The Charities Act 2006 (Act) was the result of a review of the sector in 2001. The Act was passed on 8 November 2006 and has been implemented in stages, with the latest implementation on 1 June 2010.
So where are we now and what are the things that you need to be aware of? Below is a list of the key provisions and what it means for your organisation on a case-by-case basis:
1.
in 2008, the new definition of charitable purpose came into force. The list now includes 12 charitable purposes which are all now clearly recognised as charitable with one additional "sweeper up" purpose which is included so that the Charity Commission can review those organisations which do not neatly fit into any of the other categories.
2.
Since 1 April 2008 charities have had to be able to demonstrate a public benefit. This needs to be reported on annually and is no longer presumed if you have charitable purposes. There has been a lot of commentary and debate as to how this will apply to different types of charities and the Charity Commission has provided some practical guidance for distinct sections of the sector.
3.
Secondary legislation came into force on 1 June 2010 which implemented provisions of the Act relating to exempt charities. Exempt charities (e.g., grant maintained schools) are currently not required to register with the Charity Commission (Commission) and are therefore not directly supervised by the Commission.
The aim of the provisions in the Act is to make all organisations with charitable status subject to the same supervision requirements. Whether an exempt charity will fall under the supervision of the Commission will depend on whether they already have a "principal regulator".
An exempt charity which already has a "principal regulator" does not need to register with the Commission provided that the "principal regulator" agrees to access the charity's compliance with charity law as part of its overall monitoring role. For example, museums and galleries are currently supervised by the Department of Culture, Media and Sport as their "principal regulator".
Where an exempt charity does not have a "principal regulator" it will lose its exempt status and become an "excepted" charity. An excepted charity is fully supervised by the Commission although it does not need to register with the Commission unless it has a gross annual income of over £100,000. From 1 June 2010 the following exempt charities will become excepted charities:
- universities in Wales;
- Student Unions in England and Wales;
- colleges of the universities of Oxford, Cambridge and Durham;
- Eton and Winchester Colleges;
- The Church Commissioners and institutions administered by them;
- and the representative body of the Welsh church and property administered by it.
It is expected that other provisions of the Act will be implemented later so that charitable industrial and provident societies in England and Wales will also become excepted charities.
It is suggested that this extra regulation will result in previously exempt charities incurring increased administrative costs.
4.
One of the main changes of the Act was the creation of a new legal structure – the Charitable Incorporated Organisation (CIO). The key advantages of a CIO are that:
- it is an organisation with a separate identity to that of its members,
- it has limited liability for the trustees; and
- avoids the dual regulation of Companies House and Charity Commission as a CIO is only registered with and therefore monitored by the Charity Commission.
The Charity Commission has published its response to a consultation which was carried out as to what a CIO will look like and how it will operate but the date on which it will be available is currently unclear. Unfortunately the implementation of CIOs has been further delayed and is now not expected to be available until late 2010 or early 2011. Given recent political events, it is unclear whether this will still be the case.