Charities Bill [HL]

I thank the Minister for that comprehensive explanation of the matter that we   debated at some length in Grand Committee in the previous Parliament. I shall not pretend that I traced the amendments from end to end, but has the Minister or his Bill team seen the letter from the Association of Charity Independent Examiners? It contains a number of detailed and technical points, to which, for the record, I shall refer briefly. I am sure that it would be then be helpful, given the Minister’s kind invitation to consider refinements, if we could look at them in detail to ensure that we are, as he said, being properly deregulatory. The concerns include the need for clarity about what is meant by ““subsidiaries”” and whether the proposals result in what is intended. The present position appears to be that parent charities who are incorporated, irrespective of the nature of their subsidiaries, must submit to consolidated accounts under company law. Subsidiaries that are themselves charities already have to account for their funds within the reporting of the parent charity, under the Charity Commission direction under Section 96(5) of the Charities Act 1993. If that is correct, this proposal applies only to unincorporated parent charities with non-charitable subsidiaries—for example, charities with subsidiary trading companies. Given that this specific applicability results in the need to bring together charity and company law, the result is a sizeable increase in the volume and complexity of the accounting provisions of the current Charities Bill. The second point concerns the definition of ““gross income”” and removing a number of charities out of the   remit of independent examination and into the threshold of full audit. That is the reverse of the issue that the Minister chided me for a few minutes ago. By defining a charity’s gross income as that of the,"““aggregate gross income of the group””," in proposed new Schedule 5ZA paragraph 6(3)(b), it is easy to see that a number of charities which are currently eligible for independent examination, on the basis of an income comprising their own income plus the profit from their trading subsidiaries, would need move to a full audit if they had to include the income of their trading subsidiary, not just its profits. The third and final point is the increased complication of independent examination which is, after all, meant to be a proportionate external scrutiny for smaller charities. As well as the charities which have to move to full audit, those whose aggregate gross income would remain small enough to allow them to opt for independent examination, rather than audit, would have a raft of new legislation to understand and comply with. Paragraph 6 of proposed new Schedule 5ZA, which deals with independent examination, would more than double the statutory requirements on independent examination. In particular, the independent examination report would then have to be about the group, not just the single charity. That would entail both the examination of the subsidiary’s accounts in some detail and an understanding of the principles of group accounts and consolidation, neither of which are requisite at the moment. This has both training implications for independent examiners and cost consequences for the charities affected. The Minister has proposed a complicated group of amendments and I have thrown back a complicated series of questions to him. I do not ask him to reply to these this evening, but it would be helpful if he could see whether this matter could be bottomed out before we reach the next stage of the Bill.