New Act will require charities to prove they are of public benefit
Introduction
Charities throughout the West Country will have to prove they are for the public benefit under a new Act passed last week. After nearly two years going through Parliament, the new Charities Act 2006 has finally gained Royal Assent and is now on the statute books.
The Government says that some 166,129 UK charities registered with the Charity Commission will be affected by the new Act, which will impose on them a greater degree of accountability and transparency.
It places upon them a clearer emphasis on the need to prove they are of benefit to the public and contains a range of measures designed to make charity administration more efficient and effective
But while the new Act brings the law into the 21 st century, the new public benefit test may cause legal problems for some charities that charge fees and even religious charities.
charities expert and partner at Ashfords, one of the UK's leading full service law firms, says the new Act, which came into force on November 8, is the most fundamental change in charities law for more than 400 years.
Geoff said: "The Charities Act 2006 will be brought into force over the coming months and it is important that charities monitor its progress carefully to make sure that they are fully compliant with the new law.
"It re-defines a charitable purpose by reference to 13 modern categories of charity and requires all charities to prove they are for public benefit, which may cause some of them status problems for which they may need to seek specialist legal advice."
"This may cause problems for charities that charge high fees -- independent schools, private hospitals, and even some theatres, music and opera groups for instance – and religious charities.
"In the past, religious charities have always been presumed to be for the public benefit but in today's society with growing religious tensions, there are many who might argue the exact opposite."
The Act should reduce red tape as Geoff explains: "At present, charities that want the protection of limited liability must incorporate as a company limited by guarantee, submitting accounts and returns to Companies House as well as the Charity Commission.
"The new Act creates the 'Charitable Incorporated Organisation', a form of company especially for charities that will be registered only with the Charity Commission. The details are eagerly awaited but it should prove a particularly attractive form of charitable organisation.
"Some charities, such as housing corporations, are currently subject to regulation by the Charity Commission and an industry regulator. In future, they will only be answerable to the "principal regulator", although they will still have to comply with charity law.
"The new Act also increases the income above which a charity must be registered with the Charity Commission to £5,000. It allows small charities greater flexibility to deal with their property without reference to the Commission and eases the restrictions on permanent endowment. The audit thresholds are also simplified.
"But there is a new system to regulate public collections. A charity must be licensed by the Charity Commission to make public collections and the role of the local authority will be limited to restricting the number of collections taking place in its area at any one time."
Finally, the new Act creates an appeal process whereby the decisions of the Charity Commission can now be challenged in a new Charity Appeals Tribunal, which should be quicker and cheaper than taking action through the courts.
Geoff concluded: "The new Act has been worth the wait but so much will depend on whether the Charity Commission is given the resources that it needs for the demands that will be made upon it."
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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