M - R

Payroll giving

Payroll giving is a simple and convenient way for donors to consciously and regularly support their favourite causes tax effectively.

Payroll giving is tax effective at source, monthly gifts are deducted from the employee’s wages before the deduction of tax, which means that it costs donors less and they are able to give more. As an example, a basic rate tax payer (22% income tax) would only pay £7.80 from their net wage (take home wage), though their charity would receive £10.00 from them. A higher rate tax payer (40% -60%) would pay even less, only £6.00 from their net earnings.

WCVA’s Giving Wales project assists Payroll Fundraising in Wales through its partnership with a Payroll Giving Agency (South West Charitable Giving). Payroll Gifts attract an administration charge of around 5% through most Agencies, though in Wales, the Giving Wales scheme is free of charge ensuring that 100% of all Payroll Gifts reach their nominated charities.

Further information can be found on the WCVA Giving Wales website

Reserves

There is no legal definition of ‘reserves’ in relation to charities and no specific legal rule about the amount or proportion of a charity's income funds which it is allowed to hold as a reserve. Generally the Charity Commission uses the term to describe that part of a charity's income funds that is freely available for its general (unrestricted) purposes. ‘Reserves’ are therefore the resources the charity has or can make available to spend, for any or all of the charity's purposes, once it has met its commitments and covered its other planned expenditure. More specifically, income which becomes available to the charity and is to be expended at the trustees' discretion in furtherance of any of the charity's objects but which is not yet spent, committed or designated.

It is also important to be aware that there is a common understanding of the term amongst accountants that is different from the Charity Commission’s definition. In accounting, ‘reserves’ is often used very widely indeed and is likely to include funds that are excluded by the relevant Charity Commission guidance. The Commission commonly refers to reserves as ‘free’, ‘general’ or ‘unrestricted’. This definition of reserves therefore excludes:

• permanent endowment;
• expendable endowment;
• restricted funds;
• designated funds, and
• income funds which could only be realised by disposing of fixed assets held for charity use.

There is an argument for saying that expendable endowment and designated income funds ought to be counted as reserves. The argument is that in each case the trustees are free to regard the funds, if they so choose, as available for general purpose expenditure. There are no legal restrictions preventing trustees treating those two types of funds as free, general purpose funds. But there are practical reasons set out in the guidance why the funds should not normally be regarded as free in the first instance.

By contrast, restricted funds can never be regarded as general purpose funds and do not fall within the scope of reserves as the term is used by the Charity Commission.

Reserves should not be excessive but do need to be adequate to protect the charity, both in relation to variations in income flows, and foreseeable expenditure or liabilities.

There are specific accounting requirements as to the recording of reserves and other funds set out in the SORP 2005.

The Charity Commission gives extensive guidance on charity reserves in their publications: Charities’ Reserves (CC19) and Charity Income Reserves (OG43)