The Charities Act 2011 sets out how charities are registered and regulated. By law, if you set up a charity you must apply to register with the Charity Commission of England & Wales unless the annual income of the group is under £5,000 and you are not registered as a Charitable Incorporated Organisation (CIO).
Which legal structures can register as a Charity
There are a number of different not-for-profit legal structures however the only legal structures which can register as a charity are:
- Unincorporated Association
- Charitable Trust
- Charitable Incorporated Organisation
- Company Limited by Guarantee
What are the benefits of Charitable Status?
There are a number of benefits to registering as a charity however it is important to decide whether this is right for your organisation as charities are also restricted in how they can operate. The benefits of charitable status include:
- Reduced business rates
- Tax relief (Includes Gift Aid)
- Eligible for grants and funding
Are there any restrictions if a group has charitable status?
Before registering as a charity it is important for the Management Committee to understand that Charities are restricted in what they can do and how they work, for example charities:
- Must file an annual return to the Charity Commission which provides details about their activities and finances. This information is available to the public via the Charity Commission website.
- Have a set of purposes in their governing document which are charitable in law. A charity cannot have a mixture of charitable and non-charitable purposes.
- Are run by trustees who are normally unpaid volunteers who do not benefit personally from the charity's activities.
- Must be independent - a charity can work with other organisations but must make independent decisions about how it carries out its charitable purposes.
- Are restricted around political campaigning, for example a charity can campaign for a change in law which would help to achieve charitable purposes but a charity cannot campaign for a change in government.
- That plan to sell goods or services need to make sure that their activities are not classed as non-charitable 'trading'.
What is a Charitable Purpose?
A governing document which is charitable should include charitable purposes. As a starting point it might be helpful to look at the list of 13 recognised charitable purposes which are defined in the 2011 Charities Act:
- The prevention or relief of poverty
- The advancement of education
- The advancement of religion
- The advancement of health or the saving of lives
- The advancement of citizenship or community development
- The advancement of the arts, culture, heritage or science
- The advancement of amateur sport
- The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
- The advancement of environmental protection or improvement
- The relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
- The advancement of animal welfare
- The promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
- Any other charitable purposes
How to apply for charitable status
It is worth noting that organisations need to adopt an appropriate legal structure before registering for Charitable Status. This means that your group needs to:
1. Adopt a governing document
2. If applicable you may need to register with Companies House.
3. Register your constituted organisation or new legal entity (e.g. a Company) as a Charity.
The charity application process can be completed online on the Charity Commission website. In addition you will also need to provide:
- Bank or building society details
- Public contact details
- A charitable governing document which has been signed or witnessed
- An incorporation certificate (Companies only)
- Proof that your charity’s income is over £5,000 (unless it’s a CIO) e.g. annual accounts, a recent bank statement
There is a lot of preparation needed to ensure an application is successful. Be aware that Companies House do not assess whether a governing document is charitable. This unfortunately means that it is possible to register as a Company and then have Charitable Status refused due to an inappropriate governing document. If you have never been through the charity registration process before we strongly recommend seeking advice to ensure that your governing document is charitable.
How long does charity registration take?
Charity registration varies and can take a couple of months or over a year. It depends on the legal structure of the group and whether the appropriate paperwork is in place. The Charity Commission website states that complete applications that meet all the requirements can take 5 working days however it may take up to 45 working days if the Commission need to ask for more information or clarification.
Are there other charitable regulation options?
Groups with an annual income under £5,000 do not have to register as a charity. However if you have an income under £5,000 per annum but would like to register as a charity it is possible to register as a Charitable Incorporated Organisation.
For smaller groups it is also possible to apply to HM Revenue and Customs to recognise your organisation as charitable. This will enable your group to claim back tax on Gift Aid donations. To do this you will need your
- Bank account details and financial accounts
- Officials’ details, including dates of birth and National Insurance numbers
- Charitable objectives (sometimes called purposes)
- Governing document