Supporting charities: do you know the legal requirements?
Corporate Social Responsibility is increasingly important for businesses and there is particular appeal for many businesses in supporting local charities, where the support is visible within the community in which the business operates, writes Liz Brownsell, senior associate with Birketts LLP.
It is also the smaller, local, community charities that are struggling the most financially. There is less and less public funding available each year, yet an increasing demand for charities to provide essential services within the community.
As a result, we are seeing an increasing trend of charities looking to forge relationships with local businesses to help them raise much-needed funds.
There are, therefore, significant mutual benefits for businesses and charities in working together, particularly where there is synergy in the communities in which they each operate.
There is a wide range of ways in which charities and businesses may work together. Most businesses no longer want to simply pay a lump sum donation, as this is not terribly effective in promoting the CSR credentials of the business.
So, many businesses are looking for ways to embed CSR more firmly within the fabric of the business. For example, some are able to make charities part of their supply chain, others enter into promotional ventures where they donate a portion of the profits from the sale of certain goods or services, some offer free services or goods or allow staff time off work to volunteer, and many engage in event fundraising for charities either as sponsors or by hosting their own fundraisers.
All of these activities are fantastic for the community, highly effective in promoting the CSR credentials of the business, and are extremely valuable to local charities that are delivering essential community services.
However, most of the smaller charities will not be aware of the complex legal and regulatory framework that applies to these activities, and will not have the resources to seek professional legal advice.
In the wake of the Daily Mail exposé in 2015 following the death of Olive Cooke, there is much greater scrutiny by the Charity Commission and the new Fundraising Regulator in respect of charity fundraising.
The implications of getting it wrong could be devastating for a smaller charity and highly damaging to the reputation of an associated business. So, it is important to ensure that you are complying with legal requirements whenever you support charities.
There are statutory requirements that apply in relation to any activity where the business is promoting a fundraising venture and communicating to the public that it is making charitable contributions to one or more specific charities.
This is known as ‘commercial participation’ and it is necessary to put a written agreement in place that complies with the statutory requirements.
Even where you are not doing anything public-facing, but are merely sponsoring a charity event, there are pitfalls to be aware of, as you might inadvertently create a VAT and/or tax liability for the charity if you ask for too much in return for your sponsorship.
The legalities of charity fundraising are often overlooked, but one of the ways in which you can really help charities when supporting them is to pay for any necessary legal advice to check whether there will be any VAT or tax implications for the charity (in which case, you could either adjust the arrangements or increase your financial support to cover that cost) and to ensure that both the business and the charity are compliant with statutory requirements for ‘commercial participation’ agreements.
To help both businesses and charities navigate this complex area of law, Birketts is producing a free guide to the legal requirements. The guide to ‘Fundraising with Commercial Partners’ will include top tips to help you identify whether there are any legal issues to be addressed, and practical tips on how to manage the projects.
• The guide will be published soon. If you would like to receive a copy of the guide once it is available, please get in touch with Liz Brownsell. Tel: 01473 406383. E: liz-brownsell [at] birketts.co.uk