DCH 236 Oxfam
1 July 2004.
Francene Graham,
Committee Assistant
Joint Committee on the Charities Bill,
Room G10,
7 Millbank,
London,
SW1P 3JA
Dear Francene Graham
Charities Bill.
Submission to the Parliamentary Joint
Committee by Oxfam.
1 We welcome the publication of the Charities
Bill and hope that there will be sufficient Parliamentary time
allotted for it to be enacted.
2 We have restricted our submission to a limited
number of points of direct interest to Oxfam. Oxfam is though
an active member of a number of voluntary sector umbrella groups
and recognises their competence to raise matters of general interest
to the sector. Oxfam is actively involved in the following: the
National Council for Voluntary Organisations (NCVO), the Association
of Charity Shops (ACS), the Institute of Fundraising (IoF), the
Professional Fundraising Regulatory Association (PFRA),the Charities
Tax Reform Group (CTRG) and the Charity Finance Directors Group
(CFDG).
3 The issues we would like to raise are:
- Charitable status
- Fundraising
- Trading
- Role of the Charity Commission
Charitable status.
4 We welcome the re-statement and expansion of
charitable purposes. In particular we welcome the reformulation
of "the relief of poverty" to the "prevention and
relief of poverty." We also strongly support the recognition
that the "advancement of human rights, conflict resolution
and reconciliation" is to be a charitable purpose in its
own right. These newly stated purposes reflect the changing nature
of the international development agenda and will enable development
charities to contribute more appropriately to the needs of our
beneficiaries.
5 We have two issues relating to charitable status
which we would like the Committee to clarify with the Minister
and/or the Charity Commission.
5.1 How easy will it be for an existing charity
to amend its current purposes to take advantage of these changes?
If, at some point in the future, Oxfam's trustees were to seek
to amend and modernise their existing objects will this be a relatively
easy process? Our concern is that a two tier regulatory system
may emerge, one for charities registered pre 2005 (when we assume
the Bill will be enacted) and another for those who register after
the Act is passed.
5.2 With regard to the advancement of human rights,
it appeared at one point that existing case law might inhibit
the full realisation of this new class of charitable purpose:
that is whether or not a charity for the advancement of human
rights could engage in campaigns to encourage states to sign and
ratify international human rights instruments. Incorporating
human rights standards into domestic law is an essential element
in the realisation of human rights and therefore an essential
component of any organisation whose purpose is to promote human
rights. Oxfam on behalf of a coalition of international charities
has worked closely with Amnesty International UK and the Charity
Commission on seeking clarity on this issue.
5.3 The Charity Commission have recently published
some revised guidelines on the promotion of human rights which
clarify what purposes they will recognise as being charitable
and what sort of ancillary activity a charity for the promotion
of human rights could carry out to further those charitable purposes.
These guidelines allow charities for the promotion of human rights
to include a wide range of potential activities as charitable
purposes (including the ability to advocate for states to sign
and ratify international human rights instruments). The guidelines
also confirm that a charity for the promotion of human rights
can engage in campaigning activities to encourage states to sign
and ratify international instruments as an ancillary activity
to an exclusively charity purpose.
5.4 However, since these guidelines are currently
draft and there did at one point seem to be some confusion as
to what was to be included under the heading of the advancement
of human rights, the Committee may wish to confirm with the Home
Office and Charity Commission that our interpretation of the guidelines
is correct.
5.5 With regard to Oxfam, we are pleased that
the Commission's guidelines formally recognise that a charity
for the relief of poverty (such as Oxfam) can use human rights
instruments as a means of seeking the relief of poverty where
it is appropriate to do so. This has been our understanding for
a while, but it is reassuring to have this formally recognised
as being the case.
Fundraising.
Public Charitable Collections and donated goods.
6 With regard to the proposed regulation of public
charitable collections we are pleased that the Home Office has
taken a light touch towards regulating the house to house collection
of donated goods. We think this is appropriate given the nature
of these collections.
7 We are aware of the concerns raised by the
Institute of Licensing with regard to the fraudulent collecting
of goods by commercial second hand goods dealers who represent
themselves either as charities or as commercial participators
raising money on behalf of charities. However, we believe that
increasing the licensing requirements for charities will not prevent
these bogus collections taking place. It will only add to the
administrative burden of charities. Better enforcement of existing
laws by trading standards officers would be a much more appropriate
response. We hope the Committee will support a light approach
to the regulation of such collections.
Statements by Commercial Participators.
8 We have a concern that clause 35 may be too
narrowly drafted.
9 Charities often enter into joint ventures with
a commercial body whereby the commercial body will offer to donate
part of the sale price of a good or service to a nominated charity.
There has long been a general concern that consumers are unclear
as to exactly how much of the sale price actually goes to the
named charity or charities.
10 Clause 35 seeks to make it clearer exactly
how much of the sale price of a good or service will go to the
charity. The clause requires that the commercial body makes a
statement at the point of sale as to how much of the sale price
goes to the charity. The clause refers to a "notifiable
amount" and defines a "notifiable amount" as being
"the actual amount of the remuneration or sum" or "the
estimated amount of the remuneration or sum, if that is known
at the time when the statement is made."
11 Our concern is that many joint ventures are
quite complex, particularly when linked to service providers or
ticket sales for plays or concerts.
12 For example, with credit cards, charities
receive a percentage of the consumers use of the card. Similar
relationships exist with internet access providers and mobile
phone providers. Present practice in promotional material is
to describe the percentage figure: eg most credit cards offer
a fix cash amount on taking out the card and then 0.25% of turnover
as their "donation" to the charity.
13 The issue with ticket sales for events is
equally difficult. Charities are usually offered the net proceeds
of the event since most commercial partners wish to cover the
costs of running the event. So if all tickets are sold a charity
can calculate how much income was generated from the sale of each
ticket. If only half the tickets are sold the income per ticket
to the charity may be minimal or nothing at all. An added complexity
is that there is usually a variety of ticket prices available.
14 Our concern is to keep the statement as simple
and as accurate as possible, at the point of sale since
there is often little space on promotional literature or tickets
to explain the detail of the joint venture. More information
can be provided in contracts for services, but we hope there will
be some flexibility in how the definition of "notifiable
amount" will be interpreted, especially to allow percentage
figures.
Trading
15 We have concerns that the issues of charity
trading has become too narrowly focused on whether or not charities
can purchase new products for re-sale and that many other issues
have not therefore been addressed.
16 For example, we are concerned that joint fundraising
ventures with commercial organisations are overly complex. This
form of fundraising appears quite simple: a charity enters into
a joint venture with a commercial company whereby the company
sells a good or service with the intention of donating a portion
of the sale price to the charity. However, this apparently simple
transaction becomes very complex because of the rules which restrict
the ability of charities to trade.
17 An essential part of the joint venture is
the ability of the commercial partner to use the charity's name
and logo on its "charity" products. Most charities
will have trade marked their name and logo which means that the
charity must provide a licence to the commercial company to allow
it to use the name and logo on its products. The Inland Revenue
regard the use of the charity's name and logo by the commercial
body as a taxable trade and therefore the charity has to earmark
some of the "donation" as a fee for the licence. This
fee is therefore taxable. In order to avoid paying corporation
tax on the fee, the name and logo is licensed through the charity's
trading company. The trading company then gift aids its profits
to the charity in order to avoid paying corporation tax. This
makes joint fundraising ventures complex if charities are to maximise
their income.
- The charity must license the company to use the
charity's name and logo on its products.
- The charity and commercial partner must agree
a fee for the licence.
- To avoid paying corporation tax on the fee the
charity cannot itself licence the use of its own name and logo.
It does so through its trading subsidiary. This means there
are then three parties to the contract.
- The "fee" element of the "donation"
is then also subject to VAT, which is charged by the trading subsidiary
to the commercial partner. This requires a separate set of transactions.
It is an added cost to those commercial partners from the finance
sector which cannot recover the VAT paid on the license fee.
- Unless the commercial partner is prepared to
pay a separate "fee" for the licence, the "fee"
charged for the licence is deducted from the "donation".
- All this can make the statement required in clause
35 of the Bill difficult since the company's contribution to the
charity is part fee (paid to the trading company) and part donation
(given to the charity).
- Therefore the transactional costs of this type
of joint venture are higher than they ought to be since the agreement
involves three parties (the charity, the trading company and the
commercial partner) and involves separate billing for the licence
and receipts of donations.
- It also prevents joint ventures being transparent
and adds considerably to the transactional costs of setting up
and running such joint ventures.
18 A simple solution would be to allow charities
to trade directly where their own assets are involved, especially
when it comes to exploiting their name and logo. This would involve
a change to tax rules as well as charity law. There are other
examples of where the currently tight restrictions on charities
trading creates difficulties for charities to exploit their own
assets, whether this is their name and logo, intellectual property,
or land or other assets. We think this an urgent issue for review
and inclusion in the Bill. We hope the Committee will take this
issue up with the Minister.
Role of the Charity Commission.
19 We would like to echo the concerns raised
by the NCVO and others about the statutory objectives set for
the Charity Commission and in particular Clause 5 (3) 3 which
instructs the Commission to encourage charities to maximise their
social and economic impact. This is a narrow view of the contribution
charities can make to improving the quality of life for their
beneficiaries or in furthering their specific purposes. Not all
charitable purposes are connected to social or economic activities.
The Charities Act 1993 currently describes the Charity Commission's
purpose as "promoting the effective use of charitable resources"
and "to make effective the work of the charity in meeting
the needs designated by its trusts…". We believe the
Commission's role is to encourage efficiency and effectiveness
of charities in meeting their designated purposes. This may or
may not included "maximising their social and economic impact."
20 We welcome the establishment of an appeals
tribunal but would welcome clarification over how cases will be
funded. We also believe that the tribunal ought to be able to
hear appeals on all Charity Commission decisions.
Yours sincerely,
Joss Saunders,
Company Secretary
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