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An Inspector Calls - Montage of baordroom image and Perer Sellers as Inspector Clouseau
Last updated May 2016

An Inspector Calls

Attempts to tackle corruption and fraud may have unexpected consequences for charities.

The recent international anti-corruption summit held in London on May 12th was given a welcome publicity boost by David Cameron when he jabbered to the Queen about the “fantastically corrupt” countries attending. I think I know what happened. For a mere commoner like Dave making small talk with the monarch can be a nerve-wracking prospect and lead to brain fail.

The highlight of my short career as a royal escort included accompanying Princess Diana around a seedy bed & breakfast hotel in Hackney. Just the two of us, no security, no equerries, wandering the dingy corridors harbouring impoverished inhabitants who had run out of luck and had nowhere else to go.

Diana was a genuinely popular figure and attracted adoring crowds. I met her twice. The first time, introducing a homeless family of Irish travellers, she took me for the head of the family and only quick action on my part prevented proceedings taking a surreal turn. We took great delight in photographic evidence of our Chief Executive, a retired Colonel, appearing to curtsey at the crucial moment.

The aim of changing the culture of financial secrecy that allows public wealth to be looted in the developing world, aided by financial institutions in the west using questionable offshore arrangements is admirable and overdue. Cameron called corruption “the cancer at the heart of so many of the world’s problems” and “one of the greatest enemies of progress in our time”.

The London conference participants signed a commitment to “expose corruption wherever it is found, to pursue and punish those who perpetrate, facilitate or are complicit in it, to support the communities who have suffered from it, and to ensure it does not fester in our government institutions, businesses and communities”.

Which neatly brings us to the unexpected threat posed by the UK’s implementation of the Automatic Exchange of Financial Account Information in Tax Matters via the Common Reporting Standards (CRS) and its specific effect on charities, and our deep concerns about the potential impact of the CRS on UK charitable organisations.

Given that charities have to start reporting under the CRS from the 31st May 2017, there is very little time for charities to prepare. If you are one of the organisations required to report, the bad news for you is that the reporting period has already begun.

Under CRS, organisations will be regarded as ‘Financial Institutions’ if they primarily rely on investment returns to fund their activity and will have to report on their grant-recipients’ tax residency status.

They will be required to record and verify the tax status of beneficiaries and organisations that they fund, both in the UK and in reporting jurisdictions, beginning with the European Union, Crown Dependencies and UK Overseas Territories.

As charities do not currently collect this information, this will require changing all grant agreements and forms to be able to include this additional information. This will be compounded by the fact that beneficiaries of grants will be required to self-certify. This means that charities will be required to undertake further work in explaining to beneficiaries the complex language of the CRS and ensure that they make the appropriate disclosures. In a further twist, while the onus is on the recipient to self-certify their tax status, the sanction falls on the charity for failing to comply.

It is ironic at a time when charities have come under criticism for spending too much on administrative and support costs, we are confronted with an increase in administration spending to meet the wholly disproportionate reporting demands of the CRS.

Another unintended consequence concerns the relationship between charities and their beneficiaries. Even if the self-certification process is made simple for small grants, tax information is highly personal and asking for this information may act as a barrier to people approaching charities for help.

It is a sorry state of affairs that the relationship between a charity and a beneficiary should be seen as ‘transactional’, but asking for tax information risks turning receiving a grant from a charity into something akin to setting up a bank account. This could have dangerous long-term consequences for charities and could undermine our ability to reach vulnerable people.

An Inspector Calls is a play by J. B. Priestley and is considered to be one of the classics of mid-20th century English theatre. The play takes place on a single night, focusing on a prosperous upper middle-class family who live in a comfortable home in a fictional town.

The family is visited by a man calling himself Inspector Goole, who questions them about the suicide of a young working-class woman. There follows an interrogation in which it is revealed that the various family members are responsible for the young woman's exploitation, abandonment and social ruin, effectively leading to her death.

Your outreach work with applicants and beneficiaries is of necessity, well planned and carefully managed. It will need to be, more than ever. Next time your representative knocks the beneficiary may think an inspector calls.

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