Charities have had a vital role in the response to COVID-19 so far, with demand for essential support like food parcels, emergency accommodation, and mental health services, amongst many others, skyrocketing. Many charities are working around the clock to support communities through the crisis. Undoubtedly they will continue to be relied upon to help society recover from the impact of the virus once the lockdown is over. However, government ordered shop closures and the cancellation of fundraising activities have cut off a key source of income, leading to some charities facing collapse.
On 2 April 2020, the Scottish Charity Register (OSCR) updated its COVID-19 guidance to help charities navigate through these difficult times and highlight sources of support available.
On 8 April 2020, Chancellor Rishi Sunak announced £750 million of funding for the charity sector to help keep charities afloat during the COVID-19 outbreak. Of those funds, £30 million will be allocated to the Scottish Government.
The Chancellor also announced that the government will match donations to the BBC’s Big Night In charity appeal on 23 April, pledging at least £20 million to the National Emergencies Trust appeal.
In this note we summarise the guidance for charities and the sources of support available.
How will the funding announced by the Chancellor be made available?
The Chancellor announced that £370 million of the funding will support small, local charities working with vulnerable people, and that in England this will be provided through organisations like the National Lottery Communities Fund. £360 million is to go directly to charities providing essential services and supporting vulnerable people and it looks like this will be in the form of direct cash grants to charities.
£30 million of the funding will be allocated to the Scottish Government, but it is not yet clear how the funds will be allocated to Scottish charities.
What other financial support and emergency funding is available?
- Third Sector Resilience Fund – this is an emergency fund for existing charities, voluntary organisations, social enterprises and community groups based in Scotland and/or primarily delivering services in Scottish communities. The fund is for charities facing financial difficulty as a direct result of COVID-19 (as opposed to pre-existing financial difficulties). The fund provides grants of up to £100,000, as well as 0% interest loans starting at £50,000. Organisations will also be able to access specialist business advice from Just Enterprise. An eligibility checker and full details of how to apply can be fond here.
- National Emergencies Trust (NET) COVID-19 Appeal – in Scotland funds will be managed by Foundation Scotland. The government has pledged at least £20 million to the appeal through the BBC’s Big Night In fundraiser.
- Charities Aid Foundation Coronavirus Emergency Fund – this is an emergency fund for smaller charities affected by the impact of COVID-19. Grants of up to £10,000 are available to help smaller organisations to continue to deliver much needed support to communities across the UK. Due to high demand applications are currently paused. You can find out more information here.
- Deferred tax payments - the Government will support organisations by deferring Value Added Tax (VAT) payments for 3 months. The deferral will apply from 20 March 2020 until 30 June 2020. Taxpayers do not need to make a VAT payment during this period. You will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. The offer is automatic and you do not need to apply.
- Flexibility in the use of funds and reporting requirements – many funders are allowing charities more flexibility in the use of funds and reporting requirements. SCVO has a list of the main Scottish Funders and links to their COVID-19 statements here.
- Cash reserves – OSCR has advised that where you have reserves then you can use these to help the charity to deliver its activities. OSCR’s factsheet outlines what a reserve policy is and why you might need one.
- Restricted funds – OSCR has advised that you may be able to use restricted funds for other purposes, depending on the restrictions in place. Restricted funds are normally given to a charity for a specific purpose. However, the situation we are in was not foreseeable and donors may be willing to allow you to use the funds for a different purpose. You should contact single donors directly to ask them, or where funds comprise multiple donors you could sent out a newsletter or website communication with your intention to use the funds for another purpose if no objections are raised within a set period of time. You should always consider whether this is appropriate in light of commitments that the charity has (e.g. contractual commitments). You should always document decisions that you reach and the reasons for those decisions as a matter of good governance. We would be happy to discuss this with you if you have any concerns.
What can we do to support our people and protect our staff?
Charity sector employers are eligible for Coronavirus Job Retention Scheme. The scheme pays 80% of an employee’s salary where they cannot work, up to a maximum of £2,500 per month. You can find detailed information about the scheme on our information hub.
If you are a small or medium sized charity with less than 250 employees may also be entitled to reclaim the costs of Statutory Sick Pay (SSP) for sickness absence due to COVID-19. The Coronavirus Statutory Sick Pay Rebate Scheme allows you to claim up to two weeks’ SSP per eligible employee. The repayment scheme is being backdated to 13 March. The government is still putting formal arrangements in place and HMRC will announce when the service is available.
Finally, SCVO has published detailed information and advice on how to support employees and beneficiaries during this time.
What should we do about charity meetings and governance when lockdown restrictions are in place?
Adaptions will need to be made to the way you work during the outbreak, if not done so already. Decisions about how you operate will need to be taken collectively by charity trustees, where possible. Major decisions and changes need to be recorded and advice taken where necessary.
There may be an impact on your ability to hold your AGM, which might have a knock on effect on preparing your annual report and accounts. OSCR will be understanding where you need to postpone your AGM, even where this is in breach of your governing documentation. OSCR has also advised that they will not penalise charities for submitting late reports and accounts where charities have faced difficulties as a result of the outbreak.
OSCR has advised organisations to make use of virtual meetings where possible. Telephone or online meetings can be used to help make sure you have enough people to make decisions and form a quorum, even where your governing document does not currently allow so. As always, you should continue to record virtual meetings and demonstrate good governance of your charity.
You do not need to get permission to postpone events specified in your governing document.
What if we want to change our purpose to help with the outbreak?
If your charitable purposes don’t currently allow you to, you can change your purpose (either temporarily or permanently) by applying for OSCR’s consent.
This note is based on information as at 9 April 2020 and will be updated as and when further information is provided.
Insight from Pamela Muir, Corporate,Insolvency, Restructuring Partner and Chris Allan Corporate Partner at Thorntons. For more information contact Pamela or Chris on 03330 430350, alternatively email pmuir@thorntons-law.co.uk or callan@thorntons-law.co.uk
