Draft Charities (Jersey) Law - Ministerial Response - 5 August 2014

Findings

Comments

1

The  Chief  Minister's  Department recognised the need for the draft Law to help and support charities without adversely  affecting  the  financial services sector.

This has been a key principle that has underpinned  the  development  of  the Law.

2

The  majority  of  respondents  from both the finance services sector and the  voluntary  and  community  sector are satisfied with the draft Law as it currently stands.

Agreed.  It  is  fully  acknowledged however that much work still needs to be  done  to  ensure  that  all  related secondary and amending legislation is appropriate  for  both  sectors.  It  must meet the needs of the sectors and of the Public.

Findings

Comments

3

The Department has been praised for the manner in which the draft Law has been  developed  having  consulted thoroughly  with  the  general  public and representatives from the finance services  sector  and  voluntary  and community sector.

The  Department  is  committed  to ensuring ongoing consultation.

4

Without a charities register, there is currently no way of determining the exact  size  and  nature  of  Jersey's charitable sector.

Agreed. The development of the Law has  always  been  perceived  as  a  two- phase project in order that information about the size and nature of the sector can  be  fully  understood  prior  to  the development of regulatory standards.

5

It  is  anticipated  that  the  phased approach for the development of the legislation  will  allow  time  for charities,  particularly  small organisations, to adjust to the changes prior to the introduction of regulatory standards.

Agreed.  It  is  recognised  that  small organisations  needed  to  be  provided both time and support in order to adjust to the new requirements.

6

The Chief Minister's Department will provide  support  throughout  the registration  process  to  charities currently  on  the  Taxes  Office "charities list".

Agreed.  The  Chief  Minister's Department  will  work  with representatives of the sector to identify their  needs  in  advance,  in  order  to ensure that the right support services are put in place.

7

The Scott ish Charities Law has been used as the basis for the development of our own draft legislation.

Agreed. The Scott ish Law did provide the  basis  for  Jersey's  Charities  Law, although some key changes have been made to ensure it is appropriate for the Jersey context; including, for example: restricted  registration;  payment  of charity governors; a requirement on the Commissioner  to  consider  impact  on small organisations.

The  Chief  Minster's  Department  has worked to achieve the right balance for Jersey, as opposed to simply adopting legislation from a different jurisdiction.

8

Following  the  second  consultation, Articles 5 and 6 of the draft Law were amended  and  references  to  the Commissioner's  opinion  were removed  in  response  to  concerns raised  by  the  Financial  Services Sector.

Agreed.  The  Chief  Minister's Department recognised that legitimacy of  the  concerns  raised  and  therefore sought to address them.

Findings

Comments

9

All entities, including all faith groups, will be required to demonstrate they pass the charities test.

Agreed.  The  charities  test  provides  a gateway to charitable tax reliefs and to the right to use the term "charity". If the Law  is  to  help  build  public  trust and confidence,  the  Public  must  have assurance that those organisations that call themselves a charity, really are a charity.

10

The  Department  has  addressed  the concerns  raised  with  regard  to charitable purposes through allowing the States by Regulation to add the list of purposes.

Agreed. This is a unique feature of our Law, providing greater flexibility than the Scott ish Law.

11

There  is  a  lack  of  clarity  within Article 6 of the draft Law as to what constitutes "poverty, "education" and "religion".

It  is  acknowledged  that  this  is  a concern,  but  the  Chief  Minister's Department are confident that this will be  addressed  in  the  guidance that the Commissioner will issue.

12

Public  benefit  is  not  defined  within the draft Law. Rather, it will be the responsibility  of  the  Charity Commissioner to develop guidance on what is meant by public benefit and apply  the  benefit  test  to  individual applicants.

Agreed. This is as per the Scott ish Law.

13

The  draft  Law  clearly  states  that appeals which only benefit a specific person, or a very limited number of people,  do  not  provide  sufficient public  benefit  to  warrant  being  a charity.

Agreed. If an organisation is to receive public monies in the form of charitable tax reliefs, it is essential that it benefits the wider public, not just a few specific people.

14

In  response  to  concerns  raised regarding public benefit guidance, the draft  Law  has  been  amended  by placing a requirement on the Charity Commissioner  to  lay  the  guidance before the States after consulting with the Chief Minister and representatives of charities about its content.

Agreed. The Law was amended to make this an explicit requirement rather than implied assumption.

15

The Law will be introduced in stages, allowing the Charity Commissioner to publish the guidance on public benefit before  organisations  are  required  to apply for registration.

Agreed. A proposed timeframe will be published during Q3 2014.

Findings

Comments

16

The Chief Minister's Department has provided  reassurance  that  small community organisations will not be adversely effected by the new charity test and, in particular, the requirement to provide a degree of public benefit.

Agreed. The Commissioner's guidance will make it clear that it is absolutely understood that the quantum of public benefit delivered will be much smaller, if  the  charity  is  itself  a  small organisation.

17

Charitable  tax  reliefs  are  a  form  of public  monies  and  the  Panel  agree that  such  benefits  should  only  be available to organisations that benefit the public.

The  Chief  Minister's  Department welcomes the Panel's position.

18

The  draft  Law  proposes  a  one-stop registration  process,  automatically aligning  the  charities  registration process,  the  Taxes  Office  charities process  and  the  Jersey  Financial Services  Commission's  non-profit organisations registration process.

Agreed. It is intended that the Law, and the registration processes that underpin it, will be more efficient and more user- friendly.

19

The Jersey Voluntary and Community Sector  support  the  proposal  of  a Charity Commissioner, as opposed to a  Charity  Commission,  on  the grounds of cost and proportionality.

The  Chief  Minister's  Department welcomes the JVCS position.

20

The  Chief  Minister's  Department advised  that  consideration  would  be given as to whether the Commissioner should  be  given  powers  to  voice concerns to the public about specific organisations  operating  in  Jersey during Phase 2 of the Law.

Agreed. This will be scoped in Phase 2.

21

As a result of the concerns raised in regards  to  the  accountability  and transparency  of  the  Charity Commissioner,  it  is  now  a requirement within the draft Law for the  Commissioner  to  prepare  an annual  report  to  be  laid  before  the States.

Agreed.  The  Chief  Minister's Department acknowledged the concerns raised and recognised the need to ensure the  Commissioner  could  be  held  to account.

22

There is no requirement for charitable organisations  to  apply  to  become registered  charities.  However,  only charities  registered  under  the proposed Law can refer to themselves as a charity and receive charitable tax reliefs.

Agreed.  The  Chief  Minister's Department  recognises  that  the voluntary  and  community  sector  is extremely  diverse,  and  that  enforced registration  was  disproportionate  in terms  of  managing  risk  and  building public trust and confidence.

Findings

Comments

23

The creation of a charity register will allow the public, for the first time, to access  information  about  both "public" and "private" charities.

Agreed. Albeit it is an important feature of the Law that limited information will be available for those "private" charities that are on the restricted section of the register.  This  is  to  protect  the confidentiality of people who use only private money for charitable means.

24

To  address  concerns  raised  by  the financial  services  sector  during  the first  consultation,  the  draft  Law proposes  a  restricted  section  on  the register for "private" charities that do not solicit funds from the public and do not want the public to have full access to their information.

Agreed. See 23 above.

25

The draft Law proposes amendments to  the  tax  Laws,  as  set  out  in Article 42,  which  would  allow "private" charitable structures that, do not solicit donations from the public, to choose not to register but allows them to continue to receive exemption for income tax.

Agreed.  It  is  important  to  note, however, that income tax relief is only available on those monies used to make donations to Jersey-registered charities or  exempt  foreign  charities,  thus ensuring  public  benefit  in  return  for income tax relief.

26

The aim of the draft Law is to help protect public trust without putting an unnecessary burden on charities.

Agreed. This was another key principle of the Law.

27

The  information  that  charitable organisations are requested to provide during  the  registration  process  is similar  to  the  information  currently required  by  the  Tax  Office,  the Financial Services Commission or by the Association of Jersey Charities.

Agreed. The intention was not to create any unnecessary burdens by requesting superfluous information.

28

In the event that flexibility is required in the future, the draft Law has been amended to allow the Chief Minister by  Order  to  reduce  the  information required by small organisations upon registration.

Agreed. Whilst it is not believed that the  Law  does  place  unnecessary burdens  on  small  organisation,  the legitimacy  of  the  concerns  expressed was fully acknowledged, and the Law was  amended  to  allow  for  future changes.

29

To  help  avoid  deterring  small organisations  from  registering,  it  is imperative that the public understand the  draft  Law  and  what  is  being proposed.

Agreed.  The  Chief  Minister's Department  is  committed  to  ensuring that  user-friendly  information  and support is available.

Findings

Comments

30

Until Phase 2 of the Law is complete, organisations will be unaware of the extra requirements that may be placed upon  them  through  regulatory standards.

Agreed.  The  Chief  Minister's Department acknowledges that this is a source  of  concern,  because organisations  do  not  know  what  is around the corner. The Department is committed,  however,  to  continuing  to work with the sector to help ensure that Phase 2  is  proportionate.  There  is  no intention to bringing in overly-onerous or unnecessary Regulations.

31

The  Regulations  introduced  in Phase 2 must not be too onerous for small, community-based organisations as to deter them from registering.

Agreed. See 30 above.

32

The  draft  Law  does  not  place  a requirement on charities to produce a set  of  annual  accounts  upon application for registration.

Agreed,  although  this  may  be introduced in Phase 2 if, in consultation, it  is  deemed  that  this  is  right  and proportionate.

33

Under  Jersey's  Income  Tax  Law, churches,  as  well  as  parishes,  are entitled  to  income  tax  exemption. This provision within the Income Tax Law will remain if the draft Charities Law is implemented.

Agreed.  The  Law  is  not  intended  to amend the position for any organisation other than charities.

34

The  draft  Law  provides  the  Chief Minister  with  the  power  by  Order, rather  than  the  States  by  power  of Regulations,  to  add  to  the  list  of "excepted foreign charities".

Agreed. It is believed that this is a more pragmatic and cost-effective solution, as charities  will  be  added  to  the  list  on relatively regular basis.

35

As  a  result  of  the  concerns  raised during  the  consultation,  the  term manager',  which  was  used  to describe  people  who  have  overall control of a charity, was replaced by the term governor'.

Agreed.  Ideally  the  Chief  Minister's Department would like to have followed the  UK  Laws  and  used  the  term "trustee"; this was however not possible due to the existence of Jersey's Trusts Law,  which  already  uses  that  term. Governor' was deemed to be a suitable compromise.

36

The  financial  services  sector expressed  concerns  that  enforcing restrictions  on  the  remuneration  of charity  governors  could  potentially limit the growth of the philanthropic wealth management market in Jersey.

Agreed. This concern was expressed in both written submissions and also via the Charities Law Working Group set up by Jersey Finance Limited.

Findings

Comments

37

Whilst  the  restriction  placed  on  the remuneration  of  governors  has  been removed,  organisations  will  be required to declare, upon registration, that their governors are paid and the amount paid.

Agreed.  This  issue  was  given  very careful  consideration  as  the remuneration of governors is a unique feature of our Law. The position taken is that Jersey charities should be trusted to make their own decision with regard to remuneration, but where they do pay governors they must declare this in the public domain, so the public can make informed decisions about whether they wish to donate to that charity.

38

To  address  issues  concerning accountability, the Tribunal are now required to produce an annual report to be laid before the States.

Agreed. The Department acknowledged the concerns raised and recognised the need  to  ensure  the  Tribunal  could  be held to account

39

In response to the concerns raised by representatives  of  the  financial services  sector,  the  draft  Law  was amended to allow charitable trusts and foundations to apply their donations to excepted foreign charities as well as registered charities in Jersey.

Agreed. It was originally proposed that donations  should  only  be  made  to Jersey  charities,  but  the  financial services sector raised many legitimate concerns about this being too restrictive as  many  people  rightly  and understandably  want  to  support  other charities;  in  particular,  for  example, those  operating  in  the  Developing World.

40

The Panel agrees that exemption from all tax reliefs should only be available to bona fide charities that provide a reasonable degree of public benefit. If a charitable trust or foundation does not  register  to  become  a  registered charity, it should not be entitled to full charitable tax reliefs.

The  Chief  Minister's  Department welcomes the Panel's position.

41

The  majority  of  concerns  raised throughout  the  consultation  process have been adequately addressed and there is no reason why the draft Law as  it  currently  stands  should  not  be adopted by the States. However, the devil  is  in  the  detail'  and  a conclusion  on  the  Law's  potential impact  cannot  be  drawn  until  the Regulations are known.

The  Chief  Minister  welcomes  the Assembly's  acceptance  of  the  draft Law.  The  Chief  Minister  is  fully committed  to  bringing  forward Regulations in a timely fashion, in full consultation with the sector.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

The  Chief  Minister  must ensure that the consultation process which was carried out for the draft Law acts as a blueprint for all future public  consultations undertaken by the States.

Accept

The Chief Minister will ensure that the  SoJ  Communications  Unit  is aware of this recommendation and of  the  work  that  underpinned  the Charities Law consultation.

The  SoJ  Communications  Unit  is responsible for the development of guidance  on  public  consultations and  also  provides  advice  to Ministers who wish to undertake a public consultation.

September 2014

2

The  Chief  Minister's Department  must  provide further  guidance  on  the definition  of  charitable purposes  prior  to  the registration period.

Accept

As  set  out  in  the  report  and proposition,  the  Charity Commissioner will be recruited, and will  bring  forward  guidance significantly ahead of the start of the charity registration period.

Commissioner recruited:

Q2 2015*

Guidance: Q3 2015*

3

The  Chief  Minister's Department  must  ensure that  the  draft  Law  is widely publicised before it is  implemented  to  help encourage registration.

Accept

Work will be undertaken to ensure awareness.  This  will  include working  through  the  Parishes, churches, community groups, Jersey Finance  Limited  and  the  Jersey Financial Services Commission.

Q2 2015 onwards*

4

The  Chief  Minister  must ensure that representatives from  the  Voluntary  and Community  Sector  are fully  consulted  on  the details  of  the  regulatory standards  at  the  earliest opportunity  prior  to publication.

Accept

The  Chief  Minister  is  absolutely committed  to  this.  A  full consultation  timetable  will  be developed.

Q3 2014 onwards*

5

In order to maintain public trust  and  confidence,  the Chief Minister must ensure that  accounting requirements  for  all charities  are  introduced during Phase 2 and that the accounts  are  made available  for  public scrutiny.

Accept

As  set  out  in  the  report  and proposition, the Charities Law was designed as a two-phase project, and it  is  fully  intended  that proportionate,  sensible  accounting requirements  are  introduced  in Phase 2.

Q1 2018*