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These Notes refer to the Charities Bill [HL] as introduced in the House of Lords on 20th December 2004 [HL Bill 15] CHARITIES BILL [HL] ________________ EXPLANATORY NOTES INTRODUCTION 1. These explanatory notes relate to the Charities Bill [HL] as introduced in the House of Lords on 20 December 2004. They have been prepared by the Home Office in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given. SUMMARY 3. The Bill has 72 clauses and nine Schedules and is divided into four Parts. 4. Part 1 (clauses 1-5) deals with the definition of a charity and of charitable purposes. 5. Part 2 (clauses 6-41) deals with the regulation of charities and is divided into 11 Chapters as follows:
6. Part 3 (clauses 42-67) deals with fundraising by, and the funding of, charities and other benevolent or philanthropic organisations and is divided into three Chapters as follows:
7. Part 4 (clauses 68-72) contains the final provisions, covering:
BACKGROUND 8. In July 2001 the Prime Minister commissioned a review of the law and regulation of charities and other not-for-profit organisations. The review was carried out by the Prime Minister's Strategy Unit and was published (as "Private Action, Public Benefit") in September 2002. It was not a statement of settled Government policy but an analysis of the strengths and weaknesses of the current legal and regulatory framework accompanied by a series of recommendations, addressed to the Government, for change. Before responding to these recommendations the Government sought views on them through an open public consultation which ran from September 2002 to January 2003. 9. In July 2003 the Government published "Charities and Not-for-Profits: a Modern Legal Framework", which:
10. The Charities Bill will implement a majority of the accepted recommendations, with the remainder to be (or, in some cases, having already been) implemented either through other legislation or by administrative action. The Bill was published in draft on 27 May 2004 for pre-legislative scrutiny by a Joint Committee. The Joint Committee's report was published on 30 September 2004. The Government's response to that report was published on 21 December 2004 at the same time as the Bill. THE BILL COMMENTARY ON CLAUSES 11. Many of the provisions in the Bill amend the Charities Act 1992 and the Charities Act 1993, which are referred to below as "the 1992 Act" and "the 1993 Act" respectively. Clauses 1 - 3: Meaning of "charity"; Meaning of "charitable purposes"; The "public benefit" test 12. The preamble to the Statute of Charitable Uses 1601 (sometimes known as the Statute of Elizabeth I) contained a list of purposes or activities that is sometimes described as the first statutory definition of charitable purposes; but that list - because it was in the preamble, not the body of the Act - did not form part of the statute law. It was, in effect, a list of purposes or activities that the State believed were of general benefit to society, and to which the State wanted to encourage private contributions. 13. The list in the preamble to the 1601 statute has nevertheless formed the foundation of the modern definition of charitable purposes, which has developed entirely through case law. This has come about because the courts, in considering whether or not a particular purpose was charitable in law, have tended to look for an analogy between the purpose under consideration and the 1601 list, and to recognise the purpose as charitable if an analogy with the 1601 list could be found. 14. Clause 1 provides a general statutory definition of charity for the purposes of the law for the first time. It follows the definition of charity in the Charities Act 1993. 15. Clause 1(1) establishes the meaning of charity. By specifying that a body or trust is a charity if established for charitable purposes "only", clause 1(1)(a) preserves the current rule to the effect that a body or trust which has non-charitable as well as charitable purposes is not a charity. 16. Clause 1(1)(b) excludes institutions outside England and Wales from the scope of charity as defined by the Bill since the jurisdiction of the High Court extends only to England and Wales. 17. Subsections (2) and (3) of clause 1 deal with references to a charity in legislation apart from this Bill. Subsection (3) covers legislation and documents in which a charity is defined by reference to the Charitable Uses Act 1601 or the preamble to that Act and provides for that definition to be supplanted by the one in this Bill. Subsection (2) covers all other definitions of charity in legislation apart from this Bill and preserves those definitions. 18. Clause 2 of the Bill contains the first statutory definition of charitable purpose. This definition still relies on a considerable body of case law. 19. The meaning of "charitable purposes" is supplied by clause 2(1), which provides that a purpose is charitable if it meets two criteria:
20. Each of the paragraphs in clause 2(2) is a description or "head" of charity rather than a fully-stated purpose in itself. Within each of those descriptions lie a range of purposes all of which fit the description but each of which is a different purpose in its own right. The list of descriptions, taken as a whole with the purposes underlying the descriptions, encompasses everything which is to be a charitable purpose. 21. The list of descriptions of charitable purposes in subsection (2) of clause 2 contains 11 specific descriptions (paragraphs (a) to (k)) and one general description (paragraph (l)) which brings in the purposes described by subsection (4). The list of specific descriptions covers the great majority of purposes that are recognised as charitable but does not cover everything: paragraph (a) of subsection (4) covers those purposes that are currently recognised as charitable but that do not fall under any of the specific descriptions in paragraphs (a) to (k). 22. Paragraphs (b) and (c) of clause 2(4) cover purposes that are analogous to, or within the spirit of, any other charitable purposes (i.e. purposes falling within any of paragraphs (a) to (k) of subsection (2), existing charitable purposes, or purposes which themselves have been recognised as charitable under subsection (4)(b) or (c)). These provisions enable the meaning of "charitable purpose" to be expanded in the future by allowing for the possibility of new charitable purposes to be recognised. 23. Subsection (5) of clause 2 preserves the existing meaning of the terms used in the specific descriptions in subsection (2) or (3) of that clause. 24. Clause 3 deals with public benefit. Under the existing law there is a presumption that purposes for the relief of poverty, the advancement of education, or the advancement of religion - in other words the purposes that would fall under paragraphs (a) to (c) of clause 2(2) - are for the public benefit. No other purposes benefit from that presumption. The effect of the presumption at present is that, when the status (charitable or non-charitable) of an organisation established for the relief of poverty, the advancement of education, or the advancement of religion is being considered, the organisation's purpose is presumed to be for the public benefit unless there is evidence that it is not for the public benefit. By contrast, organisations established for all other purposes, which do not benefit from that presumption, have at the time their status is being considered to provide evidence that their purpose is for the public benefit. 25. Subsection (2) of clause 3 abolishes the presumption that organisations for the relief of poverty, the advancement of education, or the advancement religion enjoy, putting all charitable purposes on the same footing. Abolishing the presumption will not by itself have the effect of depriving poverty relief, educational and religious organisations that were registered as charities while the presumption existed of their charitable status. 26. Subsection (3) makes clear that the term "public benefit", wherever it occurs in clauses 1-3, refers to the existing concept in charity law in England and Wales. The concept of public benefit will remain in the common law. Guidance that the Charity Commission issues under clause 4 (see below) will explain the public benefit concept. Clause 4: Guidance as to operation of public benefit requirement 27. The Bill will give the Charity Commission a set of new objectives (see clause 7), one of which will be to promote understanding and awareness of the operation of the public benefit requirement. Clause 4 requires the Commission to issue guidance in pursuance of that objective (subsection (1)) and allows the Commission to revise its guidance from time to time (subsection (2)). Revision of the guidance will be needed if there are changes in society which bring about developments in the legal concept of public benefit. 28. Subsection (3) requires the Commission to carry out consultations before issuing its guidance under this clause. It must also carry out consultations before revising guidance that it has already issued, unless it thinks that consultations are not needed (because, for example, the revisions are so slight as not to justify the time and expense of consultations). 29. Subsection (4) requires the Commission to publish its guidance under this clause, but allows it to choose the most appropriate manner of publication - for example, as a printed document; as a document on a website; etc. 30. Although the Commission will be legally required by this clause to issue guidance, the Bill contains no provision making the guidance itself legally binding on charities or on organisations applying for registration as charities, or on anyone else. In the absence of such a provision, the guidance will have the status of advice and information put out by the Commission to assist general understanding and awareness of the public benefit requirement. Clause 5: Special provisions about recreational charities, sports clubs etc. 31. Subsections (1) - (3) of this clause make changes to the Recreational Charities Act 1958. The 1958 Act provides that:
32. The Bill affects both of these provisions of the 1958 Act, which are now thought to be incompatible with the European Convention on Human Rights. 33. Subsection (2) of the clause amends section 1(2) of the 1958 Act so that facilities made available to men only are to be regarded as charitable on the same basis as facilities made available to the public as a whole or to women only. This amendment does not affect the charitable status of any organisation which is currently charitable under the 1958 Act. 34. Subsection (3) repeals section 2 of the 1958 Act. The effect of this will be that miners' welfare organisations that can show that they are charitable under the definition of charity contained in clause 1 of the Bill will retain their charitable status. Other miners' welfare organisations will not retain their charitable status. 35. Subsections (4) and (5) make special provision for sports clubs which are registered with the Inland Revenue under the Community Amateur Sports Club (CASC) scheme established by the Finance Act 2002. Some such clubs are established for purposes which would make them charities under the definition in clause 1 of this Bill. Subsection (4) of this clause provides that any club which has charitable purposes and is registered as a CASC is not a charity. Clauses 6 and 7 and Schedules 1 and 2: The Charity Commission 36. Currently the Charity Commission has no legal existence as a body: the functions that are usually described as "the Charity Commission's" functions are in fact functions held by the Charity Commissioners for England and Wales (the "Commissioners") personally. Subsection (1) of clause 6 inserts a new section, 1A, into the 1993 Act. Section 1A(1) creates a new body corporate called the Charity Commission for England and Wales, with an equivalent name in Welsh. New section 1A(3) establishes the Commission as a Government department. 37. Other provisions in clause 6 transfer the Commissioners' functions to the new body (subsection (4)), abolish the office of Charity Commissioner (subsection (3)), and ensure that references to the Commissioners in other enactments passed before the commencement of this clause are, from its commencement, understood as references to the new Commission (subsection (5)). 38. Subsection (7) of clause 6 gives effect to Schedule 2 of the Bill, which contains provisions to deal with aspects of the transition between the Commissioners and the new Commission. 39. Provisions for the new Commission's membership, staffing, committees, procedures, and annual reporting are in Schedule 1A to the 1993 Act, inserted by Schedule 1 to the Bill and given effect by clause 6(2) of it. 40. Clause 7 inserts new four sections - sections 1B to 1E - into the 1993 Act. These provide the Commission with, respectively, five objectives, six general functions, four general duties, and incidental powers. The Commission's objectives describe what the Commission is to seek to achieve; its functions describe the activities it is to carry out in seeking to achieve its objectives; and its general duties describe ways in which, as far as it practicable, it must act, and matters to which it must have regard, in performing its functions and in managing its affairs. Other provisions in the Bill require the Commission to report annually to the Secretary of State on the discharge of its functions, the extent to which it believes its objectives have been met, and the management of its affairs (see paragraph 10 of Schedule 1A to the 1993 Act, inserted by Schedule 1 to the Bill). Subsection (2) of section 1E is to ensure that the Commission does not directly involve itself in the administration of any charity. Clause 8: The Charity Appeal Tribunal 41. Under the existing law, a right of appeal to the High Court exists in relation to some decisions of the Charity Commissioners. This clause creates a new tribunal to act as the "court of first instance" for appeals against certain decisions of the new Charity Commission. 42. Subsection (1) of clause 8 provides for a new Part 1A of the 1993 Act to be inserted after section 2 of the 1993 Act. Part 1A contains new sections 2A to 2D covering, respectively, the creation of the tribunal; its practice and procedure (which establishes (section 2B(1)) that the Charity Commission is to be the respondent on appeal to the tribunal whereas at present the Attorney General is the respondent on appeal against the Commissioners to the High Court and provides (section 2B(2) to (8)) for the matters to be covered in the Lord Chancellor's rules which would regulate the exercise of the right of appeal to the tribunal and practice and procedure); appeals from the tribunal to the High Court; and the powers of the Attorney General to intervene in proceedings before the tribunal, or on appeal from the tribunal to the High Court, where he is not a party to those proceedings. 43. Subsection (2) of clause 8 gives effect to Schedule 3, which inserts the new Schedule 1B into the 1993 Act. Schedule 1B covers the membership of the tribunal and appointments to it; its staff and facilities; the composition of its panels, who are to exercise its functions; and its practices and procedures. 44. Subsection (3) of clause 8 gives effect to Schedule 4, which inserts the new Schedule 1C into the 1993 Act. Schedule 1C provides for specified rights of appeal to the tribunal against specified decisions of the Commission, prescribing, in the case of each specified decision, which persons have the right of appeal and what powers the tribunal has in relation to the appeal or to the Commission's decision or action which is the subject of the appeal. The powers of the tribunal are set out in the table. In certain cases the tribunal would consider the merits of reviewable matters (which are listed in paragraph 3 of Schedule 1C) in the same way as the High Court would consider an application for judicial review - that is, on the basis of whether the decision met the test of reasonableness. Those reviewable decisions are provided by paragraph 3(1)(a) to (d). Clause 9: Registration of Charities 45. Clause 9 substitutes three new sections - 3, 3A and 3B - for existing section 3 of the 1993 Act. New section 3 deals with the register of charities, which the Charity Commission must continue to keep. Section 3 prescribes the content of the register and the circumstances in which the Commission must or may remove charities, or institutions which are no longer considered to be charities, from it. 46. Section 3A prescribes the requirements for the registration of charities, making different provision for different descriptions or classes of charity. 47. Section 3B deals with the duties of charity trustees in connection with registration. 48. Sections 3 and 3B in effect reproduce, in a new structure, provisions of existing section 3. The registration requirements in section 3A represent a substantial change by comparison with the registration requirements in existing section 3. 49. Section 3A begins (subsection (1)) with the general rule that every charity must be registered. Subsection (2) then provides that four classes or descriptions of charity (specified in paragraphs (a) to (d) of that subsection) are not required to be registered. These are:
50. In subsection (3):
51. Subsection (4) makes similar provision in relation to charities excepted by regulations made by the Secretary of State, except that it requires him to make regulations which have the effect of excepting from the registration requirement those formerly-exempt charities whose income does not exceed £100,000. 52. Section 3B reproduces the existing law on the duties of trustees in connection with registration. |
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| © Parliamentary copyright 2004 | Prepared: 21 December 2004 |