Slavery and human trafficking statements – what charities need to do

According to governmental guidance issued under s.54(9) (the Guidance):

"The courts will be the final arbiter as to whether an organisation 'carries on a business' in the UK taking into account the particular facts in individual cases. However, the following paragraphs set out the Government's intention as to how it should work…So long as the organisation in question is incorporated (by whatever means) or is a partnership, it does not matter if it pursues primarily charitable or educational aims or purely public functions."

So incorporated charities (including limited companies, CIOs and Royal Charter bodies) that meet the criteria will need to comply, unless the courts determine otherwise.

The £36m turnover threshold (which reflects the threshold for large companies under the Companies Act 2006) includes the turnover of any subsidiaries but only applies to sums "derived from the provision of goods and services falling within the ordinary activities of the commercial organisation or subsidiary undertaking", and only after trade discounts, VAT and other taxes have been deducted. So income from donations and investments will not count towards the threshold.

According to the Act, a slavery and human trafficking statement for a financial year is "a statement of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place (i) in any of its supply chains, and (ii) in any part of its own business, or … a statement that the organisation has taken no such steps".

The Act lists the matters that may be covered in a slavery and human trafficking statement:

• the organisation's structure, its business and supply chains;
• its policies in relation to slavery and human trafficking;
• its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
• its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
• the training about slavery and human trafficking available to its staff.

The Guidance provides a greater steer on writing statements, with Annex E offering suggestions on what information to include under each of the headings listed above.

If a subsidiary within a group meets the criteria it will also be obliged to prepare a statement, though the Guidance notes that a parent may produce a single statement for use by all qualifying group entities provided that the statement covers all the steps which have been taken by each entity.

The annual slavery and human trafficking statement must be signed by a director (or equivalent) and published on the organisation's website, with a prominent link to it on the home page. Organisations without a website must send a copy of the statement to anyone who makes a written request for one, within 30 days of receiving the request.

Although the provision is already in force, the requirement only applies to financial years ending on or after 31 March 2016. The Act does not say how soon after the financial year end each slavery and human trafficking statement must be published, though the Guidance states: "In practice, we would encourage organisations to report within six months of the organisation's financial year end. Organisations may wish to publish these statements at the same time as they publish other annual accounts."

Charities that are likely to be caught by the provisions of the Act (and particularly those with more complex group structures) may therefore wish to review their internal reporting and monitoring procedures to ensure that the information which will be required to prepare the annual statement is readily available.

If you require further information on anything covered in this briefing please contact Laetitia Ransley([email protected]; 020 3375 7152), Rachel Holmes ([email protected]; 020 3375 7561) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2016