Update and Briefing on the Charities Act (NI) 2008
The Charity Commission was established in 2009 following the First Commencement Order to the Charities Act 2008. The Commissioners were appointed in 2009 and staff team is now in place. While there has been a delay with the establishment of the register of charities the Commission has its powers of regulation, investigation and enforcement via the Third Commencement Order to the Charities Act. All Northern Ireland charities recognised by HMRC, as of 18 February 2011, are officially answerable to the Charity Commission under a transitional provision order. The Commission also has the power to give advice and guidance, however, this function in practice appears to be very limited at the moment.
NICVA understands the huge role that the Commission is tasked with, such as registering charities, maintaining the register, applying the public benefit requirement, drawing up guidance, carrying out investigations and in the future registering CIOs. NICVA stresses the need for the Commission to be adequately resourced in order to fulfil all of these functions otherwise the Commission could end up hindering the good administration of charities rather than helping them.
NICVA notes that the Charity Commission for England and Wales has scaled back on its one to one advice to charities and is concerned that the Charity Commission here will follow the same path and provide primarily web-based advice.
From time to time, charities will require detailed advice and may not be able to afford legal advice from a professional. NICVA, as well as other umbrella bodies, currently provides practical help and support on governance and calls for these advisory functions to be properly resourced so that charities will be able to avail of specialist detailed advice, as and when they need it.
The Charity Commission meets with other neighbouring regulators in the ‘UK and Ireland Charity Regulators Forum’ from time to time. The minutes of these meetings are housed on the Commission’s website.
The Second Commencement Order was made in September 2009 which brought into operation the meaning of charity and charitable purpose. The old four ‘heads of charity’, originating from 1891, have now been replaced by 12 charitable purposes.
The expansion of the definition of charity helps to reflect the wide range of charitable organisations and helps to modernise charity legislation. The new additions should help to recognise and deem charitable the work of many Northern Ireland groups in the areas of peace and reconciliation and/or addressing sectarianism and racism. The 12 new charitable purposes as outlined in the Act are:
- 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.
- Any other purposes includes any purpose recognised as charitable under existing charity law and any purposes which may reasonably be regarded as analogous to the listed purposes above, as well as those by virtue of section one of the Recreational Charities Act (1958).
The broad interpretation of the advancement of religion will include the belief in one god or more than one god and any analogous philosophical belief which does not have to involve belief in a god.
Purpose 5, which includes rural or urban regeneration and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities, will make it easier for support networks and infrastructure bodies within the sector to achieve charitable status.
The advancement of amateur sport includes games which promote health by involving mental skill or exertion. In the draft Order which was consulted on, it was games which promote health by involving physical skill only. Purpose 12 provides for the ongoing development and flexibility of charitable purpose over time.
The charitable purposes listed above reflect the majority of definitions within the Charities Act for England and Wales, thereby ensuring consistency with UK tax relief matters and that Northern Ireland charities receive comparable financial assistance.
In order to register as a charity in Northern Ireland, an organisation must have one, or more, of the charitable purposes listed in the Act and must provide public benefit in Northern Ireland or elsewhere.
The Act has been amended by the Charities Act 2013 to provide for the public benefit requirement, as opposed to a public benefit test. It will then be up to the Charity Commission to determine whether or not a charity is set up and operating for the benefit of the public rather than having a prescribed test enshrined in legislation.
The Act also states that no particular purpose should be presumed to be for the public benefit. The amendment in the Charities Act 2013 does not affect this requirement. There will be no presumption of public benefit for certain types of charity as had been initially considered as a potential option for this Bill.
The Charity Commission has carried out a full consultation on its new draft guidance which closed in early May 2013. It is anticipated that the official public benefit statutory guidance will be issued in the summer. Please see NICVA’s response to the consultation for more information.
The establishment of the Register of Charities has been delayed because of the issue with the wording on public benefit. The Register is to be maintained by the Commission. The Act states that:
“Every institution which is a charity under the law of Northern Ireland must be registered in the register of charities.”
The Revenue has handed over its list of recognised charities to the Charity Commission which is now available on the Commission’s website. This list is NOT the Register of Charities but is called “Organisations that have previously been known as charities” or the “deemed list”. The Commission has written to all organisations on this list asking them for up to date contact details and is advising those charities with a Revenue number who do not appear on this list to contact HMRC to tell them.
When the Register is fully up and running, every new charity and those already recognised by the Revenue will be required to register with the Charity Commission. For those charities registered with regulators in other jurisdictions, for example Scotland or England, they will go on a separate register as provided for by Article 167 of the Act.
The positive outcomes that will arise from having a register that is open to public inspection should help promote transparency and public confidence. When the register is fully up and running, the public will be able to check the legitimacy of a charity which should help to increase public confidence in charities. For example, if a member of the public had concerns about door to door collections, they could contact the Commission and find out whether the organisation is a legitimate charity or not.
It is envisaged that the Register should be open for charity registration from October 2013. The Commission will ask a cross section of those charities appearing on the deemed list to register at different stages over four years. It expects charities to register online unless there is a valid reason why this would not be possible. The Commission consulted on its draft registration guidance at the same time as the public benefit requirement. Please see NICVA’s response for more detailed information.
All charities operating in Northern Ireland will have to send annual financial information to the Commission. Article 167(3)(a) and (b) requires a charity established outside the jurisdiction of Northern Ireland to prepare a financial statement along with a statement of activities relating to its operations for charitable purposes in or from Northern Ireland rather than having to draw up Northern Ireland specific accounts.
The Act does not currently outline what the accounting and audit requirements are for those charities which are companies, but Articles 63-65 make provisions for unincorporated charitable associations:
- Unincorporated charities with an income of under £100,000 must get an independent examination, to be carried out by an independent examiner who is reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts. Alternatively they can choose to have an audit.
- Charities with an income falling between £100,000 and £500,000 can have an independent examination carried out by a reporting accountant, a member of the Chartered Institute of Public Finance and Accounting or a Full Member (amended from ‘Fellow’ by the Charities Act 2013), of the Association of Charity Independent Examiners if they choose not to have a full audit.
- All charities with an annual income of £500,000 or more will be required to carry out a full audit.
Until the new secondary legislation for accounting regulations for charities comes into being, charitable companies must still follow the old audit exemption rules from the Companies (NI) Order 1986 which have been saved as part of the Companies Act 2006 (see NICVA’s Advice Note 8 on accounting for more information).
The Department is currently working on preparing further secondary legislation for the accounting and audit requirements for charities which should be ready for consultation in early 2014. NICVA welcomes the opportunity to consult on the proposed regulations and will organise consultation workshops when the draft regulations are ready.
The Act provides for the creation of a Charity Tribunal to allow for charities, or a body seeking charitable status, to question and appeal decisions, orders or directions of the Commission. The Third Commencement Order to the Act makes the Tribunal’s powers operational.
A new type of legal entity is to be introduced, which has been specifically designed for charities – the Charitable Incorporated Organisation, referred to as a CIO. The CIO will be registered and regulated by the Commission. The CIO will be similar in some ways to a limited company in offering protection of trustees from personal liability.
The main benefit is that those charities opting for this type of legal form will not have the burden of dual registration or reporting with company and charity law as the CIO will be regulated by the new Commission. The organisation will always have to be charitable and the CIO will be entitled to the same tax benefits as any other charity. The Act provides some clarity around the characteristics of this legal entity, however secondary legislation will be required to implement it.
NICVA looks forward to the introduction of this new legal structure, but understands that it is not expected to become an option for charities here in the very near future (it was introduced in Scotland earlier this year and is to become operational in England and Wales later in the year).
The Act defines a charity trustee at Article 180 as:
“the persons having the general control and management of the administration of a charity”
It does not define what the general duties of charity trustees are to be although it defines the duties of a trustee of a Charitable Incorporated Organisation in Schedule 7.
NICVA agrees that not everyone will be eligible to act as a charity trustee. For example, undischarged bankrupts and people with unspent convictions for offences involving dishonesty; those that have been removed as a charity trustee by the Commission or by the court for any misconduct or mismanagement of the charity. NICVA welcomes the power that the new Commission will have to waive disqualification in exceptional cases, for example, charities who work with ex-prisoners would be considered.
The present system for licensing street and house to house collections is to be replaced with new legislation covering all public charitable, philanthropic and benevolent collections. The Act defines two types of public charitable collection – collections in a public place and door to door collections. What does and does not constitute a public place is specifically defined in the Act. A charitable appeal is defined as an appeal to members of the public to give money or property by whatever means, which would include direct debit.
An organisation must have a public collections certificate and a permit to carry out a collection in a public place and a door to door collection. The public collections certificate will be issued by the Commission, however the issuing of permits will be carried out by the new councils when they are up and running (post Review of Public Administration implementation).
The new legislation provides for local short-term collections which will be considered exempt from the requirement to obtain a public collections certificate and a permit to collect. A collection is a local, short-term collection if the appeal is local in character and does not exceed the prescribed period.
The provisions laid out in the Act do not cover lotteries (see NICVA Advice Note 9 for legislation covering lotteries) or internet fundraising.
There is no indicative timetable of when these new rules are expected to come into operation but it is unlikely that there will be any changes in the near future.
The Act will bring in new controls of fundraising for charities that use professional fundraisers and commercial participators. The Act states that there must be agreements in place with prescribed requirements. The existence of a written agreement may protect a charity or allow redress in rare cases where a professional fundraiser or commercial participator seeks to exploit a charity or charitable beneficiaries.
Professional fundraisers will be required to indicate which institutions will benefit, how the fundraiser’s remuneration in connection with the appeal is to be determined and the amount of that remuneration. Commercial participators will also have to indicate the institution(s) to benefit as well as the notifiable amount that will be given to the institution(s). This will be of great benefit to the public, enabling them to be more discerning about where and to whom they make donations.
There is no indicative timetable of when these new rules are expected to become operational.
If you require any further information, please contact Denise Copeland, Governance and Charity Advice Manager in NICVA at [email protected] or 028 9087 7777
To view the list of “Organisations Previously Known as Charities” please go to The Charity Commission for Northern Ireland’s website at www.charitycommissionni.org.uk.
The Charities Act (NI) 2013 - www.legislation.gov.uk/nia/2013/3/introduction/enacted