SANDY ADIRONDACK
Legal and governance training and consultancy
for the voluntary sector
OTHER CHAPTERS
I. THE ORGANISATION

Ch.1: Setting up an organisation
Ch.2: Unincorporated organisations
Ch.3: Incorporated organisations
Ch.4: Charitable status, charity law & regulation
Ch.5: The organisation's objects
Ch.6: The organisation's name
Ch.7: The governing document
Ch.9: Branches, subsidiaries & group structures
Ch.10: Changing legal form
Ch.11: Collaborative working, partnerships and mergers
II. GOVERNANCE
Ch.12: Members of the organisation
Ch.13: Members of the governing body
Ch.14: Officers, committees & sub-committees
Ch.15: Duties & powers of the governing body
Ch.16: Restrictions on payments & benefits
Ch.17: The registered office & other premises
Ch.18: Communication & paperwork
Ch.19: Meetings, resolutions & decision making
Ch.20: Assets & agency
Ch.21: Contracts & contract law
Ch.22: Risk & liability
Ch.23: Insurance
Ch.24: Financial difficulties & winding up
III. EMPLOYEES, WORKERS, VOLUNTEERS & OTHER STAFF
Ch.25: Employees & other workers
Ch.26: Rights, duties & the contract of employment
Ch.27: Model contract of employment
Ch.28: Equal opportunities in employment
Ch.29: Taking on new employees
Ch.30: Pay & pensions
Ch.31: Working time, time off & leave
Ch.32: Rights of parents & carers
Ch.33: Disciplinary matters, grievances & whistleblowing
Ch.34: Termination of employment
Ch.35: Redundancy
Ch.36: Employer-employee relations
Ch.37: Employment claims & settlement
Ch.38: Self employed & other contractors
Ch.39: Volunteers
IV. SERVICES & ACTIVITIES
Ch.40: Health & safety
Ch.41: Safeguarding children & vulnerable adults
Ch.42: Equal opportunities: goods, services & facilities
Ch.43: Data protection & use of information
Ch.44: Intellectual property
Ch.45: Publications, publicity & the internet
Ch.46: Campaigning & political activities
Ch.47: Public events, entertainment & licensing
V. FUNDING & FUNDRAISING
Ch.48: Funding & fundraising: General rules
Ch.49: Fundraising activities
Ch.50: Tax-effective giving
Ch.51: Trading & social enterprise
Ch.52: Contracts & service agreements
VI. FINANCE
Ch.53: Financial procedures & security
Ch.54: Annual accounts, reports & returns
Ch.55: Auditors & independent examiners
Ch.56: Corporation tax, income tax & capital gains tax
Ch.57: Value added tax
Ch.58: Investment & reserves
Ch.59: Borrowing
VII. PROPERTY
Ch.60: Land ownership & tenure
Ch.61: Acquiring & disposing of property
Ch.62: Business leases
Ch.63: Property management & the environment
VIII. BACKGROUND TO THE LAW
Ch.64: How the law works
Ch.65: Dispute resolution & litigation
UPDATED INFORMATION FOR CHAPTER 8:
THE RUSSELL-COOKE
VOLUNTARY SECTOR LEGAL HANDBOOK

This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.

These websites for each chapter update the 3rd edition of The Russell-Cooke Voluntary Sector Legal Handbook by James Sinclair Taylor and the Charity Team at Russell-Cooke Solicitors, edited by Sandy Adirondack (Directory of Social Change, 2009). The websites are not intended as a comprehensive update and should not be treated as such.

To order a copy of The Russell-Cooke Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking . It costs £60 for voluntary organisations or £90 for others, plus 10% p&p.

To avoid spamming, an email address is not given on screen. If you can't see the word 'here' or have trouble sending an email by clicking on it, the address is bookservice at sandy-a.co.uk, with the spaces and 'at' replaced by the @ symbol.

The information here covers the law applicable to England and Wales. It may not apply in Northern Ireland and/or Scotland. These news items are not a full or definitive statement of the law and are not intended as a substitute for professional legal advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be taken by the author.


Chapter 8
REGISTERING AS A CHARITY


The items below formerly appeared on the legal update website for voluntary organisations and are archived here. The content may be out of date and links may not work. For current updates to the chapter, see the legal update website for voluntary organisations at www.sandy-a.co.uk/legalstatus.htm.


HODGSON RECOMMENDATIONS ON CHARITY REGISTRATION

Updated 18/8/13. This information updates ss.8.1 & 8.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
THIS ARTICLE NEEDS TO BE UPDATED, WHICH WILL BE DONE AS SOON AS POSSIBLE.

In his review of the Charities Acts presented to Parliament on 16 July 2012, Lord Hodgson made the following recommendations in relation to charity registration, and the government commented on some of them in its interim response on 3 November 2013. The government's full response will include consideration of the Commons public administration select committee's report on its inquiry into the Charities Act 2006 and the regulation of charities, which was published on 6 June 2013.

My comments are in italic, including on the controversial recommendations to raise the registration threshold and to charge for registering with the Charity Commission.

  • The general threshold for compulsory registration should be raised to £25,000 (to match the accounting threshold), but with compulsory registration for all (non-exempt) charities below this level that claim gift aid or other tax relief [Chapter 5 recommendation 8], and with voluntary registration available for non-exempt charities that do not have to be compulsorily registered. The government's interim response said this proposal had received mixed feedback, and would need to be considered in more detail. It noted that existing evidence suggests that the public would prefer to see more, or even all, charities registered rather than fewer. The public administration select committee (PASC) recommended that the threshold not be increased.
    Sandy's comment: Some media articles have given the impression that the threshold for registration would be raised from the current £5,000 to £25,000 for all charities, without making clear that if a charity claims gift aid or other tax reliefs, it will have to register even if it is under the threshold.

    But there is no consensus within the sector about whether the threshold should be raised for those charities that are not registered with HMRC for gift aid or other tax reliefs. There is concern that where a small charity does not have to register and choose not to, it will be "off the radar", unknown to local councils for voluntary service and other support organisations, and finding it difficult to fundraise, apply for grants or gain public support.

  • To minimise the impact on the Charity Commission, deregistration of those outside the new limits (i.e. charities with income between £5,000 to £25,000 and not claiming gift aid or tax reliefs, so they no longer have to be registered) should be upon request only [Chapter 5 recommendation 10].

  • The process of lowering the registration threshold for excepted charities should continue. See Registration of excepted charities.

  • Voluntary registration of charities below the £25,000 threshold should be introduced by bringing s.30(3) of the Charities Act 2011 Act into force (which allows for non-exempt charities to be voluntarily registered), once the process of registering excepted charities with an income over £25,000 has been completed and when all existing organisations wishing to convert to a charitable incorporated organisation have had two years to do so. Applications for voluntary registration should only be available online [Chapter 5 recommendation 11].

    The public administration select committee recommended that voluntary registration should be introduced only if the Commission has adequate resources.
    Sandy's comment: In response to critics of the increased registration threshold, Lord Hodgson was quoted in an online Civil Society article on 24 July 2012 as saying that small charities which are not required to register will be empowered, because voluntary registration will enable them to choose whether to register or not.

    This does not take into account that voluntary registration cannot start until all excepted charities over £25,000 have been registered. And registration of these excepted charities, which is to take three years, cannot start until all existing organisations wishing to convert to CIO status have had two years to do so [see Registration of excepted charities]. And conversion of existing charitable companies to CIO is unlikely to start before early or mid 2014. So it could be four or five years until voluntary registration is available for charities that are not required to register.

    The registration threshold can be increased at any time by secondary legislation. A long period in which voluntary registration is not available can be avoided, of course, if the increase in the registration threshold is delayed for five or six years, so the increase happens at the same time as voluntary registration can start. It seems to me, and to nearly all other commentators, crucial that the threshold is not raised until voluntary registration is in place.

  • The processes for registering an organisation with the Charity Commission and for tax relief with HMRC should be joined up into a single process. The Charity Commission and HMRC will need to work together to design and implement such a process [Chapter 5 recommendation 12].

    The government's interim response said it would work with the Charity Commission and HMRC to explore the potential for requiring charities that register with HMRC for tax exemptions and reliefs to also be required to register with the Charity Commission, and would also ask the Commission and HMRC to consider whether any changes could be made that would reduce duplication in the registration process.

  • All charities which are unregistered should be required to disclose this fact on their correspondence, fundraising materials and cheques [Chapter 5 recommendation 13]. The government's interim response rejected this proposal, saying it would be unenforceable and in any case it should already be clear to the public which charities are unregistered, because they will not have a registration number.
    Sandy's comment: Am I missing something? Unless an organisation is registered with the Commission or is recognised as charitable by HM Revenue & Customs (which will probably only happen if it is applying for gift aid or other tax reliefs, in which case it will probably also have to register with the Commission), how will it know for certain that it is charitable? I know of many organisations where the people involved think it is a charity, even though its objects are definitely or probably not legally charitable. It surely cannot be Lord Hodgson's intention that any organisation with income under £25,000 which thinks it is a charity, does not claim gift aid and does not want to register voluntarily, not only can but must say on its headed paper, fundraising materials etc that it is an unregistered charity?

    If it is intended to apply only to excepted or exempt charities which are recognised as charitable but are not registered with the Commission, then it should be made clear that the recommendation does not apply to all unregistered charities.

  • The Charity Commission should continue to ensure that the information available about the charities on its register meets public needs and demand and is regularly reviewed to ensure it continues to meet these requirements [Chapter 6 recommendation 7].

  • All registered charities with an annual income of less than £25,000 should be identified on the Commissionís register as "small" alongside their registration number. The intention of this is to improve the public perception that these charities are subject to little proactive regulatory oversight — and alert potential donors to this fact [Chapter 6 recommendation 11]. This was not mentioned in the government's interim response but there has been considerable opposition from small charities and organisations which support them.
    Sandy's comment: Often the main reason small charities want to be registered with the Commission and are willing to go through the bureaucracy of registering, submitting annual accounts etc is to gain legitimacy with funders and donors. It seems to me that this will be subverted by putting a label on them that in effect says, "The Commission wants anyone dealing with this charity to know it is so small that we do not bother monitoring it — so beware." If labelling of small charities is to go ahead, the exact wording will be crucial.

    There is also a proposal in para.6.45 in the review (though I can't find it in the actual recommendations) that registered charities with income below £25,000 should be required to add the prefix "small" before their charity number wherever it appears. This seems ridiculous to me, and an unnecessary hassle if charities have to change their headed paper, fundraising materials and everything else that has their charity number if their income happens to go above or below the £25,000 threshold.

  • The government should work with the Charity Commission to develop a fair and proportionate system of charging for the registration of new charities. Any such charges should be set at a level to reflect the activities that they cover. Any funds raised must be accepted by HM Treasury as being an incremental increase in resources available to enable the Commission to carry out its functions more effectively not merely reason to reduce its budget by the same amount [Chapter 6 recommendation 18].

    The government's interim response said this needs more consideration, and that "given the challenge of the current economic climate for many charities, it is not something that we would propose lightly, but equally we cannot rule it out at this stage." The Public Administration Select Committee did not support introduction of a fee for registration.
    Sandy's comment: While this is not as controversial as some of Lord Hodgson's other recommendations, it is not popular. The review gives examples of a £30 charge where model governing documents and model objects are used, as these require less checking, with a much larger charge, perhaps £250, where bespoke governing documents and objects are used, as these may require significant legal input from the Commission.
Lord Hodgson's report and recommendations can be accessed on the Cabinet Office website via tinyurl.com/c2azftb. The government's interim response is on the Cabinet Office website via tinyurl.com/poqqqr6.

Go back to list of all of Lord Hodgson's recommendations


CHANGES TO THE CHARITY REGISTRATION PROCESS

Added 17/3/12. This information updates s.8.2.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
From 1 March 2012 the Charity Commission has made it compulsory, rather than simply 'encouraged' as it was previously, for all supporting documents to be submitted as PDFs at the same time as the online application for charity registration. This includes governing document, trustee declaration, bank statements and all other supporting documentation. The change is described at tinyurl.com/38hubcn.

The Commission says that its website explains how to generate PDF files, but one reference, at tinyurl.com/898fllx, is not only badly laid out but is also, in my view, confusing and unhelpful. It says, "From 1 March 2012 you will need to attach your governing document and signed trustee declaration as PDF files at the time you submit your application. ... You will only be able to produce PDF files on your computer if it has PDF writing software. Such software enables you to prepare PDF files and can convert other formats to PDF. It can also create them in conjunction with a scanner. If you are unsure about this type of software you will need to take advice on whether different products are compatible with your computer."

This does not make clear that:

  • all documents, not just the governing document and trustee declaration, must be submitted as PDFs;
  • some programs such as recent versions of Microsoft Office will save documents in PDF format, but even with this facility, PDF writing software and a scanner will be essential because at least some of the documents will be in paper format;
  • PDF writing software can be downloaded free of charge;
  • some scanners will scan only into photographic formats (jpeg, tiff, gif or bitmap) and if the Commission means what it says about all documents having to be in PDF, these other formats will not be acceptable;
  • most (or all?) scanners will only scan single-sided documents, so if a document such as a bank statement is double-sided each page will have to be scanned as a single document, or — if the scanner can scan multiple-page documents — a photocopier will be needed to copy the reverse of each page so all pages can be scanned together as a single document.
Nor does the above "guidance" link to the slightly more detailed webpage on help with PDF files, at tinyurl.com/7znjhdh. This does at least have links to two sources of free PDF writing software, but still does not make clear that a scanner will be needed.

One of the webpages I looked at — though I can't find it again, which says something about the complexity of the Commission's website and the fragmentation of information — says that the Commission cannot accept documents larger than 12MB. It is not clear whether this means each individual document, or the total of all documents. Whichever it means, I think some web browsers might not send an application with several large documents attached.

I will be sending these comments to the Commission. Others who are concerned about the difficulties that this new requirement may pose for individuals who are not familiar with, or do not have easy access to, the necessary hardware and software may also want to contact the Commission.

Maybe I am getting unnecessarily agitated about this particular issue, but as someone who often needs help to understand even fairly basic hardware, software and unfamiliar programs, I am very aware of the blocks that technology can create.

CHARITY REGISTRATION IN NORTHERN IRELAND

Updated 20/8/13. This information updates ss.4.4.6, 5.3.8 & 8.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
THIS ARTICLE NEEDS TO BE UPDATED, WHICH WILL BE DONE AS SOON AS POSSIBLE.

The Charity Commission for Northern Ireland (CCNI) remains on course to start registering charities in autumn 2013, with a phased process. The Charities (2008 Act) Commencement No.4 Order (Northern Ireland) 2013 brought into effect, on 24 June 2013, many provisions of the Charities Act (Northern Ireland) 2008 giving powers to the CCNI and placing requirements on registered charities.

The 2008 act created for the first time a statutory framework for charities in Northern Ireland and established the CCNI and a charity tribunal, But implementation was delayed by uncertainty about the legal interpretation of the public benefit provision in s.3 of the 2008 act, exacerbated by differing views about whether all charities should be required to demonstrate public benefit or whether some types of charities should be presumed to be for the public benefit, without having to demonstrate it as part of the registration process.

Finally the Charities Act (Northern Ireland) 2013, which received royal assent on 18 January 2013, amended the 2008 act to make clear that all charities in NI are required to demonstrate how they benefit the public. But it will be up to the CCNI to determine whether or not a charity is set up for the benefit of the public, rather than having, as the 2008 act provided, a prescribed test enshrined in legislation.

As soon as the 2013 act was in place the CCNI opened a public consultation, from 4 February to 6 May 2013, on its public benefit and registration guidance. The final statutory guidance, The public benefit requirement, was published in July 2013 and can be accessed, along with a glossary and frequently asked questions, via tinyurl.com/ph82659. Supplementary information on the 12 purposes set out in the 2008 act is being finalised.

From 19 August 2013, the Charities Act 2008 (Transitional Provision) Order (Northern Ireland) 2013 replaces the 2011 order with the same name. The 2013 order makes clear that organisations which as of 19 August 2013 are registered as charitable for tax purposes with HM Revenue & Customs are to be treated as charities until a decision is made about whether they are to be registered with CCNI. CCNI has referred to these charities as "deemed charities". The distinction is necessary because there may be some situations where HMRC has granted charitable status for tax purposes, but CCNI, when it comes to register the organisation, decides that its purposes do not fall within the 2008 act or are not for the benefit of the public so it cannot be registered.

In early October 2013 the CCNI will start a public consultation on its interim reporting proposals for registered charities, followed by a consultation in
2014 on the format, structure and content of the full accounting and reporting requirements. During the interim period, registered charities will be required to provide their accounts and reports and complete an annual return covering their activities, governance and finances, but the accounts and reports can be in the format they currently use. Information about the consultation is at tinyurl.com/o5jvyhv.

The CCNI's website includes information about cy près schemes, which allow property or funds to be used for charitable purposes other than those for which it was originally intended. The CCNI can consider such schemes now, but cannot finalise them until further statutory provision is made, which they hope will be by late 2013. Information is at tinyurl.com/lhydbwh.

The cy près webpage also includes information about the Charity (Failed Appeals and Disclaimers) Regulations (Northern Ireland) 2013, under which the CCNI can make a scheme where an appeal for a specific purpose does not raise enough funds for the purpose (for example, for a specific project or piece of equipment), or raises too much. The regulations came into effect on 1 July 2013 and are at tinyurl.com/ku6z5vq.

Under s.167 of the 2008 act, charities that operate in NI but are based in England and Wales, Scotland, the Republic of Ireland or other countries have to register with CCNI and submit financial returns to CCNI, but it will be a "light touch" registration rather than full registration, and they will be included on a "parallel register" which will not require them to show that they are legally charitable under NI law. These "s.167 charities" will not be registered until all NI-based charities are registered and regulations are in place setting out the s.167 accounting and reporting requirements.

Overall, the NI legislation is similar to the 1993 and 2006 Charities Acts (now the 2011 act) for England and Wales. Some significant differences are:

  • "The advancement of peace and good community relations" is included in the charitable purpose that includes the advancement of human rights, conflict resolution, reconciliation etc (s.2(3)).
  • Promoting the efficiency of the armed forces is not a charitable purpose, as it is in England and Wales.
  • As in Scotland all charities will be required to register, with no exemptions or exceptions as there are in England and Wales (s.3).
  • "Designated religious charities" which meet certain criteria will have more organisational freedom than other charities (s.165).
The CCNI website is at www.charitycommissionni.org.uk.

NIVCA (the Northern Ireland Council for Voluntary Action) has information, including its submission to the CCNI public benefit and registration consultation, on its website at www.nicva.org/news/charity-law-reform.

The Charities (2008 Act) Commencement No.4 Order (Northern Ireland) 2013 is at www.legislation.gov.uk/nisr/2013/145/made.
The 2008 and 2013 acts are at www.legislation.gov.uk/nia/2008/12/contents and www.legislation.gov.uk/nia/2013/3/contents/enacted.

CHARITY REGISTRATION STILL DELAYED IN NORTHERN IRELAND

Updated 4/1/12. This information updates ss.4.4.6, 5.3.8 & 8.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
The Charities Act (Northern Ireland) 2008 creates for the first time a statutory framework for charities there and establishes a Charity Commission for Northern Ireland (CCNI) and charity tribunal. But charity registration and the creation of the register of charities, which were expected to start in the first half of 2010, have still not started, and the rules for public collections and the introduction of the charitable incorporated organisation did not come into effect in 2011 as originally expected.

In the meantime, the Charities Act 2008 (Transitional Provision) Order (Northern Ireland) 2011 allows the CCNI to regulate (but not yet register) approximately 7,000 organisations already registered as charitable with HMRC. These organisations on the "deemed" list of charities (as they are called by the CCNI) are listed on the CCNI website and must provide updated information to the CCNI, and the CCNI has power to investigate complaints about them. New charities should continue to apply for registration with HMRC, and will be added to the list on the CCNI's website on a quarterly basis. The CCNI will also assume, in 2012, its powers to make cy près schemes allowing property or funds to be used for charitable purposes other than those for which it was originally intended.

The delay in registering charities has been caused by an inconsistency in the drafting of the Act. The NI legislation includes the England/Wales Charities Act 2006 definition of a charitable purpose as "a purpose which is for the public benefit", but the NI Act also says that in assessing whether an organisation is charitable, it will be assessed on the same basis as Scottish charities are under the Charities and Trustee Investment (Scotland) Act 2005: whether it "provides or intends to provide public benefit". This leaves it unclear whether a prospective charity is to be assessed on the basis of its stated purposes (as in England and Wales) or its actual or proposed activities (as in Scotland).

The Department for Social Development, which is responsible for drawing up charity law in NI, put forward proposed legislation in February 2011 that would make clear that the England/Wales criteria would apply. It was proposed that the new legislation go through on an accelerated procedure so it could be passed before the Assembly was dissolved on 24 March. However, s.3 of the 2008 Act says that in determining whether an organisation is for the public benefit, "it is not to be presumed that a purpose of a particular description is for the public benefit". The expectation was that the CCNI would vet all organisations, even those already registered with HMRC, to confirm they comply with NI law before registering them. But after putting forward its proposed legislation in February to clarify the definition of public benefit, DSDNI was asked to include amendments that would reintroduce a presumption of public benefit for organisations whose purpose is the advancement of religion, advancement of education or relief of property. This would be a major change, inconsistent with the current approach in both England/Wales and Scotland.

The three options now being considered are: (1) all charities in NI would be required to demonstrate how they benefit the public, as is provided for in the 2008 Act, but it would be up to the CCNI to determine whether or not a charity is set up for the benefit of the public, rather than having a prescribed test enshrined in legislation; (2) the presumption of public benefit would be restored to those charities working for the relief of poverty, the advancement of education and the advancement of religion (the three original heads of charity); or (3) the presumption of public benefit would be restored, but only for those charities that are engaged in the advancement of religion. At the end of 2011, no decision had been made and it was not expected that charity registration would start until October 2012 at the earliest.

When registration finally starts, it is expected that charities based in England/Wales, Scotland or the Republic of Ireland that operate in NI will have to register with CCNI and submit financial returns to CCNI, but it will be a "light touch" registration rather than full registration, and they will be included on a "parallel register" which will not require them to show that they are legally charitable under NI law (s.167).

Overall, the NI legislation is similar to the 1993 and 2006 Charities Acts for England and Wales. Some significant differences are:

  • "The advancement of peace and good community relations" is included in the charitable purpose that includes the advancement of human rights, conflict resolution, reconciliation etc (s.2(3)).
  • Promoting the efficiency of the armed forces is not a charitable purpose, as it is in England and Wales.
  • As in Scotland all charities will be required to register, with no exemptions or exceptions as there are in England and Wales (s.3).
  • "Designated religious charities" which meet certain criteria will have more organisational freedom than other charities (s.165).
The CCNI website is at www.charitycommissionni.org.uk. Its office moved in October 2011 from Belfast to 257 Lough Road, Lurgan, Craigavon BT66 6NQ.

NIVCA (the Northern Ireland Council for Voluntary Action) has information on its website at www.nicva.org/news/charity-law-reform.

The Act is at www.legislation.gov.uk/nia/2008/12/contents.
The transitional provision order is at www.legislation.gov.uk/nisr/2011/12/contents/made.


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