What government support is available to charities?

INSIGHTS CHARITY SECTOR SPECIAL
15 May 2020: Philippa Kelly, Director of ICAEW’s Technical Strategy Business Group, looks at the business support available for charities. 

Early in the coronavirus crisis, the government announced funding for charities comprising £360m to be directly allocated to charities providing key services (including hospices, St John’s Ambulance, victims charities, vulnerable children’s charities and Citizens Advice), and £370m for small and medium-sized charities.

However, many are facing financial challenges and will need additional support. Much of the support available to businesses can also be used by charities. If not already considered, the following schemes and mechanisms may allow charities to continue operating through the crisis and beyond.

• Deferring VAT payments to manage cashflow
• For those with charity shops, taking advantage of business rates relief and the more recent top-up will benefit small charity properties that meet the criteria for Small Business Rates Relief
• Charities should consider using the extended furlough scheme
• Consider whether to apply for a Bounce Back Loan or a Coronavirus Business Interruption Loan.

Charities can access the government-backed loan schemes, and the criteria are flexed to reflect the activities of a charity. Charities are not required to confirm that more than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity, as long as they meet the other criteria. The “business in difficulty” criteria or the accumulated losses test do not apply if the charity is a trust or unincorporated association.

For charities in acute financial difficulties, speak to your independent examiner or auditor as a source of advice, as there may be other options available. If you have existing debt, talk to your lender about payment holidays or restructuring. If you have insurance which is not required due to the effects of coronavirus, speak to your insurer about how you best receive the benefit of the premiums, or potentially a refund.

Charities may also be able to amend restrictions to funds due to the current extreme circumstances, allowing them to access cash they would not otherwise be able to, however, this should only be considered if other options are not possible, and there may be longer term impacts, including on financial resilience and donor relationships.

The Charity Commission has further guidance if you are in more severe financial difficulties.