UK Parliament / Open data

Charities Bill [HL]

moved Amendment No. 49:"Page 27, leave out lines 28 to 32 and insert—" ““(b)   the charity’s assets exceed £2.8 million”” The noble Lord said: This is another amendment that we have tabled to try to make clearer and simpler the   thresholds at which the need for inspection or examination of accounts kick in. As I argued in Committee on 14 March, in Hansard at cols. GC 457–58, the Bill provides for a rather complicated double test for a charity to satisfy before it can determine whether it is required by statute to have its accounts audited. That requirement would apply if either,"““the charity’s gross income in that year exceeds £500,000; or . . . the charity’s gross income in that year exceeds the accounts threshold””—" £100,000—"““and at the end of the year the aggregate value of its assets (before deduction of liabilities) exceeds £2.8 million””." The two-pronged nature of that second test seems unduly complicated, particularly when read alongside the first. It seems perfectly sensible that a charity with assets of more than £2.8 million should in any event be required to have an audit, even if those assets are primarily functional assets or for some other reason do not produce high levels of income. Losing assets worth £2.8 million could have an impact on public confidence. The fact that the charity had an annual income below £100,000 would not make any difference to that. The Minister explained the value of the concept of the accounts threshold at col. GC 458 on 14 March, but I felt that it was an inadequate explanation of a threshold that makes only this one fleeting appearance in the Bill. Is the accounts threshold truly necessary considering that there are two other tests concerning, first, the annual gross income, and secondly, the aggregate value of the assets? Surely, the fact that a charity’s assets exceed £2.8 million should be a sufficient benchmark to establish whether a charity needs an audit. Members of the Committee might notice that the amendment differs from the one to which I spoke in the earlier Committee, in that it excludes the words ““before deduction of liabilities””. That follows a point made by the noble Lord, Lord Phillips, who asked in that Committee:"““Why is the £2.8 million taken before deduction of liabilities? That seems very odd, even bizarre, if you have a land charity with £3 million in assets and a mortgage of £2.5 million””." The noble Lord, Lord Bassam, replied:"““Yes, all right. The noble Lord has floored me. Having heard what I have been advised, I want to drop the noble Lord a note about it. I want to understand the point better as well””.—[Official Report, 14/3/05; col. GC 459.]" Our point remains achieving clarity about the thresholds and dividing lines that govern charity law. If you have £2.8 million of assets, there should be a return on it. If you have geared up your assets by borrowing against them, as envisaged by the noble Lord, Lord Phillips, you have assumed implicitly a greater degree of risk. Therefore the need for an audit is not removed—in fact, it is probably increased. Therefore, the second alternative of the test should be simplified by referring simply to the asset value of £2.8   million, and the reference to income levels in this part should be deleted. I beg to move.

About this proceeding contribution

Reference

673 c1055-6 

Session

2005-06

Chamber / Committee

House of Lords chamber
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