Is charity law too complicated for small charities?
Julian Lomas
Over the years we have helped register countless small start up charities, inspired by amazing people who see a need in their community and want to do something about it. All too often registration of even the most obviously charitable endeavours throws up questions that dumbfound these wonderful people, causing them to ask “how on earth is that relevant to being a charity”.
Of course, those questions are entirely relevant when one digs into the detail of the Charity Commission guidance on the proposed charitable purposes (objects) for a new charity. All this guidance (and there is a lot of it) has been drawn up reflecting the requirements of charity law as set out in statute and evolving case law. Nonetheless, to the lay-person, the complexity and, on occasion, obscurity of these requirements can be bewildering.
Much of the complexity derives from the subtleties of the public benefit rules for charities, which (in a nutshell) require that a charity’s purposes must:
be objectively beneficial in a way that is identifiable and capable of being proved by evidence where necessary and not based on personal views;
not give rise to any detriment or harm that outweighs the benefit (also based on evidence, not personal views);
benefit the public in general, or a sufficient section of the public (which varies from purpose to purpose); and
not give rise to more than incidental personal benefit, i.e. personal benefit (having regard both to its nature and to its amount) must be a necessary result or by-product of carrying out the purpose.
Much of this complexity and obscurity arises from these latter two tests, known as the “public aspect”. Lay-people are often surprised by what constitutes a personal benefit and therefore by the need to demonstrate this it is incidental to the public benefit. They can also be surprised by what the courts have previously held not to be a “sufficient section of the public”.
Moreover, the Charity Commission’s remit to promote public trust and confidence in charities has led to them asking a myriad of detailed, often operational questions about how a charity’s activities are designed and delivered, even in areas as obviously charitable as advancement of education or relief of sickness. The Commission’s concerns in this regard are well founded, particularly given the high profile charity scandals of the last 15 years or so and the potential for charities to be used as vehicles for nefarious activities. But we find. that most small charity founders are bewildered when asked these detailed operational questions, which they may not yet have even started to work out for themselves.
In a short blog like this, we don’t have the space to go into all the detail (you’d still be reading this next week!), but just a few examples of charitable purposes we most frequently encounter that give rise to these apparently strange considerations include:
Community buildings, where the requirements of the Recreational Charities Act 1958 can appear counterintuitive for those on the committee of a village hall or youth club.
Conservation of the environment, particularly for purposes that relate to recycling or reduction in food waste.
Arts, heritage and culture, where, for example, it is necessary to show educational merit as opposed to simply entertainment.
Regeneration, where questions such as “how will the trustees know when the regeneration of an area has been completed” appear bizarre to any seasoned professional in this field.
Animal charities, where, for example, it is necessary to show benefit to the public (i.e. people) rather than the animals in question.
Many of these purposes are furthered by small (often very small), local charities whose Trustees cannot possibly be expected to have at their fingertips a detailed knowledge and understanding of the requirements that relate to their charity’s purposes nor can they afford to retain legal advisers to alert them to potential risks.
For us, this begs the question, is charity law simply too complicated for small charities to navigate? Increasingly our conclusion is a resounding “yes”. What can be done about it is less clear, given almost 500 years of history in the evolution of charity law, but it is perhaps high time it was looked at afresh.
Meanwhile, small charity trustees will continue to need to expend precious charitable resources on professional advisors to help them manage these risks and complexities as well as relying on the reassurance in the Charity Commission’s guidance on Trustee responsibilities:
“The Charity Commission expects trustees to take their responsibilities seriously. Using this guidance and ensuring you give sufficient time and attention to your charity’s business will help. The Commission recognises that most trustees are volunteers who sometimes make honest mistakes. Trustees are not expected to be perfect - they are expected to do their best to comply with their duties. Charity law generally protects trustees who have acted honestly and reasonably.”
To find out more about the governance support and training we offer, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.