About Charity Law Reform Proposals Future changes in legislation in the Charities Act.
Charities Bill update
Lords reject Charities Bill public benefit amendment - Click here for further information.
Snippits of News The Charities Bill has passed through the Committee Stage in the House of Lords and is now set to enter the Report Stage. This has been provisionally scheduled for 12th October, following the end of the Summer Recess.
One amendment to the Bill is that the Receiver and Manager process, which the Charity Commission uses when investigating a charity, is to have its name changed to Interim Manager. This follows complaints that the Receiver and Manager title implies that a charity is going through receivership, which is inappropriate for the sector.
David Hunter, policy and development officer at acevo, said: “It’s great news for the sector that the Bill has made it through the Lords. We hope that progress continues to be made in the autumn, and that despite Home Office ministers’ attention being elsewhere following the recent events in London, it will continue to remain a priority for the government.”
Charities Bill is re-introduced
The Queen's Speech on 17th May 2005 contained the welcome news that the Government will re-introduce the Charities Bill, after it was timed-out when the General Election was called in April. We hope the Bill will be reintroduced shortly.
The announcement that a Charities Bill will be re-introduced is great news for the voluntary sector. Doubtless all concerned are pleased that this legislation has been given the priority it deserves to help equip all those involved in running and regulating charities to move forward in a changing world.
We equally look forward to the Bill being discussed in Parliament. The proposals in the Bill have already been closely looked at during the previous Parliament and we expect that future debates will build on the valuable discussions that took place in the Lords earlier this year.
We will keep you updated of developments as a new Bill goes through Parliament.
Charities Bill Time Line Fact File
FACT FILE: The Charities Bill, at present, gives 12 statutory definitions of “charitable purpose”, replacing the four “heads” of charity.
It says that all charities must provide “Public Benefit”.
Puts all charities on the same footing by removing the presumption that education, religion, and relief of poverty provide public benefit.
Gives the Charity Commission the task of consulting the issuing guidance on the definition of public benefit.
Gives the Commission the role of deciding whether organisations meet that definition and quality as charities.
Rationalises the Commission’s powers and extends them to include the regulation of fundraising.
Sets up a new Charity Appeal Tribunal.
Raises from £1,000 to £5,000 the income level at which charities must register with the Commission.
Sets up a new legal form for charities, the “Charities Incorporated Organisation”.
Draft Charities Bill [Session 2003/04] Included in the Queen's Speech 19/11/2004:
A draft Bill on charities will also be published which will modernise charity law and better enable charities to prosper.
Under these long-awaited proposals to reform charity law, many campaigning and social justice groups would be able to apply for charitable status.
Plans outlined by the Home Office in July 2003 outlined proposals for a new application process, which would require organisations to pass a two-stage test to qualify as a charity.
Firstly, their objectives would have to match one or more of those on a new list, which includes goals such as the advancement of amateur sport, and the prevention of poverty.
Next, the organisation would have to show it was run on the principle of public benefit.
On-going checks would then be carried out by the Charity Commission on an organisation's public character.
The changes would mean organisations like Amnesty International, could become charities.
The changes may also allow trustees to be paid for work carried out for a charity outside of their role as trustees.
There are concerns that this could create conflicts of interest, so safeguards have been planned, which could include limiting the remuneration they may receive.
The Voluntary Sector has warmly welcomed the plans, and looks set to keep pressure on the Government if it fails to live up to its promises to introduce full legislation soon.
The proposed new Charities Bill may not have grabbed many headlines after the Queen's Speech, but it will be good for charities, the general public and their relationship with each other, says Charities Minister, Fiona Mactaggart.
One of the main aims of the draft Bill is to help new and existing charities to thrive and grow. We want charities to be key players in building a generous society: encouraging people to give their time and talents so that local communities and people with common interests can deal with their own problems and build a better society.
So first things first it will produce a clear definition of what charitable means, laying out all the purposes that are, or ought to be, recognised as charitable. Public benefit will remain as the most fundamental test of charitable purpose. It's certainly time for an update the list of purposes has remained the same since the time of Elizabeth I!
The Bill will make life easier for charities. It will aim to streamline the administration of charities, so they can be more efficient and effective. In the past, some charities chose to incorporate as a company limited by guarantee. This meant that they ended up being regulated by both charity and company law, and that a potential conflict of interest was created for board members who were trustees and directors at the same time. In the Bill, charities that wish to take a corporate form will be able to become a Charitable Incorporated Organisation (CIO). This new type of company will be regulated by the Charity Commission and it will end the absurd demand on directors to take decisions in two capacities.
Other practical measures are designed to make life more straightforward for charities. For example, trustees of a charity will be able to be paid to do work for the charity themselves. So, if, for example, one of the trustees of a charity was a builder, the charity could now employ them to work on buildings it owns, something that was previously prohibited. Of course, this measure would contain proper safeguards to ensure it is not abused.
Charity trustees would also be able to apply directly to the Charity Commission, as well as to the courts, for relief from personal liability for breach of trust in instances where they have acted honestly and reasonably. This is intended to encourage more people to act as trustees, giving them confidence that they are unlikely to have to pay money out of their own pockets if things go wrong in unforeseeable circumstances. Of course, trustees found to have acted fraudulently would still be personally liable.
More comprehensive information about charities will be available. Charities will be more accountable, their workings more transparent and their achievements more evident. Clearly, charities will benefit from increased public confidence confidence that the money, effort and time they are giving to charitable causes is being well used. In turn, as people see the extent and impact of charities' work, they will feel that as an individual they can make a difference by contributing to a charity. It is in this way that the Bill aims to help charities realise their full potential as a force for good in their communities.
Anyone wanting to find out detailed information about a charity will be able to find it simply by searching the Charity Commission website. The Commission itself will be made more accountable through a range of measures. The number of Commissioners will rise from 5 to 9, and there will be a separate Chair and Chief Executive. Also, anybody wanting to challenge the Charity Commission's legal decisions will be able to go to a new Charity Tribunal which will be much cheaper than trailing through the courts.
The Bill will seek to ensure confidence in charitable fundraising, updating the law to recognise methods of giving (such as giving a direct debit commitment to a face-to-face fundraiser) that did not exist when the last law was written, and modifying the licensing scheme for public collections. We are encouraging self-regulation aimed at improving standards of conduct and practice in fundraising. Everyone recognises that you can only be confident in charity collections if you know, for example, what the cost of organising the collection itself is. We want to arrive at the point where, when you give money to a collector on the street, you are happy that it will benefit the good cause effectively.
Provisions will be made for the Home Office to regulate fundraising if self-regulation fail. The Government is committed to giving the sector every chance to provide better regulation and ensure that public confidence is maintained.
Charities are a powerful force for good in our society. This Bill will help to preserve this capability by creating a clear modern definition of charity and helping to make sure that charities conduct their business well. This will help build up public confidence which is crucial to help charities of every kind to contribute to a better world and which will encourage people to be generous with their time and money which of course charities need to work well.
Bates, Wells & Braithwaite, solicitors for Directory of Social Change, completed a summary of the main points of the Draft Charities Bill, which was published on 27th May. A brief summary of the points is available on the Charity Exchange page of the DSC website at:
A more detailed summary is available on the Bates, Wells & Braithwaite website at:
The full text of the Draft Charities Bill is available on the Home Office website at:
DSC would appreciate any feedback on the Draft Charities Bill that you can provide. We are part of a working group which will amalgamate feedback for the Joint Committee of both Houses of Parliament which has been set up to scrutinise the Bill. A meeting of the working group was held on the 15th June 2004 for this purpose.
We would appreciate it if you could submit your comments direct Responses to DSC.
A Charities Bill to reform charity law in England & Wales was introduced during the last session of Parliament. Look out for more information on the contents of the Bill on this page when the Bill is published. Meanwhile the background to the reform proposals is summarised below.
The Cabinet Office Strategy Unit made 61 proposals for reform of charity law in its report “Private Action, Public Benefit A Review of Charities and the Wider Not-For-Profit Sector” (September 2002). A period of public consultation then took place during which 1087 organisations made written comments on the published proposals and 50 public consultation events were held. After analysis of the responses the Government published its own response to the report (“Charities and Not-For-Profits: A Modern Legal Framework” available on the Home Office website).
The majority of the original proposals have the support of both the Commission and the Government. Key points include:
Wide support for a new statutory definition of what is charitable, with 12 specific categories of charitable activity (promoting animal welfare, providing social housing and advancing science are all to be included as additions to the 9 categories suggested in the report).
All charities will be required to provide public benefit. The meaning of “public benefit” will remain a matter of common law, as now.
The proposed new legal concept of the “community interest company” will be introduced. This has been the subject of separate public consultation. The new optional form of charitable corporate body, the charitable incorporated organisation, will be introduced. However the Government still intends to “review the need for other legal forms” which could include considering the possible removal of some current options, after a period (5 years rather than the original suggested 3).
Some flexibility to allow payment of trustees in certain circumstances and subject to statutory safeguards.
No compulsion for small charities to register, the compulsory registration threshold to be set at £5,000 rather than the original proposed £10,000. At the other end of the scale excepted charities with incomes over £100,000 pa will have to register with the Charity Commission and exempted charities with such incomes will also have to do so unless they have an alternative main regulator due to other regulatory requirements.
To the disappointment of much of the charity sector, and despite 84% support from the respondents to the consultation, the Government opposes the suggestion that charities should be allowed to undertake any lawful trading directly, without having to use a trading subsidiary.
Major changes to the role and organisation of the Charity Commission are to be introduced.
About Charity Law Reform Proposals 
Future changes in legislation in the Charities Act.
The Charities Bill has passed through the Committee Stage in the House of Lords and is now set to enter the Report Stage. This has been provisionally scheduled for 12th October, following the end of the Summer Recess.
The Queen's Speech on 17th May 2005 contained the welcome news that the Government will re-introduce the Charities Bill, after it was timed-out when the General Election was called in April. We hope the Bill will be reintroduced shortly.
It says that all charities must provide “Public Benefit”.
Draft Charities Bill
