What is Charity?

I’ve been reading some of Wednesday’s debate in the House of Commons about the Charities Bill. This has been kicking around for a few years now – in fact, I thought it might end up becoming law last year, but it got put on hold when Labour started gearing up for last year’s General Election.

The Charities Bill will be the biggest shake-up in UK charity laws for hundreds of years, so I’ve been trying to get my head around what will be changing – in particular what the implications for SYA might be.

What is charity?
One of the biggest changes seem to be the very definition of what makes a charity. The Bill describes a “public benefit” test, where charities will need to demonstrate that they provide benefit in one or more of these areas in order to have charitable status. The current four headings for what makes a charity (relieving poverty, advancing education, advancing religion, benefiting the community) are being extended to a longer list of charitable purposes:

(a) the prevention or relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the advancement of health or the saving of lives;
(e) the advancement of citizenship or community development;
(f) the advancement of the arts, culture, heritage or science;
(g) the advancement of amateur sport;
(h) the advancement of human rights, conflict resolution or reconciliation
or the promotion of religious or racial harmony or equality and
(i) the advancement of environmental protection or improvement;
(j) the relief of those in need by reason of youth, age, ill-health, disability,
financial hardship or other disadvantage;
(k) the advancement of animal welfare;
(l) the promotion of the efficiency of the armed forces of the Crown;

This looks like it could have a variety of impacts – like an end to the assumption that groups involved in promoting religion or education are necessarily charitable. It’s not that they wont be able to be charities in future, but under the new Charities Bill, they will need to demonstrate that they provide a public benefit.

This seems to be a matter of some controversy. As Alan Milburn highlighted during the debate:

…when asked, only 15 per cent. of the public believe, for example, that a charity such as Tate Modern is indeed a charity. Even fewer believe that Eton is, or indeed should be, a charity�but it is.

It was a lively debate – helped by what look like spirited contributions by Ann Widdecombe. I don’t think that we will be very affected by this change (other than perhaps needing to fill in different paperwork) as I am confident that we could demonstrate that we serve a public benefit under the new guidelines). However, it was an interesting question – what is charity? What makes a group charitable? Is there a problem that charities based on religious beliefs currently getting more support than other equally worthwhile groups? Should private schools run as profit-making organisations automatically be entitled to charitable status (with all the tax breaks and other benefits that go with it), without making some effort to demonstrate that they benefit their community?

Charitable Incorporated Organisations
There are other topics that could have a more direct impact on us, however. When we originally formed, we had to register both as a company with Companies House, and as a charity with the Charity Commission. Even now, it means we have two organisations to submit paperwork to every year, under two different schedules and in two different formats. As with all paperwork – it can feel like an unnecessary burden. The Charities Bill includes the creation of Charitable Incorporated Organisation (CIO) – a new legal form giving incorporated status to charities without needing to register as a company and charity. The Charities Bill includes a section detailing a transfer process to make it easier to switch from being a charity and a company to this new, less complex, form – without the normal (extensive!) process of closing down a company and charity.

I first heard about this a long while ago when the Bill was still very much in draft, and opinions on how it would be implemented varied widely. At the time, I thought that it looked like it could be appropriate for us. But, it has changed a lot since then, and from reading the Bill, I’m not clear exactly what the benefits (other than a single return to file each year) for us would be from such a change. This is an area which we will have to scrutinize – and it will be interesting to see what advice emerges about this in the weeks to come, and whether many charities like us decide to take it up.

Other changes
There are also some other clauses which could make our life easier, like “Relaxation of restriction on altering memorandum etc. of charitable company” – making it easier in certain circumstances to make changes to our governing documents, which is currently a fairly long-winded ordeal.

There is an increase in the annual income required before a full audit is required – from £250,000 to £500,000. Although we haven’t gone over £250,000 in a year yet, we’re close enough that an audit in the near future was a possibility, so this allows us to avoid that expense.

There are a bunch of changes to the law regarding collecting money. Getting a license for a ‘public charitable collection’ is a pain – and needs to be done every time you do a collection. Changes to licensing such as regular collectors being able to apply for longer term licenses seem like a sensible way to remove some of the red tape.

The Bill should be going to the House of Lords on November 7th to consider the amendments (pdf) made this week, so as I understand it, all going well we could be seeing it become law in the next few weeks. It will be interesting to see what will happen next.

3 Responses to “What is Charity?”

  1. […] But it still feels wrong to me. Covering expenses is one thing. Ensuring that noone is prevented from being a trustee because of a financial barrier is one thing. But paying what is essentially an executive salary is another. To revisit an earlier post, when is a charity still a charity? When does an organisation that is that large, that complicated, and led by a board of paid directors, stop being a charity and start becoming a business? […]

  2. […] The Companies Bill became The Companies Act 2006 last week. I’m technically (and somewhat scarily!) a company director, so it’s something that I need to be aware of, although I’ve got to admit that I’ve not followed the progress of this one as closely as I did the other recent Bill to be passed – Charities Act 2006. […]

  3. Phil says:

    Good classification.