John Hodge gave evidence.

Q 50

I welcome a representative of the Law Society of Scotland to give evidence. Please introduce yourself.

John Hodge: I am John Hodge, a member of the charity sub-committee of the law reform committee of the Law Society of Scotland. I am a solicitor in private practice and also involved with charities both professionally and as a volunteer.

Q 51

Thanks very much for coming to give evidence. To begin with, could you set out your general views on the Bill, which I believe are supportive, wanting to see as many organisations as possible take advantage? Could you also identify particular issues, specifically around the definition of a charity, as the Bill uses the English definition? Does that pose any potential problems for Scotland?

John Hodge: Basically, the Law Society of Scotland is supportive of the Bill. We think that it is a good start and will enable several charities to have a benefit that they would not otherwise get from cash donations. We appreciate the problems and the balances that have to be sought and we feel that that is perhaps ongoing work.

We would encourage subjecting the Bill to review to see how it works in practice and whether there are opportunities after it has bedded down for a time to see whether it could be extended, and some of the charities that would not at the moment qualify might at some stage be considered to qualify under the terms of it. We would be keen for there to be some flexibility either in the legislation, or alternatively there should be an undertaking that it should be reviewed within three or five years, after a suitable time.

One effect we have noticed is obviously that some of the very small and new start-up charities would not be able to benefit. Some of those might be set up to deal with a particular situation that has arisen, or local fundraising. One situation that came to mind that we were involved in was the setting up of the Linda Norgrove Foundation. At that stage, thanks to the co-operation of OSCR, the Office of the Scottish Charity Regulator, and HMRC we managed to have the charity set up in time for her funeral and it was able to get gift aid. Clearly, in that situation we would not have been able to get the benefit of the small donations Bill for any cash donations that might have been given at the funeral or  whenever. That sort of situation is still excluded, and that is the type of situation that we might like to be considered as time goes on.

Generally, we thought £20 was a bit small. We did find it quite difficult to know how you police this, and to assume that gifts are not greater than £20. My own experience when out with the collecting tin or passing the plate around at church is that you do not want to look and see what people are putting in. I deliberately try to look away in those situations. How in practice would it be? Would it be the case that when the money is counted and there are two £20 notes folded together it is assumed that that donation was more than £20? There could be difficulties. A lot of charities are keen to ensure that they abide by the letter and I can see that this could be a difficult point.

One other item that slightly surprised us is in clause 3(2) where it says that

“if a small donation…is applied to purposes other than charitable purposes”

it will not be treated as a small donation. A charity has to apply all its funds for charitable purposes. If that means primary charity purposes, that is, that the food is going to the homeless or people overseas rather than towards the administrative costs, I am not sure how that would work. Would you have to put cash into a separate account and then apply that account solely for these purposes? As I said, a charity basically has to apply all its funds for charitable purposes, and we found it difficult to understand quite what this subsection was there for and what it was meant to achieve. I think the guidance stated that it was to keep it in line with the gift aid rules. The gift aid rules have detailed provisions about benefits for the donor, and I think there is a similar provision inserted in the schedule to the Bill, so it did not seem to me to tally with that.

Moving on, we thought the connected charities provisions were pretty complex. We also felt that there could be some unforeseen consequences where charities are linked where they are not really in practice. It is quite common for there to be cross-representations between charities and to have representatives of one on the board of the other. That is to be encouraged. We encourage charities working together. The danger is that they might then fall to be treated as connected and would not be entitled to independent small donations provision.

Looking forward to the community buildings provision, we understand why that is necessary. We did feel, looking at the whole provision, that it was pretty complex and quite difficult to follow. It got more and more complicated as we got into it. We noticed that there was a provision that HMRC may provide for cases where a building is no longer to be treated as a community building. The negative was there, but there was not also the positive. We wondered whether guidance could not be given both ways.

I presume that clause 12 is intended to apply where an unincorporated charity, for instance, incorporates, possibly into a company limited by a guarantee or a SCIO—a Scottish charitable incorporated organisation—and we think that covers that. There could be issues if there was an amalgamation and one charity with a gift aid record amalgamated and transferred its assets to another one without it. We are not convinced that this particular clause would necessarily cover that situation.

I was asked to comment particularly on the definition of “charitable purpose”. In Scotland, we have been used, for some time, to operating with two separate definitions. We have our own definition in the Charities and Trustee Investment (Scotland) Act 2005, which is broadly similar but not identical. There are various differences from that in the Charities Act 2011. We also have to cope with the HMRC’s interpretation, which, again, can be slightly different. Our concern was that the definition in clause 17 might lead us to having three separate definitions to cope with. It would be helpful and beneficial if we could bring this together. This issue is before us, and we intend to make representations to the Scottish Government as well. We hope that possibly, in due time, we may get a unified definition at some stage. There were also some very technical comments on whether the reference was strictly necessary, given the terms of the Charities Act 2011, but that is delving into very detailed wording.

Q 52

May I probe slightly on the clause you mentioned? We are engaged in line-by-line scrutiny, which is an opportunity, if we feel that that particular part is not necessary or should be amended, to do something about it, notwithstanding the wider  context in which representations are going to be made to the Scottish Government. Should the Committee be looking to either remove or amend that clause?

John Hodge: We thought that including a reference to the law of Scotland—I am assuming Northern Ireland as well, although I have not looked into Northern Ireland’s situation—was not strictly necessary. The terms of the Charities Act 2011, in its definition of the early sections, in section 7, says that the chapter affects the law of Scotland except in so far as it falls within devolved matters. We therefore thought that that was sufficient to apply it to Scotland. If one is going to have the exception in to be consistent, it might be better to have a similar qualification to that in the Charities Act, to say that it applies to Scotland except in so far as the references to devolved matters.

If Members have no further questions, that brings us to the end of our business this morning.

Ordered, That further consideration be now adjourned. —(Jeremy Lefroy.)

Adjourned till this day at Two o’clock.