9th October 2017
A recent report from the Charity Commission found that, in the year ending 31 December 2016, nearly 100 charities filed accounts that included an auditor’s statement that their accounts were or could be mis-stated.
An analysis of these charities by the Charity Commission showed that 45 were not compliant with the Statement of Recommended Practice, and of those, 27 had incorrectly valued their property and investment assets. In 50 other charities, six were unable to show that they even owned the properties or investments mentioned in their accounts.
For charities that own the properties they work from, or who own properties that are leased to other organisations, the property is likely to form a significant part of that charity’s assets. Whilst there are significant tax reliefs available for charities, these rely on up-to-date valuations and a clear and accurate statement of value in the accounts.
According to the Charity Commission, several of the charities contacted about their property valuations said that they didn’t believe acquiring professional valuations was a good use of their funds. It is, however, a very necessary use and the Charity Commission will not accept this as a reason for not having an up-to-date valuation in place. Failure to do so may place the charity and its trustees under investigation.
Many charities simply rent properties from commercial landlords in order to keep costs down – there is usually a discretionary rental rate in place. In terms of financial planning, however, charities should always be mindful of the following possibilities:
The last of these could be particularly tricky for charities. Landlords can claim relief of up to 80% on their business rates if their property is let to a charity. There are qualifying conditions, however, and if the local authority believes the charity is complicit in helping the landlord to reduce business rate payments, the charity itself could be liable to pay 20% of the rates owed. If you are thinking of renting a building, you should always speak to your financial and legal advisers before you sign any paperwork.
To find out more about the benefits and responsibilities of owning or renting property as a charity, talk to a Wise & Co charity specialist today.