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Unanticipated tax liabilities contributed to Cares Family closure, documents reveal

16 Nov 2023 News

By Zerbor/Adobe

A number of factors, including unanticipated liabilities to HMRC, led to the insolvency of the Cares Family group of six charities, according to internal files. 

The national organisation and its five local charity members announced at the beginning of the month that it would close due to financial issues.

This came after founding CEO Alex Smith described the group as a “happy organisation confident in itself and more secure than ever” when he stepped down as CEO in April.

Documentation seen by Civil Society suggests that unanticipated liabilities to HMRC and high turnover of directors and key staff contributed to its insolvency.

The personnel changes impacted the charity's ability to develop an appropriate plan to reduce costs or generate more funds, the files state.

A budget that did not include sufficient resilience to withstand missed targets on fundraising or a move to a more sustainable operating model, particularly given the lack of unrestricted funding in the charity’s reserves and the time available, were listed as factors.

Staff made redundant

The documentation states the organisation first experienced serious financial difficulties in 2022 and that the directors provisionally agreed a deficit for 2023-24.

It most recently had an annual income and expenditure of £949,000 in the year to August 2022, according to Charity Commission data, while its five members operating across London, Liverpool and Manchester each had a revenue of between £200,000 and £400,000. 

The files state the management accounts for the year to August 2023 indicated a further deficit of £150,196 was incurred.

The new CEO Nicola Upton wrote to directors in September 2023 to raise concerns that the anticipated approach was not achievable due to lack of unrestricted funds.

Accountancy firm RSM was engaged on 16 October to undertake a review of the financial position of the charity and the associated charities. On 24 October, RSM presented its findings to the board of trustees.

The documentation states the decision to close was taken solely by the trustees.

On 26 October RSM was instructed to assist trustees in preparing the statement of affairs and the administering of the creditors.

Most staff were made redundant on 31 October, with some staying on until 3 November to assist trustees with the closure.

The national charity had 14 employees, according to the Charity Commission website.

A Commission spokesperson said: “We are engaging with the trustees at Cares Family and are assessing information to inform our next steps.”

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