Readers may recall all the way back in the summer of 2022 the Charity Commission consulted on revisions to the Annual Return for 2023, which all charities have to submit annually to the regulator. DSC made a detailed response and put forward some constructive ideas to make changes to improve the quality of information and reduce the regulatory burden, and also asked people to submit their own views.
It turns out a whopping 456 responses were received, which is a huge number for such a specialist topic. The good news is that all that effort has had an impact – the Charity Commission have listened and changed their proposals as a result. In summary, the Commission says for the new AR2023 they won’t introduce 5 of the questions they previously proposed, will amend wording for 13 questions, will create income thresholds for 4 of the new questions to ensure the regulatory burden is proportionate, and will remove 6 questions from 2024 once they’ve found alternative means to collect similar data.
The removal of some proposed questions and the introduction of income thresholds for others to maintain proportionality and not over-burden small organisations was a core theme in DSC’s response. The considerations about how data needs could be met from other alternative sources in future also shows constructive and considered thinking.
Some of the modifications mean that individual questions will seem longer than what was initially proposed, but will hopefully be clearer or more relevant to more respondents. For example, a question that asks what policies the charity has in place has grown to become a more comprehensive list, but the explanatory guidance will clarify that these aren’t necessarily all required, it depends on what the charity does and whether it needs them. In any event, prompting respondents about the range of policies could have the positive effect of spurring trustees to put key policies in place if they are lacking.
While nobody will have got everything they wanted in the new version and it isn’t perfect, the staff at the Commission should be congratulated for conducting such a thorough exercise and genuinely listening to and analysing the responses submitted. Consultations from public bodies can sometimes feel like an empty gesture at times, and thankfully that wasn’t the case here.
You can read more on the specifics by looking through the Annexes to the consultation analysis, but I’ll pull out a few ‘highlights’ in case you don’t have the time.
The originally proposed version of the AR2023 called for respondents to submit percentage figures for different types of income received, which could be complicated and time-consuming to calculate. The revised version asks for actual values of different types of income, and includes gross income thresholds of £100,000 and £500,000 for supplying more detail.
Income and operations outside the UK
The previous and proposed version of the Annual Return asked a series of questions about income received from outside the UK and any overseas operations. The gist of these questions remain in place but the Commission have amended some definitions and revised some categories for selecting types of income. If your charity receives any overseas income you will still need to complete these sections (as before), but hopefully it will be a bit more relevant and accurate, and they have introduced rounding for financial figures.
Location of charity premises
The proposed version of the new Annual Return sought more data on the location of charity premises and where services are delivered. While this is important information from a research perspective, we pointed out that there were problems with using the Annual Return to gather this information, as well as potential data protection and even safeguarding risks in publishing it for some types of charities. The Commission has decided not to ask these questions in the final version of the AR2023 and will keep investigating other ways of gathering this data, but will ask respondents to confirm the charity’s public address and headquarters address (if different).
The proposed version of the AR2023 asked for numbers of staff and volunteers, including those overseas. The revised version clarifies the status of staff (permanent, fixed-term, self-employed) and allows volunteer numbers to be estimated, and for both to be categorised as ‘outside the United Kingdom’ if applicable.
Finally, readers will be glad to hear that the Commission has scrapped a proposed question which asked whether any of the charity’s websites were hosted outside the UK and in which countries. We couldn’t see the justification for this question and calculated that it could be time-consuming and expensive to answer without any tangible benefit. So, good riddance!
Next steps – using the new Annual Return for real
Annual Returns must be filed by charities no later than 10 months after the end of their reporting year. In its response to the consultation, the Charity Commission states that ‘the changes to the Annual Return will apply to charities’ financial years ending on or after 1 January 2023’ which should mean that there is time to implement and adapt to the changes in advance of returns being submitted, even for charities closing their accounts early in 2023. The Commission has released a revised step-by-step guide to completing the new Annual Return, which helpfully explains what each question is about and how it may have changed from previous versions. The revised digital service which charities will use to submit their Annual Return will be released later in 2023.