Charity law and regulation

Charity law in England and Wales sets out the legal framework for organisations established for charitable purposes only. The Charities Act 2011 provides the main statutory basis, consolidating earlier legislation. Later acts, including the Charities (Protection and Social Investment) Act 2016 and the Charities Act 2022, introduced new powers for the Charity Commission and expanded trustee disqualification rules.

Charity law and regulation in England and Wales

The Charities Act 2011 defines a charity as an institution established exclusively for charitable purposes and subject to the High Court’s jurisdiction. A charitable purpose must fall within the descriptions listed in section 3 of the act, such as the prevention or relief of poverty, advancement of education, religion, health, arts, or environmental protection. It must also be for the public benefit, which involves two aspects: the purpose must be beneficial and the benefit must be available to the public or a sufficient section of it. The act does not define “public benefit” but requires the Charity Commission to promote awareness of this requirement.

Other legislation includes the Charities (Protection and Social Investment) Act 2016, which strengthened the Charity Commission’s powers, extended trustee disqualification criteria, and introduced a legal power for charities to make social investments. The Charities Act 2022 focused on simplifying charity administration, including changes to governing documents, land disposals and permanent endowment rules.

The Charity Commission for England and Wales

The Charity Commission is an independent, non-ministerial department accountable to Parliament. Its objectives include increasing public trust in charities, promoting compliance with legal obligations, and ensuring effective use of charitable resources. It can investigate misconduct or mismanagement and open statutory inquiries where serious regulatory concerns exist, such as significant financial loss, harm to beneficiaries, or misuse of a charity for illegal purposes. The Commission also has powers to gather evidence and take remedial action.

Charities dissatisfied with a Commission decision can request an internal review or appeal to the First-tier Tribunal (Charity) within 42 days. Complaints about the Commission’s service can be escalated to the Parliamentary and Health Service Ombudsman or, in some cases, challenged through judicial review.

Setting up a charity

To register as a charity, an organisation must have charitable purposes for the public benefit, a governing document, and an annual income over £5,000 (unless it is a Charitable Incorporated Organisation). It must also appoint trustees and choose a legal structure, such as a trust, unincorporated association, charitable company, or Charitable Incorporated Organisation. The governing document sets out how the charity is run, including trustee appointments and rules on payments and dissolution.

Governance and management of charities

Charity trustees have general control over a charity’s administration and must comply with legal duties and the governing document. Trustees must meet eligibility requirements and avoid disqualification under the Charities Act 2011, which covers bankruptcy and certain criminal convictions. Trustees of charities claiming tax reliefs must also satisfy the “fit and proper person” test under the Finance Act 2010.

Charities must keep financial records, prepare annual accounts and reports, and submit them to the Charity Commission if income exceeds £25,000. They must also report serious incidents and comply with fundraising standards set by the Fundraising Regulator.

Legislative and policy developments

The Charities Act 2022 introduced some changes:

• Amending governing documents: Unincorporated charities now have a statutory power to amend their governing documents, subject to Charity Commission consent for certain changes.
• Cy-près powers: These allow charitable assets to be applied to new purposes when original purposes fail, under specified conditions.
• Disposal of charity land: The act widened the category of advisers and gave trustees more discretion over advertising disposals.
• Permanent endowment: Charities can spend or borrow from permanent endowment funds within set limits without prior Commission approval.
• Commission powers: The act expanded powers to regulate charity names, validate defective trustee appointments, and authorise equitable allowances for trustees.