Political upheaval
Disruptive legal and regulatory changes, as well as social unrest and political turmoil, are also set to introduce unique dilemmas to financial leaders working in the Not For Profit sector. This is inevitable due to Great Britain’s withdrawal from the European Union (EU) as the everyday realities of Brexit take centre stage. For example, there is a serious concern presented by the loss of European staff in addition to EU funding.
Speaking to Forbes, CEO of NC IDEA Foundation Thom Ruhe said: “The non-profit sector will need to step up, tune out the noise, rethink funding priorities and consider broader partnerships to advance the common good.” While political uncertainty may encourage some donors to become more hesitant to submit, Not For Profits are also presented with the unique opportunity to raise both involvement and awareness for critical causes that may no longer receive national funding.
Government regulations and IR35
Non-profits are expected to work hard to adapt to changing government regulations in 2020. The regulatory environment affects major issues including revenue, organisation growth, funding and fundraising. Changing regulations have an impact on the way Not For Profit companies operate, compete and generate revenue, and CFOs will need to be aware of competition for donor and member money, which produces continuous risk and opportunity.
From April 2017, it has been compulsory for public sector organisations to inspect the arrangements they have with workers who supply their services through intermediaries such as partnerships, agencies and personal service companies (PSCs). It is obligatory for public sector engagers to operate PAYE either directly or via an intermediary on all amounts payable to the worker.
The 2018 Autumn Budget announced that IR35 would be extended beyond the public sector to all businesses and charities commencing April 2020. Therefore, businesses currently paying workers via intermediaries are best advised to review their arrangements to conduct an assessment into any off-payroll workers that are either self-employed, fall under the remit of IR35 or whose status is potentially less certain and necessitates detailed review. While a review into IR35 is currently underway, CFOs and finance leaders are best advised to prepare ahead of April 2020 and to keep up to date with developments and announcements with regard to IR35 from HMRC to ensure the Not For Profit is not negatively impacted after the deadline.
The bottom line
Flexibility in the modern gig economy is incredibly important — and IR35 represents a major threat to that. Despite the fact that a recent survey found that 92% of non-profit employees are satisfied in their current roles, going forward it is clear that it will be more costly and less attractive to engage freelancers or ad hoc workers, which will be to the detriment of the business, industry and economy as a whole.
Social enterprises and charities will need to contemplate their relationships with PSCs over the course of this year to make sure they engage and pay contractors accurately from April 2020. Any failures to implement and deduct PAYE could lead to fines from HMRC, which is another financial burden that many Not For Profits simply do not have the funding to deal with.
Identifying contracts that are at risk, planning how to manage any potential changes and ensuring that steps for full PAYE operations are implemented where appropriate from 6 April 2020 will, therefore, be essential activities for finance leaders working in non-profit businesses during the year ahead.
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