Opinions and insights from Roythornes' charity law team.
Do your charity managers meet the fit and proper persons test?
- AuthorSarah Banner
It can be tricky, especially for smaller charities, to keep on top of the necessary administrative measures and legal requirements needed to remain within the regulations which govern charities and the way they operate. The regulations are however in force in order to provide protection and the latest development, which concerns tax reliefs claimed and how that relief is used, is something that no charity can ignore.
A recent update from HMRC clearly indicates a further expectation that charities should ensure that their ‘managers’ meet the “fit and proper person test”, in order that the charity can secure and retain valuable tax reliefs.
As you will be aware, the "fit and proper persons test" is a way to check that a charity is not managed or controlled by individuals who may present a risk to the charity. An inability to demonstrate that your managers fit within the criteria of the test will result in a loss or denial of valuable tax reliefs.
There are a number of activities which will result in an individual not being deemed to be a "fit and proper person", including being involved in tax fraud, being disqualified from acting as a charity trustee, or being involved in designing and promoting tax avoidance schemes featuring charitable reliefs. The full list can be found on the HMRC web site here.
The test applies to all ‘managers’ of charities and it is very important that all charities are clear as to who is a ‘manager’ within their organisation. The legislation defines a ‘manager’ as someone who "has the general control and management of the administration of the charity".
In a smaller charity this could include the Chairperson, Treasurer, Secretary and other committee members who have some control over expenditure. In larger charities, it is likely to be the Executive Board.
In order to help charities identify managers and keep a record of whether they are fit and proper, HMRC have also issued a very useful help sheet and statement of declaration. This is available for free download here.
Our advice in light of this new guidance is that charities should review those individuals engaged in ‘manager posts’, including their trustees and require that they all sign up to the statement of declaration as part of the charity’s ongoing review of organisational structure.
We work with a large number of charities and have an experienced team who are happy to help and provide guidance in this area. Our charity clients range from nationally recognised organisations to local grassroots charities, but we find that the issues of structure, governance and regulation are a common thread to the enquiries we receive.
If you have any questions or concerns about the latest guidance, would like to discuss whether your organisation meets the new requirements, or any other aspect of your charity, please contact Sarah Banner or Julia Seary of our charity team.