DCH 19 Home Office
Note
for the Joint Committee on the draft Charities
Bill
on
the difference that the Bill would make
to smaller voluntary-run charities
and on
new statutory obligations being placed
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[27].
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[28].
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[29];
- 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.
Home Office and Charity Commission
June 2004
27 98,000 out of 165,000 as at 31 March 2004 (www.charitycommission.gov.uk/
registeredcharities/factfigures.asp#intro) Back
28
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
29
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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