House of Commons - Explanatory Note
Charities Bill - continued          House of Commons

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262.     A regulatory impact assessment was published alongside the draft Bill, and has been revised in light of the Joint Committee's report on the draft Charities Bill 9. It is divided into five chapters.

9 The Joint Committee's report is available at

  • Chapter 1 provides an overall summary of the costs and benefits of the Bill.

  • Chapter 2 examines the costs and benefits of the proposed changes to the legal framework, and administrative and structural reforms. The introduction of the Charitable Incorporated Organisation is permissive, so there will be no unavoidable costs to charities. It will provide a corporate vehicle specifically for charities reducing the regulatory burden of complying with company law and charity law registration and reporting requirements. Changes to the Charity Commission will improve its effectiveness and accountability as a regulator. The new Charity Tribunal will provide an accessible independent forum in which charities can challenge the Charity Commission's decisions. Charities will not have to pay to use the tribunal.

  • Chapter 3 assesses the impact of the proposals for an integrated licensing scheme for public charitable collections. Under these proposals the responsibility for licensing public charitable collections would be divided between the Charity Commission and local authorities. The proposals should promote public confidence in charitable collections through striking an appropriate balance between facilitating responsible collecting activity, and restricting inappropriate fundraising and public nuisance.

  • Chapter 4 examines the costs and benefits of the proposals for currently exempt charities, which, under this legislation would lose their exempt status or be regulated in charity law by a principal regulator. These proposals should promote confidence in the integrity of charitable status resulting from the greater accountability and transparency of exempt charities.

  • Chapter 5 assesses the proposals for currently excepted charities, which would result in excepted charities with an income in excess of £100,000 per annum having to register with the Charity Commission. These proposals should promote confidence in the integrity of charitable status resulting from the greater accountability and transparency of excepted charities.

263.     The proposals have sought to minimise the regulatory burden on charities wherever possible. The views of the Small Business Service have been sought, and are set out in the regulatory impact assessment. A race equality impact assessment has been included in the regulatory impact assessment.


264.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement before Second Reading about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Right Honourable Charles Clarke MP (Secretary of State for the Home Department) has made the following statement:

     "In my view the provisions of the Charities Bill are compatible with the Convention rights."

The advancement of religion

265.     Clause 2 sets out a definition of "charitable purpose". One of the purposes listed in clause 2(2) is "the advancement of religion". It has been argued that this head should be amended to read "the advancement of religion or belief" and that the failure to include non-religious causes (such as humanism) under this head amounts to unlawful discrimination under the ECHR.

266.     Article 14 of the ECHR (prohibition of discrimination) provides that the enjoyment of the rights and freedoms set out in the Convention shall be secured without discrimination on any ground and specifically refers to a number of grounds, including religion. It is well-established that for the purposes of Article 14 there does not need to be a breach of the substantive article relied on, but the discrimination complained of must fall within the ambit of another right. Charitable status gives rise to fiscal benefits and so a decision on charitable status would seem to engage Article 1 to the First Protocol (protection of property).

267.     The second requirement of Article 14 is that there should be some difference in treatment between the complainant and others put forward for comparison. Although associations promoting non-religious beliefs do not come within clause 2(2)(c) (the advancement of religion) they can come within paragraph (l), which includes all other purposes recognised as charitable under existing charity law, or analogous to, or within the spirit of, such purposes. The Department does not consider that there is any relevant difference between the treatment of a religious organisation applying under paragraph (c) and an organisation promoting a non-religious belief applying under paragraph (l). Accordingly the Department is satisfied that clause 2(2)(c) is compatible with the ECHR.

Removal of the presumption that a purpose is for the public benefit

268.     Clause 3(2) removes the presumption that certain purposes - those for the prevention or relief of poverty, the advancement of education or the advancement of religion - are for the public benefit. This potentially has the effect that certain organisations that are at present recognised as charities will no longer be so recognised and so will cease to benefit from the associated tax benefits. Article 1 of the First Protocol is accordingly engaged and the third rule, which recognises that states are entitled to control the use of property in accordance with the general interest is applicable. It seems clear that it is in the public interest that a public benefit test be applied to charities. The requirement to satisfy the public benefit test is prescribed by law and would seem to be proportionate. In the circumstances the Department considers that clause 3(2) is compatible with the ECHR.

Practice and procedure of the Charity Tribunal

269.     The Charity Tribunal is established by clause 8 of the Bill to hear appeals from decisions of the Charity Commission. Section 2B of the Charities Act 1993 (which is inserted by clause 8 of the Bill) makes provision for the practice and procedure of the Tribunal.

270.     Section 2B(1) provides that the Lord Chancellor may make rules regulating the right of appeal to the Tribunal and about the practice and procedure of the Tribunal. Particular matters that may be addressed in the rules are specified in 2B(2), (3) and (4). These include provision about the admission of members of the public to proceedings. Section 2B engages Article 6 of the ECHR (right to a fair trial) in that the Tribunal will determine civil rights and obligations, although it will not determine criminal charges.

271.     The Department considers that the Charity Tribunal as constituted by the Bill will satisfy the requirements of Article 6 of the ECHR, in particular it will be an independent and impartial tribunal, established by law.

272.     Article 6 generally requires a public hearing, but sets out various circumstances in which the public may be excluded. If the rules to be made by the Lord Chancellor provide for the exclusion of the public this could only be in the circumstances where this is permitted by Article 6, since the Rules themselves will need to be ECHR compliant. Accordingly, the Department considers that the enabling power for the rules to be made by the Lord Chancellor is compatible with the ECHR. Section 2C provides for an appeal on a point of law from a decision of the Tribunal to the High Court with the permission either of the Tribunal or the High Court.

Powers of entry

273.     Clause 26 of the Bill inserts section 31A into the Charities Act 1993, which contains a power for a Charity Commission employee to enter premises under the authority of a warrant issued by a Justice of the Peace. There are various pre-conditions to the exercise of the power of entry. In particular, an inquiry must have been commenced under section 8 of the Charities Act 1993; there must be reasonable grounds for believing that there are documents or information on the premises in question relevant to the inquiry; and there must be reasonable grounds for believing that, if the Commission ordered production of the documents or information, they would not be produced or they would be removed, tampered with, concealed or destroyed. Section 31A(3) allows an employee of the Commission named in the warrant to enter the premises, seize documents or electronic devices, take copies of any relevant document, and retain any document or electronic device as long as is necessary for the purposes of the inquiry.

274.     The power of entry gives rise to issues under article 8 of the ECHR (right to respect for private and family life) so the question is whether the interference can be justified under Article 8(2). The power of entry is prescribed by law and is for a legitimate aim: the prevention of crime or the protection of the rights and freedoms of others. The power is also necessary and proportionate, bearing in mind in particular the conditions imposed on the exercise of the power. A Justice of the Peace may only issue a warrant where he has reasonable grounds for believing that the documents or information in question would otherwise be tampered with. Documents and information may only be removed if they are relevant to the inquiry and they may only be retained for so long as is necessary for the purposes of the inquiry. The Department is therefore satisfied that the power is compatible with Article 8 of the ECHR.

Repayment of remuneration by trustee

275.     A trustee may not receive any remuneration from his charity without authority, which may come from the charity's governing instrument, the Charity Commission, or a statutory provision. Section 73A, inserted by clause 36, provides a power for a charity to pay remuneration to a trustee in respect of services provided by the trustee to the charity, provided that certain conditions are satisfied. One of these conditions is that there must be a written agreement, which contains details of the remuneration to be paid. Section 73C, inserted by clause 37 of the Bill, disqualifies the trustee involved from acting as a trustee in any decisions relating to the agreement. Where a trustee acts in breach of this provision, section 73C(5) and (6) provide that the Commission may, respectively, order the trustee to repay the whole or part of the remuneration to the charity, or order that the whole or part of the remuneration is not to be paid to the trustee.

276.     The Department considers that subsections (5) and (6) of section 73C engage Article 1 of the First Protocol since they interfere with the trustee's right to property. However the provision seems to be in the public interest, in that it has the effect of restoring to the charity property that was unlawfully paid out to the trustee. It also seems proportionate, particularly as the order may require repayment of the whole or part of the remuneration. In the circumstances the Department considers that the provision is compliant with the ECHR.


277.     Except for the purposes of a small number of amendments to other statutes, and for two substantive provisions, the Bill extends to England and Wales only. The law and regulation of charities is now a devolved matter in both Scotland and Northern Ireland, but even before devolution each of those territories had its own body of charity law different from the law applying in England and Wales. The substantive provisions extending beyond England and Wales are:

  • clause 6(5), which extends to Scotland and Northern Ireland; and

  • clause 23, which extends to Northern Ireland.


278.     The Bill provides Welsh names for the Charity Commission ("Comisiwn Elusennau Cymru a Lloegr", in clause 6) and Charity Tribunal ("Tribiwnlys Elusennau", in clause 8).

279.     Schedule 1A, inserted into the 1993 Act by Schedule 1 of the Bill, provides for the membership of the Commission. Paragraph 1(3)(c) provides for the appointment of a member who knows about conditions in Wales and has been appointed following consultation with the National Assembly for Wales.

280.     Clause 71 of the Bill confers a power on the National Assembly for Wales to give financial assistance to certain charitable, benevolent or philanthropic institutions whose activities benefit Wales. This is equivalent to the power conferred on the Secretary of State, in relation to such institutions whose activities benefit England, by clause 70.


281.     The following provisions will come into force on the date of Royal Assent:

  •      clause 13(4) and (5);

  • clause 73;

  • clause 74(4) and (5);

  • clause 76;

  • clause 77;

  • clause 78.

282.     The remaining provisions will be brought into force by commencement order, or orders, made by the Secretary of State.

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Prepared: 11 November 2005