Charitable status and charity law

Charitable status and charity law

The origins of existing UK charity law date back to the Charitable Uses Act of 1601. However, charity law has developed differently in each of the home countries. In England and Wales, legislation concerning charities has been passed at numerous points over the centuries, whilst in Scotland a "laissez faire" approach to charities existed until the Law Reform Act of 1990. Current charity law reform aims to simplify and clarify the law, making it easier for charities and the public to understand, therefore increasing confidence in the public benefits provided by charitable organisations.

What is the status in England and Wales?

The current list of charitable purposes was last updated in the nineteenth century, and it has been over a decade since charity law was last reformed. As a result, it has not kept pace with changes in society and within the diverse voluntary sector. In May 2004 the Government published a draft Bill for pre-legislative scrutiny by a Joint Committee of both Houses of Parliament. The Bill was introduced into the House of Lords in December 2004, and fell with the general election in 2005. A new bill incorporating amendments suggested in the Committee stage of the previous bill was introduced in June 2005, and this is expected to reach the Report Stage in October 2005.

The key reforms of the Bill are listed below, but in general it is likely that there will be greater flexibility for various groups of charities - including families and endowed foundations - to be treated and regulated appropriately to reflect their particular circumstances. It is anticipated that the Bill will receive Royal Ascent early in 2006.

Key reforms of the Bill include the following aims.

• to update and expand the list of charitable purposes and place a clearer emphasis on the need to provide public benefit;

• to include a range of measures designed to enable charities to administer themselves more efficiently and work more effectively;

• to introduce a new legal form specifically for charities;

• to provide for a greater degree of accountability for charities which are currently excepted or exempt from the requirement to register with the Charity Commission;

• to improve the regulation of public charitable collections for charitable, philanthropic and benevolent purposes; and

• to modernise the Charity Commission's functions and powers as regulator and increase its accountability.

The Bill proposes the following descriptions of charitable purposes:

• the prevention or relief of poverty;

• the advancement of education;

• the advancement of religion;the advancement of health or the saving of lives;

• the advancement of citizenship or community development;

• the advancement of the arts, culture, heritage or science;

• the advancement of amateur sport;

• the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;

• the advancement of environmental protection or improvement;

• the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;

• the advancement of animal welfare;

• other purposes currently recognised as charitable and any new charitable purposes which are similar to another charitable purpose.

In practice, the activities of registered charities are recognised as charitable by the Charity Commision. If you have any doubts about whether a proposed beneficiary is charitable, you should check with HMRC or the Charity Commission.

Details of the Bill's progress can be accessed on the website of the UK Parliament.

What is the status in Scotland?

Since the 1990 Act there have been several reviews of charity law in Scotland, culminating in the Scottish Charity Law Review Commission, which reported in 2001. The Charities and Trustee Investment (Scotland) Bill was introduced on 15 November 2004, and passed in June 2005. The Act is likely to come into force in April 2006.

The Charities and Trustee Investment (Scotland) Act 2005 removes the presumption of public benefit for all charities and introduces a two-part "Charity Test". It also allows for a proportionate regulatory regime to be introduced by Ministers and introduces a new legal form that allows charities to take on corporate status and to limit liability for their members.

More information on charity law in Scotland can be found on the website of the Office of the Scottish Charity Regulator.

What is the status in Northern Ireland?

The Department for Social Development in Northern Ireland has launched a public consultation on proposed changes to charity law in Northern Ireland. Proposals include the creation of a Charities Commission and a Register of Charities in Northern Ireland.

More information on charity law in Northern Ireland can be found on the website of the Department for Social Development.