DSC Charity Law Conference 2014
Charity Law
Developments 2014
Alice Faure Walker, BWB
Jenny Ebbage, Edwards & Co
15 May 2014
Charity law developments 2014
• 2013 – 2014 - a round up
– The Charity Commission
– Public benefit
– CIOs one year on
– Permanent endowment - total return
– Lobbying and campaigning
– Northern Ireland
– Tax
• What else is in the wings?
– Charity law reform
Charity Commission
Charity Commission
• Continued squeeze on resources
• Public scrutiny
– Public Administration Select Committee
– National Audit Office
– Public Accounts Committee – twice!
Charity Commission
“The Commission’s approach to regulation and enforcement lacks
vigour.”
Public Accounts Committee, 13 May 2013
“The 2006 Act represented an ambition which the Commission could
never fulfil, even before budget cuts were initiated.”
Public Administration Select Committee, 21 May 2013
“The Government continues to believe that the Charity Commission has
sufficient resources to effectively regulate charities, provided it focuses
on its core regulatory functions.”
Government response, September 2013
Charity Commission
“… can be slow to act when investigating regulatory concerns… does not
take enough tough action in some of the most serious regulatory cases…
is reactive rather than proactive…”
“The Commission is not regulating charities effectively. …. We conclude
that the Commission is not delivering value for money.”
National Audit Office, 4 December 2013
“The Commission has no coherent strategy for delivering clearly defined
priorities within its broad remit …. The Commission has not regulated the
sector effectively. … We have little confidence in the Commission’s
ability to put right its problems and failings.”
“We intend to return to review the Commission’s progress in a year’s
time.”
Public Accounts Committee, 29 January 2014
Charity Commission
“We have already begun to implement the recommendations of the
National Audit Office.”
“But if we are to fulfil all the expectations placed on us … we must be
adequately funded..”
William Shawcross, Charity Commission chair
Charity Commission – what does all this mean?
• Step up in regulatory action
– More statutory inquiries (48 opened April 2013 – February
2014)
– More use of legal enforcement powers (657 occasions April
2013 – February 2014)
– Increased reporting:
• Inquiry reports
• Operational compliance reports
• Regulatory case reports
Charity Commission – the implications for you?
• Themes of regulatory action
– Late filing – class inquiry
• 24 charities in 2013
• 72 more charities warned
– Governance
– Pre-investigation assessment and monitoring
• Co-operation
• Draft report
Charity Commission
• Cabinet Office consultation
– More occasions for automatic disqualification of trustees
– Charity Commission powers to disqualify trustees
– Increased enforcement powers
– The latest position?
• Support
– Reduced contact centre hours
– Reduced support?
• More rigid parameters?
New guidance - charity trustees and decision-making
• Trustees must:
– act within their powers
– act in good faith and only in the interests of the charity
– make sure they are sufficiently informed
– take account of all relevant factors
– ignore any irrelevant factors
– manage conflicts of interest
– make decisions that are within the range of decisions that a reasonable
trustee body could make
“The courts and the Commission … can only consider whether the decision was within
the range of decisions that a reasonable trustee body could have made, and whether
the trustees have followed proper processes and the principles in this guidance.”
It’s your decision: charity trustees and decision-making
Charity Commission
• Changes to Annual Return
• What’s in the wings?
– SORP
– Conflict of interest guidance
– Law Commission
• Charity Tribunal
– 17 applications in last 12 months
– Fair trade
– Two decisions to start an inquiry upheld
– Bath Recreation Ground
Public benefit
A short history
• Charities Act 2006: three main changes
– Charity Commission to produce guidance
– Trustees to “have regard” to the guidance
– Trustees to report on compliance
• 2008 Charity Commission guidance
• 2011 Independent Schools Council case in Charity Tribunal
• 2013 revised public benefit guidance
Public benefit
• Suite of documents
• “Statutory guidance”
– PB1 Public benefit: the public benefit requirement
– PB2 Public benefit: running a charity
– PB3 Public benefit: reporting
• Supporting documents
Two aspects of public benefit
• The benefit aspect: whether a purpose is beneficial
– A purpose must be beneficial
– Any detriment or harm that results from the purpose must not
outweigh the benefit
• The public aspect: who the purpose benefits
– The purpose must benefit the public in general, or a sufficient
section of the public
– The purpose must not give rise to more than incidental personal
benefit
Public benefit: running a charity (PB2)
• Trustees must have regard to the guidance when making
decisions which impact on:
– The way in which people benefit from the charity’s purpose
– Who can benefit from it
Public benefit: running a charity (PB2)
Making “the right” decision:
- “When making decisions about how to carry out their charity's
purposes for the public benefit, many trustees are concerned
about what is 'the right' decision. In many situations there is no one
'right' decision to be made.
- However, trustees must make decisions that are within the range
of decisions that trustees could properly make in those particular
circumstances.
- Provided that the trustees make a decision within that range, then
they will have made a 'right' decision.”
Public benefit: running a charity (PB2)
“When making decisions about how to carry out your charity's purpose
for the public benefit you should:
-
know who can potentially benefit from your charity's purpose
- give proper consideration to the full range of ways in which you could
carry out your charity's purpose.
When making decisions that affect who can benefit, you may choose to
focus on certain beneficiaries. You can do this provided that:
• you have proper reasons for doing so
• you do not exclude the poor from benefit
• the smaller group of people you wish to focus on is a sufficient section
of the public for your charity's purpose
• you make decisions in accordance with the framework for trustee
decision-making.”
Public benefit – what’s in the wings?
• No statutory definition
• Preston Down
• Scotland: St Margaret’s Adoption Society
Charitable incorporated organisations – one year on
• Incorporated legal form available since January 2013
• Now no registration threshold
• 1,717 CIOs registered
• Model constitutions
• Emerging themes
– Ease of registration
– Register of charges
– Flexibility for membership charities
– Dissolution
Permanent endowment – total return
• What is permanent endowment?
– Power to spend income return but not capital growth
• Trusts (Capital and Income) Act 2013
– Statutory power to adopt total return approach
– Compliance with Charity Commission regulations
• Total return approach in best interests of charity
• Seek advice
• Meet needs now and in future
• Spend and replace up to 10% of capital
• Law Commission
– Insolvency
– Mixed-purpose investment
Lobbying and campaigning
• Transparency of Lobbying, Non-Party Campaigning and Trade Union
Administration Act 2014
– Expenditure which can “reasonably be regarded as intended” to promote
or oppose the electoral success of a party, candidate or group of
candidates, or to enhance their standing = “controlled expenditure”
– Includes staff costs
– Registration with the Electoral Commission:
• £20,000 in England
• £10,000 in Wales, Scotland or Northern Ireland
– Maximum limits
• £310,800 in England: £55,400 in Scotland; £44,000 in Wales; £30,800 in
Northern Ireland
• £9,750 targeted at specific constituency
Lobbying and campaigning
• Reporting of donations
• Joint Electoral Commission/Charity Commission guidance
– Due early July
• Company law
– Resolution of members must authorise political donations of over
£5,000 and political expenditure at any level
Tax and VAT
• Gift Aid Small Donations Scheme
– Limited take up
• “Fit and proper persons”
– “involved in designing and/or promoting tax avoidance schemes”
• What’s in the wings?
– Social investment tax relief
– Gift Aid
• Simplified declaration
• Use of intermediaries
– Preventing use of charities for tax avoidance
– Joint HMRC/Charity Commission application?
Registration of a NI Charity
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Registration is compulsory for all NI charities/online process
Started December 2013
Must apply to register if:
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Exclusively charitable purposes
Purposes are for the public benefit
Governed by the law of Northern Ireland
Has control and direction in Northern Ireland
(Different from HMRC tax recognition)
• Info required:
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Activities
Charitable purposes & gov doc
Areas of operation
Financial information and Trustees’ annual report
Trustees’ names
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Statutory Guidance on Public
Benefit - mandatory
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Registration
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Branches, Local groups & Subsidiaries?
Not HMRC recognition for charity tax exemption
3 categories – Deemed/ Non-deemed/Special circumstances
Expression of Intent Form
Called forward in tranches
3 months to complete registration from call & password
Public Ben Statement
Governing Document/bank account/trustee declaration
Online register
IRRs
Public register of charities
Annual monitoring – AMR/Annual accounts/annual return
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Registration Tools & Materials
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Online tutorial
Guidance booklet
Toolkit
Checklist & Document list
Application form
Workshops
Checklist
Trustee Declaration & Access NI confirmations – vulnerable people or
children
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Interim Reporting Requirements
For registered NI charities
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Accounting periods on or after 01.04.14
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AMR
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Accounts (current format)
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TAR
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Charity audit report
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Registration of designated religious
charities
• Section 166 – e.g. registration of Church groups
• Section 166 (3) – contains the conditions:
Q. is the advancement of religion the organisation’s principal purpose;
Q. Is the regular holding of public worship its principal activity;
Q. Has it been established in Northern Ireland for at least 5 years.
CCNI will assess the designation conditions alongside the
registration conditions.
If both are met = appear on register “registered with religious
designation”
Special ss.33-36 not apply
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Non NI charities – operating in NI?
s.167? – not in force
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“Section 167 Institutions” – not a charity under the law of
Northern Ireland but which operates for charitable purposes
in or from Northern Ireland
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“operates for charitable purposes”?
fundraise/presence/employee/representative/activities
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What “charitable purposes”?
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Not required to “register” in Northern Ireland – possible
separate “parallel register” of “Section 167 Institutions”
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Points to note about non-NI
Charities or “s.167 institutions”
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Required to prepare and submit:
– financial statement; and
– statement of activities relating to its Northern Ireland
operations for charitable purposes
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Open to public inspection
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Commission may extend other parts of Act
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Multiple registrations – CCEW, OSCR, [Irish] and others? …
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Running your Charity Guidance
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Duties and responsibilities of charity trustees
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Public benefit
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Finance, funding, reporting and accountability
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Good governance
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Risk & Insurance
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What’s new for charity boards
under the Charities Act (NI) 2008?
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Trustees must comply with the Charities Act
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Definition of charity and public benefit
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The Act already applies to Deemed List: “HMRC Charities”
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Registration has started
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Accountability to the CCNI/public/service users
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Reporting eg Interim Reporting requirements in force
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Authorisations e.g. ex gratia payment
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Remuneration rules (not paid as trustee)
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Trustee indemnity insurance - in statute
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Auditors will report material concerns
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Powers of CCNI e.g. advice, inquiries, remove trustees, close charities
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Day to day encounters with
the CCNI
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Consents e.g. change to objects of charity company
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Authorisations
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“concerns” e.g. contracts for services/payments to trustees
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Cy-près schemes
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Small UA charities – transfer of all property ss.123 – 130 Charities Act (NI)
2008
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S.22 statutory inquiries
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- ex gratia payments e.g. to retiring CEO
- Ss.46 & 47 – moral obligation
The Charity Tribunal for Northern
Ireland – appeal decision of CCNI
3 Cases reported
1/13 & 2/13: (10 May 2013 – taken together)
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Bangor Provident Trust Limited and CCNI
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Victoria Housing Estates and CCNI
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s.22 CCNI statutory enquiry
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2 housing associations – one was a charity & the other was not!
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Appeal May 2014
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The Charity Tribunal for Northern
Ireland
Case No 3/13 (02.07.13)
Trevor McKee and CCNI
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McKee, former Chairman/director and a member of the charity
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Complained about CCNI initiating a s.22 CCNI statutory enquiry
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Decision – he had no standing to bring the application regarding the CCNI
decision
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The Charities Act (NI) 2008 - next
Winter 2013+
Registration Guidance & First Charity Registrations & PBR
Supporting guidance for 12 charitable purposes
1 April 2014
Interim Reporting Regulations
2015+
Accounts regulations
Financial Returns – reports and accounts
Fundraising?
Charity registered elsewhere but operating in Northern
Ireland s.167 Institutions
Charitable Incorporated Organisations
2015+
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Next Commencement Order? (charity land & mortgages)
Scotland and the Republic of Ireland
• Scotland
– Public benefit
– Referendum on independence
• Republic of Ireland
– Charities Regulation Authority
What’s next? – charity law reform
• Lord Hodgson’s review
• PASC report
• Government response
• Law Commission
What is not changing?
• The basic role of the Charity Commission
• Public benefit test
• The rules about paying trustees
• Self regulation of fundraising (but 5 year review)
• National Exemption Orders for house to house collections
• Registration threshold of £5k (and £100k for excepted
charities)
What may change?
• Charity Commission powers
• Late filing fines?
• Increase in audit income threshold from £500k to £1m
• Joint filing for charitable companies?
• Social investment
• Charity land
• Charity Tribunal
What else?
• Company administration
– Simplified filing
• Judicial review
– Financial barriers
• Data protection
– Changes in Europe
• Procurement
– Changes in Europe
Disclaimer: The content of this presentation is © of Edwards & Co. and Bates
Wells & Braithwaite London LLP 2014.
The content of this presentation is for information and teaching purposes only in
connection with the DSC/BWB Charity Law Conference. It does not constitute
legal advice. We acknowledge the assistance of the Charity Commission for
Northern Ireland regarding the public benefit and registration slides, and the
owners of the images used.
Every care has been taken to ensure the accuracy of the content of this
presentation at the time of its delivery, however no responsibility for loss
occasioned to any person acting or refraining from action as a result of the
material in this presentation is accepted by Edwards & Co. Solicitors or Bates
Wells & Braithwaite London LLP.
The information in this presentation is current at 6 May 2014.
Alice Faure Walker
Bates Wells Braithwaite
2-4 Cannon Street
London EC4M 6YH
Tel: 020 7551 7777
Email: a.faurewalker@bwbllp.com
Web: www.bwbllp.com
For more information
Jenny Ebbage
028 9040 8390
jenny.ebbage@edwardsandcompany.co.uk
www.edwardsandcompany.co.uk
@jennyebbage28
@EdwardsandCo_
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Please note: The content of this presentation is for information purposes only and further advice
should be sought from a suitably qualified professional advisor before any action is taken.
© Edwards & Co. and Bates Wells & Braithwaite London LLP 2014