Further memorandum from the Home Office
and Charity Commission (DCH 19)
EFFECTS ON
SMALL CHARITIES
1. The Charity Commission treats charities
with an annual income of less than £10,000 as "small
charities". These charities comprise 60% of registered charities.[5]
They are usually voluntary-run—ie their boards consist of
unpaid trustees and they do not employ any paid staff. Where they
have to take professional advice, the costs of doing so consume
a higher proportion of the charity's resources than with larger
charities.
2. Some of the Bill's proposals are aimed
directly at benefiting small charities while others would benefit
other charities as well as small charities.
Proposals aimed directly at benefiting small charities
3. The threshold for compulsory registration
would be raised from £1,000 to £5,000 with voluntary
registration allowed for charities below the new threshold. The
requirement that a charity must register if, regardless of how
small annual income, it owns permanent endowment or uses/occupies
land would be abolished. This change would mean that many small
charities would not have to register until they were better resourced
to do so. In 2003-04 the Charity Commission registered over 2,000
charities with incomes between the current (£1,000) and the
proposed new (£5,000) thresholds.
4. The Bill would extend to greater numbers
of small charities the possibility of taking advantage of a simplified
procedure for:
— changing the purposes of their charity;
— merging with other charities by transferring
all assets to them; and
— spending their capital as if it were
income.
5. The Charity Commission estimates that
an additional 24,000 registered charities would be eligible to
take advantage of the first two of these provisions for the first
time. The conditions for using the provisions will be made more
flexible and the processes will be streamlined.
Proposals benefiting small charities and other
charities
6. The Bill proposes new regulatory objectives
for the Charity Commission. These would underpin its proportionate
and risk-based approach and will allow a continuation of its "light
touch" approach to small charities and simplified regulatory
processes.[6]
7. In addition the Bill contains a range
of measures which are intended to reduce the burden of regulation
for all charities, including small charities. All of the following
would be capable of benefiting small charities:
— introduction of the Charitable Incorporated
Organisation, which would give access to the benefits of legal
personality and limited liability without the considerable burden
of complying with company law;
— ability for trustees to obtain relief
from personal liability for honest mistakes. This would be free
of charge and much quicker and less formal than at present (when
trustees have to apply to the High Court);
— ability to challenge Charity Commission
decisions through the new Charity Appeal Tribunal, which would
be free of charge and much quicker and less formal than at present
(when appellants have to take the Commission to the High Court);
— ability for unincorporated charities
to make administrative changes to their constitutions without
the need to obtain a legal scheme or order from the Charity Commission;[7]
— ability of trustee bodies to pay
individual trustees for providing services to the charity without
the need to obtain legal authority from the Charity Commission;
— giving the Charity Commission discretion
as to whether legal schemes should be publicly advertised or not.
At present, advertising for a minimum of a month is compulsory.
This will in many cases reduce the length of time needed for making
schemes;
— changing the procedures relating
to failed fundraising appeals to allow, in many cases, funds collected
to be used for other purposes. This will save charities from having
to track down donors and return their money to them;
— introducing a new register of mergers
which would allow automatic vesting of property in the newly-created
or -merged charity, and the transfer of future legacies gifts.
This would save charities from having to carry out the legal formalities
needed to transfer legal ownership of land and other property
from one charity to another on merger. And at present a charity
("charity A") which transfers all its property to another
("charity B") on merger has to be kept alive as an inactive
shell by charity B in order to receive legacies and gifts made
in the name of "charity A" after the merger. The proposal
in the Bill would provide for legacies etc made in the name of
"charity A" to go automatically to charity B, thus saving
charity B the need to continue to keep alive and to administer
charity A.
— allowing charitable companies to
make a wider range of amendments to their constitutions without
needing the Charity Commission's consent. This would save charities
in those cases from having to apply for consent.
New statutory obligations on small charities
8. The Bill would place no new statutory
obligations on small charities.
June 2004
5 98,000 out of 165,000 as at 31 March 2004 (www.charitycommission.gov.uk/
registeredcharities/factfigures.as_intro) Back
6
Examples of this regulatory approach include streamlined registration
procedures for small charities, and a risk based approach to case
work which increasingly relies upon charities self-certification
in selected areas (for example to authorise trustee remuneration). Back
7
Small charities with an income under £5,000 already have
this power under small charities provisions. The Bill extends
this power to include not only small charities with an income
of £5,000-£10,000, but all charities. Back
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