The Charities Bill

In May, the Queen’s Speech saw the announcement of the Charities Bill, which is the result of several years of coordinated effort between the Government, the Law Commission, the Charity Commission, and a number of charitable organisations. The Bill aims to simplify the legal framework for charities, helping them dedicate more time and resources to their important work. 

What are the 6 key changes? 

The main changes proposed by the Charity Bill are as follows: 

  1. Property disposals 

Currently for most land disposals, charity law requires the engagement of a RICS qualified surveyor to write a detailed report on the property. The same standards are required of the sale of a small slice of land as for a complex development, which has been previously criticised as being disproportionate and burdens smaller charities with unnecessary costs. 

By increasing the pool of advisory professionals and ensuring the report content will be matched to the nature of the transaction, the Bill seeks to break up this monolithic approach with one that is tailored to the scale of the transaction. 

  1. Ex-gratia payments 

Trustees currently require the authorisation of the Charity Commission for all ex-gratia payments. However, the Bill will introduce a power that will allow Trustees to make small ex-gratia payments without prior consent from the Charity Commission.  

The power will also allow Trustees to delegate ex-gratia decision making to a member of staff, though this carries with it further potential reporting obligations in such a case. 

This regime allows further flexibility for Charities to respond to situations without incurring the additional expenses and delays associated with direct applications to the Charity Commission. 

  1. Governing documents 

The process for charities and Trustees to amend their governing documents or Royal Charters will be simplified and streamlined, an area that has in the past been highly restrictive and particularly difficult for unincorporated charities. 

The Charity Commission will now use a three-part test to decide upon any amendments: 

  • The original purposes of the charity 
  • The desirability to keep the proposed purposes close to the originals. 
  • The need for the charity to have purposes which are suitable and effective 

Through these changes, Charities should gain greater flexibility when considering amendments to their governing documents, but without losing controls and assurances from the Charity Commission. 

  1. Permanent endowment 

The Charities Bill will introduce a power which will allow Charities to spend up to 25% of their permanent endowment without prior approval from the Charity Commission, providing the Trustees can give assurance that they will recoup those funds over a period of 20 years.  

In the case of permanently endowed investment portfolios, the Bill also introduces a power to release the permanent endowment restrictions on making investments with an uncertain return. 

This will allow charities greater ability to leverage their assets for the furtherance of their charitable objectives and remove the time and resource costs associated with applications for Commission approval. 

  1. Supply of goods to a charity by a Trustee 

Currently, Trustees can only be paid for the supply of services to a charity. However, the Bill seeks to allow trustees to be paid for goods provided to a charity, in certain circumstances. This covers a wide range of goods, and will hopefully allow greater opportunity for charities to access resources from Trustees when needed, without requiring the permission of the Charity Commission. 

  1. Charity appeals 

Under the regulations proposed by the Bill, rules regarding failed fundraising appeals will be simplified and made more proportionate, rather than a one-size fits all policy. If a charity appeal does not raise sufficient money to be successful, the charity will be able to spend donations below £120 on similar charitable activities, without needing to contact the individual donors for permission to do so. This will greatly reduce the unnecessary administration costs associated with a failed charity fundraising appeal. 

Conclusion 

The Bill has had its first and second readings in the House of Lords, so no immediate changes have been made, but over the coming months the Bill will continue its journey through Parliament and subsequently take legal effect. As it does so, the MHA Not-for-Profit team will investigate further changes proposed. 

Find out more

Click here to read our latest edition of eNews or if you would like to talk to us more, please do get in touch.