Fundraising Regulator Levy: What Charities Need to Know
13th February 2017 by Adrian Piddington
There has been much controversy over the setup of the new Fundraising Regulator since its inception in July 2016. The Regulator is currently being funded by a voluntary levy on certain charities. More recently, there has been a report of a charity making a formal complaint to Trading Standards after receiving an invoice from the Regulator; the issue of an invoice implied (to the charity concerned) that the levy was mandatory.
By now, all charities that qualify to be contacted by the Fundraising Regulator should have been invited to pay the new levy.
The background to the formation of the Fundraising Regulator stems from reports made in the national press in the summer of 2015, which alleged that some of the biggest and well-known charities in the UK had been employing controversial methods to raise funds. Some of these reported malpractices involved the particular charities buying and selling donors’ personal data, and pressurising elderly people.
The allegations led to the Etherington Report being commissioned. One of its recommendations was to replace the Fundraising Standards Board with a new Fundraising Regulator. The new Regulator is being funded by an annual levy paid by charities voluntarily, according to how much they spend on fundraising.
Since 1 September 2016, the Fundraising Regulator has been sending letters to charities who meet the fundraising spending criteria and invoices for the levy have been enclosed with this correspondence.
In this article, we will cover some of the main questions charities have been asking about the new levy.
What charities does the Fundraising Levy apply to?
The levy applies to charities in England and Wales who have spent £100,000 or more on generating voluntary income.
What is the amount spent on generating voluntary income based on?
The amount spent is based on the amount reported as ‘costs of generating voluntary income’ in the Charity Commission’s Annual Return, currently for the year ended 31 December 2014 as at the date of this article. Generally, charities with incoming resources over £500,000 need to report this additional financial information in their Return.
The type of costs included within this total are as per the Statement of Recommended Practice (SORP) for financial reporting for charities.
Per the Charity Commission’s Annual Return Guidance Notes, the costs may include fundraising, advertising, marketing and direct mail materials, as well as any payments to an agent, and normally include publicity costs but exclude the cost of educational material produced to promote the charity’s work, which is classed as a cost of charitable activities.
How much is the Fundraising Levy?
The following amounts are payable annually over a 3 year period (in the first instance):
|Charity’s annual spend on generating voluntary income based on total spend (£)
|| Annual levy (£)
| 100,000 to 149,999
| 150,000 to 199,999
| 200,000 to 499,999
| 500,000 to 999,999
| 1,000,000 to 1,999,999
| 2,000,000 to 4,999,999
| 5,000,000 to 9,999,999
| 10,000,000 to 19,999,999
| 20,000,000 to 49,999,999
| Over 50,000,000
Some charities are not regulated by the Charity Commission such as universities and educational establishments. These organisations are known as ‘exempt charities’ as they are exempt from the requirement to register with the Charity Commission, instead being regulated by an alternative regulator such as the Department for Education.
Exempt charities will be levied on a flat rate basis of £1,000 per year.
As mentioned, it is only charities with income over £500,000 who need to report the additional information in the Annual Return to the Charity Commission which the levy is based on. Small charities with spending below the relevant threshold can opt in to be contacted by the Regulator and voluntarily pay the levy at a flat rate of £50 annually.
If a charity receives a letter from the Regulator with an invoice – do they have to pay the levy?
No, the levy is payable entirely on a voluntary basis; the invoice can be discarded.
Whilst it is disappointing that some charities will be subject to more regulatory burden, and the way in which the Fundraising Regulator has raised the levy by issuing invoices is contentious, those charities who receive an invoice may consider it appropriate to commit to paying the levy in order to contribute to the running costs of the Regulator, whose presence should be viewed as restoring confidence in the sector. By paying the levy, those charities who are engaged the most in fundraising activities are also agreeing to follow the Code of Fundraising Practice, which will give confidence to their prospective donors.
The Fundraising Regulator has stated that those charities who have been invited to pay the levy and do not contribute may be published in a list in the future, and that the funds not obtained due to non-payment by some qualifying charities will need to be recouped by increasing the levy on other charities already making their contribution.
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