall out - complaints, investigations
even perceived non-compliance can rob your and legal matters. The demands of sustained
Outsourcing risks need to be managed organisation of its public trust, which can have investigations can and do prove costly but also
severe consequences. weaken morale. Diverted resource results in
less time and energy spent on your end cause,
Regulatory impact leaving service users the ultimate victims.
The regulatory environment is becoming
ever more onerous for business in general.
The fundraising strategy should be aligned with
The charity sector is not immune from this.
the communications strategy Legislation such as the EU General Data
Protection Regulation (GDPR) and the ePrivacy
3 PwC | Charity News Ethical fundraising
Transparency &
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2. Manage outsourcing risks 3. Align the fundraising strategy with the communications strategy
Reputational risk Performance risk Communicate why you fundraise Communicate how you fundraise and
where the funds go
Many charities choose to outsource their You can also ensure quality by building good Ethical fundraising may win minds but passionate
fundraising activities. This is often beneficial fundraising approaches into performance fundraisers win hearts. Amárach’s research for CII Educating the public on how you fundraise will
from an economic and operational perspective. reporting. Rewarding fundraisers by noted a lack of trust recovery, despite increasing build trust. Likewise, explaining and justifying
Like any outsourcing arrangement, this ‘acquisition’ rates only may encourage aggressive regulation. Yet the survey also revealed that how you spend funding will also help increase
results in additional risk, particularly from a and unethical behaviors from fundraisers. almost two in three people believe that charities trust. Although one in two people do not trust
reputational perspective. The importance of Instead, consider measuring ‘retention’ rates have an important role to play in Irish society. charities, almost one in four people have not yet
robust due diligence prior to the appointment indicating inspiring conversations that win long- Fundraisers are the ‘shop window’ to your made up their minds. A clear and transparent
of any external party is vital, as is ongoing term supporters. You can also align performance organisation. By training fundraisers as your fundraising model supported by targeted
governance and monitoring to ensure the “rules levels with the Guidelines for Charitable ambassadors, you can win new supporters and communications can prove highly effective.
of engagement” are upheld. Organisations on Fundraising from the Public keep them. An inspiring conversation can cause
issued by the Charities Regulator in 2017. a one-off cash giver or raffle player to convert to
Regulatory risk a regular giver. Aligning your communications
Outsourcing fundraising does not outsource strategy with your stewardship journey will help
your organisation’s responsibilities for ensuring develop a committed support base.
compliance. In our last edition, we covered the
Questions to ask your trustees:
duties of trustees under the Charities Act 2009.
This includes acting with reasonable care and
skill. You should ensure contractor compliance
• Are they aware of the Guidelines Questions to ask your fundraisers: Contact
for Charitable Organisations on
by setting compliance targets and checking that
Fundraising from the Public issued by • Can they describe the organisation’s
your agencies are complying.
the Charities Regulatory Authority? mission? Lina Sleath
• Have they assessed whether the • How would they explain the role Risk Assurance Manager
reward structure for fundraisers of fundraising and the difference lina.sleath@ie.pwc.com
motivates ethical fundraising? people’s support makes? (01) 792 5416
• Have they asked for third party
due diligence before outsourcing
Andy Banks
fundraising?
Risk Assurance Partner
andy.j.banks@ie.pwc.com
(01) 792 6805
4 PwC | Charity News Ethical fundraising
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Transparency & the trustees’ report
Transparency in an era of financial reporting and regulatory change
The trustees’ report is effectively a narrative registered with the Charities Regulatory
At present in Ireland, the outlining the charity’s achievements and Authority. While the Charities Regulator has
performance for the year, including its financial not yet exercised his right to publish financial
Charities (Accounting and performance during the year. It should also statements of charities, he has indicated his
Reporting) Regulations have provide various qualitative disclosures on intention to do so, and it is expected that this
not yet been enacted, so there is matters relating to governance, structure, will happen shortly.
no legal requirement to prepare administration details, future plans, and
environmental and social reporting matters. Interestingly, it is not just charity accounts
a trustees’ report. It is widely which are moving towards an increased level
accepted that when enacted, While writing these reports can be onerous, of transparency and disclosure. The European
the Accounting and Reporting it is important to remember that the messages Union (Disclosure of non-financial and diversity
regulations will require the use of conveyed in annual reports are critical to information by certain large undertakings and
the Charity SORP FRS102, and a how charities are perceived by donors, and groups) Regulations 2017 (the Non-Financial
by the media and the public at large, and so Disclosure Regulations, or the Regulations)
trustees’ report is a requirement Aisling Fitzgerald, who
it is important that the report is as fair and were signed on 30 July 2017 by the Minister
of the SORP. Many charities have transparent as possible. for Jobs, Enterprise and Innovation, and came is head of our not-for-profit
early adopted the SORP and are into operation on 21 August 2017. They apply to Assurance Practice, outlines the
therefore already preparing a In an era where transparency is increasing and financial years beginning on or after 1 August key disclosure requirements for
where donors and funders expect to have a 2017, and require entities within their remit to inclusion in your trustees’ reports.
trustees’ report. Others have yet
large amount of information about the charity disclose information on the way they operate
to adopt. they are supporting at their finger-tips, it is Padraig McKeon, an
and how they manage social and environmental
imperative firstly, that your annual report independent communications
challenges.
includes that data, and secondly, that your consultant, provides some tips and
annual report is readily accessible and publicly Given this move towards increased advice on how you can ensure you
available. transparency in financial reporting for charities communicate with impact in your
and large corporates, we thought it timely to annual report.
Section 54 of the Charities Act 2009 provides cover this topic. In the next two articles Aisling
for the publication of annual financial and Padraig discuss what you need to disclose
statements of charitable organisations and how best to communicate it.
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The trustees’ report - key disclosure requirements
Overriding requirements
It is important to remember that the overriding A good trustees’ report will tell the reader what
purpose of the trustees’ report is to ensure the charity is set up to do, how it is going about
that the charity is publicly accountable to it, and what has been achieved as a result of its
its stakeholders for the stewardship and work. The report will assist the user to make
management of the funds it holds. economic decisions in relation to the charity
and to assess the charity’s progress against its
In preparing the trustees’ report, the trustees objectives. It will tell the story of the charity
of a charity should consider the information in a balanced manner, acknowledging both
needs of the primary users of their report. The significant successes and failures.
primary users may vary from charity to charity,
but will normally include funders, donors, One thing we have noticed in practice is that
financial supporters, service users and other people do not like to talk about their failures, in
beneficiaries. the public domain. A sign of a balanced report
is one which takes credit for the successes of
The report should be written in a coherent and the charity, and which sets out areas where
logical manner that meets legal and regulatory objectives were not achieved during the year,
requirements. explaining also what got in the way of the
charity achieving its targets or objectives.
The Charity SORP FRS102 notes that the
trustees’ report should provide a fair, balanced
and understandable review of the charity’s
structure, legal purposes, objectives, activities,
financial performance and financial position.
Good financial reporting provides a context for the
reader within which to interpret the accounts
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Charity SORP FRS102 –
1. Objectives and activities 3. Financial review 4. Structure, governance and
management
trustees’ report disclosure a. The trustees’ report must include an a. This section of the report should provide
requirements outline of the charity’s objectives, aims an interpretation of the key financial a. This section should deal with the
and strategic activities. performance as outlined in the Statement structure and governance arrangements
The SORP requires that for larger of Financial Activities, the Balance in place for the organisation. It should
charities (turnover > €500k), the b. The report must also cover the charity’s
Sheet, and the Cash-flow and Reserves explain how the organisation is governed,
seven headings below must be strategic investment policy, grant making
statements. what committees are in place, how
included in the trustees’ report. policies and contribution of volunteers.
board members and key management
We outline some of the important b. It should cover the principal funding
c. It is useful for this section of the report are trained, how often the board and
messages which should be dealt with sources, details of any pension deficit,
to include an outline of the strategic committees meet, and what matters are
under each of the seven headings. A and the extent to which the organisation
objectives included in the organisation’s reserved for the board/committees.
more detailed document describing takes social, environmental or ethical
overall business/strategic plan.
the “musts” and “shoulds” under considerations into account in its b. It should also deal with procedures for
each of the seven headings is
available on our website at:
2. Achievements and performance investment policy. management remuneration.
https://www.pwc.ie/ a. The report must cover the performance
c. A suite of KPIs is often used in this section
of the trustees’ report to illustrate the 5. Reference and administrative details
publications/2018/trustees-report- of the charity in the year against its charity’s financial performance. KPIs such a. This section should provide reference
considerations-not-for-profit.pdf stated objectives, covering in particular as the following are often provided as and administration details for key
fundraising performance, investment these are of interest to readers: management and other professional
performance, and the impact of material
i. Direct charitable expenditure as a % of advisors.
expenditure incurred to raise income.
total expenditure.
b. A good report will provide some
ii. Support costs as a % of total costs.
6. Plans for future periods
information on the individual objectives
in the organisation’s strategic plan and a. The future plans of the organisation,
iii. Salaries and wages as a % of total costs including details of the activities planned
to what extent the organisation has and/or total income.
delivered on each objective in its overall to achieve them, should be detailed in this
plan during the year. iv. Governance costs as a % of total costs. section.
c. The report should also identify challenges
encountered during the year, in
v. Fundraising expenditure as a % of
income raised.
7. Funds held as Custodian Trustee on
behalf of others
particular challenges relating to the non- vi. Unrestricted reserves as a % of income.
achievement of strategic objectives. a. If the charity holds funds as an agent
vii. Government income as a % of total acting on behalf of others, details of the
income. nature of the agency arrangement should
be included here.
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Other information which is expected to
be included:
While not covered explicitly in the seven
headings above, there is an expectation
that the trustees’ report will also include a
certain amount of information in relation to
environmental and social reporting matters.
The report should illustrate the organisation’s
awareness of environmental issues, It should
include a Social Responsibility Statement,
covering health & safety, equal opportunities
and employee rights. It should also include
a policy statement on green/ethical based
procurement policies followed by the
organisation, as well as a policy statement for
the organisation on waste management and
recycling.
So as you can see, the trustees’ report should Tips and advice on how to communicate your Contact
contain quite a lot of information about the key messages with impact
organisation. One key tip we have is that you
should not wait until the end of the financial Having considered the reporting Aisling Fitzgerald
year to put this information together. In the requirements in the SORP for the
Assurance Director
same way that your finance teams won’t wait trustees’ report by our internal
aisling.fitzgerald@ie.pwc.com
until year end to deal with income shortfalls or SORP experts, the next section of
(01) 792 8707
liquidity risks, the thought process which needs our newsletter provides an external
to go into drafting a solid and informative communication expert’s view of
trustees’ report is an evolving process which some of the key communication
Angela Devaney
should be started early in the financial year. pillars and how you can use these
to drive effective communication Assurance Director
with your key stakeholders. angela.devaney@ie.pwc.com
(01) 792 6861
8 PwC | Charity News Transparency & the trustees’ reportTransparency &
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The trustees’ report - effective communication
Using the trustees’ report as a pillar of effective communication to key stakeholders
shape the expectations of those interested in
The new regulatory reporting their organisation.
requirements for not-for-profit While the primary statutory obligation is to
organisations present a dual report legal and financial status, there is an
challenge for many charities. opportunity also for trustees to give a social
In the first instance there is a report and to put a context on the environment
in which they operate, the constraints and
change in the settings on privacy obligations that they deal with, the work that
which requires previously private they do and what has been achieved.
information being, at some
level, in the public domain. Then In this article we will take a look at how that
opportunity can be exploited.
there is the concern for their
reputation - how third parties • We will firstly put it in a little bit of context.
will interpret that information. No organisation can ‘speak’ to everybody,
and there would be little value in trying to
do so. There will always be third parties that
are more important and influential than
others, so we will look at how those might be
Let’s get the difficult piece out of the way first. identified and categorised.
We can’t control reputation. Nobody – personal
or corporate – can control what other people • This gives a frame of reference for
think of them. Fundamentally, reputation communications in general and specifically
forms around how an organisation behaves but in this case for an annual report which can
it can of course be influenced significantly by become a benchmark piece of communication
organisations that communicate effectively. for those important audiences.
The Annual Report is a naturally occurring • Finally, we will look at some of the specific
opportunity to communicate. Every charity steps that can be taken in drafting and
should look on it as an opening to address and presenting the report to put the charity and
its work in context.
9 PwC | Charity News Transparency & the trustees’ reportTransparency &
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First order of business – understand an organisation is that of ‘salience’ – the Fig 1. Power / Urgency matrix
who you are talking with degree to which a stakeholder is important
to or connected with the objectives of the High
The starting point for effective communication
organisation. There are a variety of ‘mapping’
today is not crafting the message – it is
tools or models that originated in the practice
understanding the audience. To create an
of project management and management
effective piece of communication, in any
consulting but are increasingly used by Keep satisfied Key players -
context, it is important to know who we
communicators to analyse the competing claims and monitor engage often and
are talking with, what matters to them and
of third parties and interested cohorts.
critically ‘why’ does it matter? carefully manage closely
These tools typically group stakeholders
Any given organisation will have a range of
on a map (see Fig. 1) by reference to the
stakeholders - “any group or individual that can
stakeholder’s
affect or is affected by the achievements of the
organisation’s objectives” . • potential power over, or impact on,
the organisation: the extent to which
Power
Critically, the stakeholder decides whether
the stakeholder can hope to impose their
they are ‘interested’ and how they are affected.
principles over the organisation and affect
The organisation doesn’t get to choose its
what the organisation wants to do – and their
stakeholders. What it must do is understand Monitor, with Keep informed
who its stakeholders are, decide which are the • interest: the extent to which the minimum effort
most important to it achieving its objective and stakeholder has a meaningful interest in what
then manage the relationship with those as the organisation does as it sets out to meet its
effectively as possible. objectives
Not all are equal, and circumstances will This structure gives the organisation a means of
change so that what defines a given stakeholder deciding which group of stakeholders needs the
as more significant in one situation will see most and the ongoing attention – specifically
someone entirely different to be the priority at those to whom the organisation is of great (self)
another time. interest and those who hold some element of
power over the organisation.
The most widely used filter for assessing
the position of a stakeholder relative to Low High
Urgency
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The power / urgency matrix explained
Looking at it quadrant by quadrant:
• Those on the top right are the key
stakeholders. They have a high level of power
and a sense of urgency. The organisation is
of great interest to them and they have the
power to help make it successful (or to derail
it). The generic strategy would be to manage
communication with these groups actively
and be responsive on an ongoing basis.
• Those in the Low Power – High Urgency
quadrant have a strong interest in the
organisation which they will voice openly
but they have little actual power to influence
what matters to the organisation. The
strategy will be to keep them informed – feed
and satisfy their need as a standard process.
• Those with High Power and Low Urgency are not expressly vested in what the
organisation does but will have occasional cause to become to take an interest and hold
a latent power that could impact greatly if activated. The generic strategy for that group
is to monitor closely to ensure they remain satisfied and to respond quickly and with
energy where required.
• The Low Power – Low Urgency quadrant may have occasional cause for taking an
interest, but generally have little interest and because they have little power the
approach here would be to maintain a monitor but to expend minimum effort.
11 PwC | Charity News Transparency & the trustees’ reportTransparency &
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Communicate your purpose in their operationally and to ensure the optimum use Stories are about emotion. Anecdotes and
language. Concentrate on why of resources. The focus should be all about scenarios, whether real life or composite
Contact
the deliverables and the outcomes – with stories, bring what organisations do to life.
Now that we know which stakeholder groups
a clear rationale for expenditure linked to They offer examples that people can relate to Padraig McKeon
are most important, we must shape the content
outcomes. and feel strongly about. Independent
of the report to meet their needs. Sinek* notes
that “people don’t buy ‘what’ you do, they buy communications
• The cost of personnel and administration is Stories describe products or services by consultant
‘why’ you do it”. determined in the first instance by having reference to what can be achieved with them
padraig@mckeonireland.com
the right people in the room to deliver on rather than to their features.
A well-crafted report allows the charity the (087) 2312632
the organisation’s needs and benchmarked
means of doing this. The focus of the report The central element of all stories are people –
against the market.
text will not be around the numbers employed, who use services, achieve change, overcome
or the amount spent or the funds under • The organisation plans ahead and maintains adversity, find happiness or whatever is relevant
investment. Those are the ‘what’ and ‘how’ of a development fund that allows it to to the cause.
the organisation. Instead the focus in the first invest in the sustainability of its assets and
instance will be on the ‘why’ of the organisation infrastructure to avoid under-performance Readers can identify with people as characters,
– the benefits, opportunities, and contributions and obsolescence. it allows them to connect with what is
it is making to others. That is then followed happening in the organisation and see its
by the ‘what’ and the ‘how’. To give some Under these headings the organisation purpose in ordinary terms.
examples: can outline its remuneration policy, its
administration costs ratio, its mix of So, in summary, far from being something to
• When talking about the executive team, personnel employed, its board structure and fear, the trustees’ report is an opportunity. It
we talk in the first instance about the decision making, its investment strategy and should be considered as a substantial voluntary
importance of stewardship and of ensuring contingency plans including working capital contribution that an organisation can make
that we have the right calibre of people to reserve. These are the ‘whats’ and ‘hows’. to the ongoing process of investing in its
ensure the charitable objectives are met Critically however, the language and the reputation. Focus the effort in the first instance
and in a controlled fashion. This would rationale for the material covered starts with on the key stakeholders that matter and whose
focus on the outcomes achieved on foot of ‘why’, which centres the report on the purpose ‘power’ can impact most on the organisation.
the organisation’s presence. That is why of the organisation and the benefits it creates. Work on finding stories that illustrate ‘why’
the CEO/key management is paid a market your organisation is relevant and use them to
competitive salary. Purpose is easier to tell through stories move beyond just the numbers and the legal
requirements.
• Likewise the organisation has professional The optimum way to bring the work of the
staff in all of the key technical and organisation to life is to find and tell stories that
support areas that are required to deliver illustrate the work that it does. *Sinek, S., (2011). Start with why: How great
leaders inspire everyone to take action. Penguin.
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VAT Compensation Scheme for Charities
What must you as a charity do now to maximise the recovery of VAT on costs?
In October 2017 the government Basic requirements: How much VAT will I be refunded?
set out, at a very high level,
a scheme to compensate • You must be registered with the Charities • Subject to the above you will be refunded on
Regulator. the basis of the proportion of your privately
charities for VAT suffered on (non-State/EU/international organisations)
goods and services consumed • You must hold a tax clearance certificate.
generated funding to total funding, e.g.
in delivering their services. • You must have a set of audited accounts if 40% of your funding is generated from
Such compensation has long for the year for which the claim is being private fundraising, subscriptions and
been sought as charities, being submitted. donations then you may claim 40% of your
input VAT for the year concerned.
generally exempt from VAT, VAT specific requirements
cannot recover VAT incurred • If the total of VAT sought by all charities in
• You should be able to identify all VAT paid 2019 (for the calendar year 2018) exceeds the
on costs. The scheme has been to suppliers (including any ‘reverse charge’ cap of €5m then you will be refunded on a
capped at €5m for 2018. The VAT which you may have accounted for) in pro-rata basis.
scheme will work one year in a calendar year, commencing with 2018 -
arrears, with compensation you should start this identification from 1 • Claims valued below €500 will not qualify.
for VAT incurred in 2018 being January 2018.
When can I claim the VAT and when am
sought by the charity in 2019. A • You should be able to identify any VAT which I likely to receive it?
proportion of the VAT incurred you paid and which is excluded from the
• For the year 2018 you will make the claim in
in 2018 will be refundable. It is refund scheme, namely:
2019 (closing date is not specified so for the Contact
likely that any claim made in • VAT on private, non-charity related present it is assumed to be 31/12/2019)
2019 (in respect of 2018) will not expenses;
• According to the published document on the
be paid out until 2020. • VAT incurred and which is deductible under refund scheme, the cap of €5m is an annual Pat Kennedy
an existing special refund scheme, and cap. This suggests that payment to you under Senior Consultant
the scheme will not be made until sometime patrick.g.kennedy@ie.pwc.com
• VAT incurred which is otherwise deductible.
in 2020. (01) 792 6223
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Tax updates
Employment Taxes Taxation of payments to apprentices by Visa required nationals list updated
Topics covered in this issue Education & Training Boards (ETB) As of 31 January 2018, UAE nationals will no
Taxation of illness benefit and longer require a visa to travel to Ireland. The
include the impending Revenue have updated their position on ETB
government has promised to focus on reviewing
occupational injury benefit with effect
introduction of Real Time payments made to apprentices attending
from 1 January 2018 the list of visa required nationals more
college as part of their training. ETBs are now
Reporting (RTR) for employment frequently.
Revenue will now incorporate taxable illness required to deduct tax under the operation
tax and payroll compliance, of PAYE. Apprentices are advised to obtain
and similar benefit payments into an employee’s Citizenship application – six weeks
restrictions on tax relief for tax credit certificate. Employers may need to tax credit certificates so that the correct outside Ireland
professional subscriptions, the review their policies for the treatment of illness deductions can be made. This is likely to lead to
taxation of illness benefits and benefit payments to ensure that these reflect complications where an apprentice already has Those applying for citizenship should be
of payments to apprentices, the new Revenue process. their tax credits allocated to their employment aware that there has been an increase in the
in the normal manner. number of applicants asked to provide detailed
and a number of immigration
Professional subscriptions and information regarding their travel patterns.
related updates. In addition, tax treatment of employer paid Immigration updates This is due to a policy which limits the time
a reminder not to ignore the subscriptions permitted to be spent outside Ireland to six
potential application of Relevant The following changes may be of interest to weeks in the year preceding the application for
Revenue recently updated their Tax & Duty employers with employees who are not EEA citizenship.
Contracts Tax. The costs are high Manual in relation to professional subscriptions nationals:
if you get it wrong, so it’s better paid by employers on behalf of employees. Review of employment permits regime
to be careful and check if you’re In essence, Revenue will only accept two Changes to national minimum wage No official announcement has been made, but it
potentially in scope in advance situations where such subscriptions can be paid is likely that a review will focus on the eligibility
of undertaking any building, tax-free on behalf of employees. These are (i) This increased by 30c to €9.55 from 1 January for employment permits for some lower
where there is statutory requirement for the 2018. This modest increase may have an impact skilled workers. This would widen the net for
development fit-out, installations on the eligibility for all employment permit and
employee to be a member of the professional employers looking to fill roles where the talent
or ongoing repair work. body and the individual is employed in that Atypical Working Scheme applications. is difficult to source.
professional capacity, and (ii) the membership
entitles the employee to represent a client of Atypical working scheme
his/her employer in a tribunal or similar and
this is a duty of the employment. All individuals travelling to Ireland under this
scheme must now do so within 90 days of the
approval letter issuing.
14 PwC | Charity News Tax updatesTransparency &
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Relevant Contracts Tax (RCT)
RCT is a withholding tax system that applies where
With effect from 1 January 2019: Contact
a Principal Contractor engages a subcontractor 1. Employers must notify Revenue 4. Payment of all amounts due to
to carry out Relevant Operations. The Principal at the same time as or before the Collector General must be
is then required to notify the contract, and all the payment of emoluments to made by the 23rd of that month Doone O’Doherty
payments under the contract, to Revenue on the employees by way of a Payroll (where the employer pays and Partner
eRCT system in advance of payment being made. Submission Request. For each files online via ROS). doone.odoherty@ie.pwc.com
employee, employers must notify (01) 792 6593
There is a common misconception that RCT applies There will be no requirement to file
Revenue of:
only to the construction industry. However, any P35s or P30s or to issue P60s or P45s
not-for-profit organisation (including boards of • the amount of emoluments for 2019 or subsequent years.
management of schools, universities, hospitals, being paid,
The next milestones along the
charities, religious organisations etc.) can fall • the date of the payments, and road to 1 January 2019 include the
within the scope of RCT.
• PAYE, USC and PRSI due; launch by Revenue of a full size test
As the penalties for non-compliance with the site in March 2018 and the rollout
2. Shortly after month end, of an employer data alignment
eRCT procedures are severe, it is important that
Revenue issue a monthly programme by Revenue in July 2018.
all not-for-profit organisations consider their RCT
statement summarising Payroll
obligations before undertaking any building,
Submission Requests made For more information or to contact
development, fit-out, installation or ongoing
during the month; our RTR team, visit: https://www.
repair work.
pwc.ie/payemod
3. An employer return will be
Real Time Reporting (RTR) submitted by the 14th of the
following month specifying the
The introduction of RTR is becoming all the more total PAYE/USC/PRSI deducted
‘real’ following the publication of Finance Act 2017. from individual employees. (The
The Act sets out the changes necessary for the statement from Revenue will be
implementation of RTR on 1 January 2019. deemed the return unless the
employer disagrees and amends
Since RTR was first announced in October 2016,
the statement in advance of the
Revenue has dedicated substantial resources to
deadline); and
planning for and implementing this ambitious
PAYE modernisation plan. The Department of
Finance committed an allocation of €50 million to
the project in Budget 2018.
15 PwC | Charity News Tax updatesTransparency &
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Investment and Governance
Challenges have emerged periodically,
Managing the assets of your including Brexit, US elections and global
political tensions, but inflation and long term Investment Scope of
charity and making appropriate interest rates have remained subdued, so with
manager investment
investment decisions are two reporting powers
limited alternative investment options many requirements
of the general duties of charity not-for-profit investors have invested in equities
trustees as outlined in Guidance and have been rewarded.
for Charity Trustees, issued This is now potentially going to change. Market Target and
by the Charities Regulator indicators are suggesting a rise in interest benchmark Investment
in June 2017. With market rates, and as a result alternative investment performance objectives
indicators suggesting change, options become more viable – and there is also monitoring
and alternative investment the potential for equity market turbulence if
interest rates rise.
options becoming available, we
consider the areas of investment Those charged with the stewardship of funds
governance needing particular in not-for-profit organisations will need to rely Who can make
on clear and robust governance processes to Attitude
focus at this time. investment
to risk
navigate this potentially changing investment decisions
environment.
What to focus on How much is
Types of
available for
Previous newsletters have discussed the investment
investment, time
importance of having such a process in place e.g. ethical
Investment governance investments
horizon and
and ensuring it is able to withstand shifts in liquidity needs
Strong investment performance over the last the investment environment such as these. The
number of years means that many investors areas a not-for-profit organisation’s investment
who have invested in “risk assets” have seen the policy should cover are outlined in the diagram
value of their investments grow substantially. on the right.
16 PwC | Charity News Investment & GovernanceTransparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
What opportunities are there?
As the potential for increasing investment
market volatility emerges, the two aspects There is now a clear market expectation that both
of governance we think trustees and boards interest rates and volatility in equity markets are
should be paying most attention to are: on the rise. But why does this matter?
1. Investment objectives: What do It matters because in recent years, due to
we want to achieve? Is there clarity sustained low interest rates, investors have
among our stakeholders around these been forced to seek out riskier assets, such
objectives? as equities, to generate a return. If interest
rates continue to rise, investors will have the
2. Attitude to risk: Given the needs of
opportunity to lock-in a more substantial return
the organisation and the investment
without suffering the ups-and-downs associated
time horizon, what is an appropriate
with risk assets. In doing so, investors are able
level of investment risk?
to reduce investment risk and also “bank” some
of the performance over and beyond their long
term target from the last eight or nine years.
Reacting to investment outcomes
Next steps
Very often, investors will react only to negative
outcomes. What investors are actually reacting In essence, the current situation in investment Contact
to is a significant change in circumstances, markets highlights the reasoning behind
and this is just as relevant after a period of having a written investment governance policy
significantly positive performance as after a in the first place; it provides a framework Munro O’Dwyer Martin McAlister
period of significantly negative investment for making investment decisions, helping Partner Manager
market performance. A clear investment boards and trustees to manage the not-for- munro.odwyer@ie.pwc.com martin.mcalister@ie.pwc.com
governance policy provides a framework to profit organisation’s resources effectively and (01) 792 8708 (01) 792 6197
allow decisions to be made where positive demonstrate good governance.
investment performance is delivered.
In any case, given the changing investment
Where investment performance has exceeded environment we believe a review of investment
expectations, a key question to consider is governance and strategy should be on the
whether the current level of risk remains agenda for charities and other not-for-profit
appropriate – or is there an appropriate time organisation’s during 2018, with particular
to consider reducing that risk by adjusting the focus on reviewing the robustness of their
asset allocation of the portfolio? strategic decision making processes.
17 PwC | Charity News Investment & GovernanceTransparency &
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Community matters
People Giving Scheme
Alzheimer Society World
Over €600K Memory Ribbon Day
has been raised through the scheme
to date for 27 different charities
Presentation of the 2017 PwC People Giving Scheme
Fund: Ava Battles, CEO MS Ireland, Evelyn Kelly Raised €59,902
PwC, Mairead Dillon, Head of Fundraising The in 2017 through payroll
Alzheimer Society of Ireland, Denise Fitzgerald, CEO
Temple Street Foundation, Mary McCluskey PwC donations and fundraising events
Trick or Treat for
Temple Street
€3,116 raised
Christmas
fundraiser in
Restaurant with
for our 2017 charities by the
funds going to
all charities Annual Table Quiz in CCD
18 PwC | Charity News Community mattersTransparency &
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Community matters
People Giving Scheme
Co-Ops volunteering day
Volunteers worked for 5 different charities on 1 December - ISPCC,
Focus, NCBI, An Cosán and SVP - doing a variety of work including
painting, warehouse work, charity shop work and sales.
Attending the Barretstown
Annual Report launch in PwC:
L-R: Dee Ahearn (Barretstown),
Maurice Pratt (Barretstown),
Aisling Fitzgerald (PwC) and
Feargal O’Rourke (PwC).
Santa Gift Appeal
19 PwC | Charity News Community mattersTransparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
PwC not-for-profit team
Teresa McColgan Aisling Fitzgerald Andy Banks Ken Johnson
Tax Partner Assurance Director Risk Assurance Partner Assurance Partner
teresa.mccolgan@ie.pwc.com aisling.fitzgerald@ie.pwc.com andy.j.banks@ie.pwc.com ken.m.johnson@ie.pwc.com
(01) 792 8613 (01) 792 8707 (01) 792 6805 (061) 792 8520
Ciara Whelan Angela Devaney Pat Moran Anna Kinsella
Tax Director Assurance Director Cybersecurity Partner Pensions and Investments
Director
ciara.whelan@ie.pwc.com angela.devaney@ie.pwc.com pat.moran@ie.pwc.com
(01) 792 8635 (01) 792 6861 (01) 792 5308 anna.kinsella@ie.pwc.com
(01) 792 6171
Chris Timmins Michael McDaid Ellen Roche Fiona Barry
VAT Director Advisory Partner Executive Search Entity Governance
& Reward Director & Compliance
chris.timmins@ie.pwc.com michael.j.mcdaid@ie.pwc.com Senior Manager
(01) 792 6768 (01) 792 7950 ellen.roche@ie.pwc.com
(01) 792 6703 fiona.barry@ie.pwc.com
(01) 792 6720
Doone O’Doherty Lina Sleath Munro O’Dwyer Pat Kennedy
Tax Partner Risk Assurance Manager Pensions and Senior Tax Consultant
investments Partner
lina.sleath@ie.pwc.com
doone.odoherty@ie.pwc.com patrick.g.kennedy@ie.pwc.com
(01) 792 5416 munro.odwyer@ie.pwc.com
(01) 792 6593 (01) 792 6223
(01) 792 8708
20 PwC | Charity News PwC not-for-profit teamTransparency &
Ethical fundraising the trustees’ report VAT Refunds Scheme Tax updates Investment & Governance Community Matters
www.pwc.ie
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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