This article is taken from Helena Luckhurst’s blog The Wealth Lawyer UK.
Whatever your reasons are for setting up a charity (perhaps it is for tax reasons or to benefit from business rates relief), here are a few points to consider when doing so.
Trustees are those who have general control and management of the administration of the charity. The Charity Commission suggests appointing a minimum of three trustees. There is no limit on the maximum number of trustees that can be appointed, although having too many trustees can complicate matters and slow down the process when decisions must be made on behalf of the charity. Trustees have a number of duties which they must carry out.
The most common structures used to set up a charity are charitable trusts, charitable companies and charitable incorporated organisations (CIOs).
Every charity requires a governing document which, amongst other things, sets out the charity’s objects and how decisions shall be made. If the charity is to be registered with the Charity Commission, they will want to review the governing document and check that it meets their requirements.
Registering a charity
- A charitable trust or charitable company must apply to the Charity Commission to register as a charity unless it:
- generates gross annual income of £5,000 or less in any financial year; or
- is regarded as an “exempt” or “excepted” charity under the Charities Act 2011 and therefore does not need to register.
- The requirement for registering a charity applies to charities that are based in England or Wales. An organisation is not regarded as a charity in England and Wales if it is subject to another country’s jurisdiction, including Scotland, Northern Ireland, the Isle of Man or the Channel Islands. The charity must be subject to the High Court’s charity law jurisdiction, which means that the court must have the power to make decisions about the administration and purposes of the organisation. The following factors can suggest that the organisation is subject to the High Court’s charity law jurisdiction:
- the governing document adopts the law of England and Wales to govern it;
- most of the trustees reside in England and Wales;
- most of the organisation’s property is in England and Wales; and
- the organisation’s centre of administration is in England and Wales.
- In addition to (possibly) being registered with the Charity Commission, a charitable company must be formally incorporated as a company by filing the necessary documents at Companies House and obtaining a certificate of incorporation.
- All CIOs must be registered with the Charity Commission.
- You will also need to consider whether to register your charity with HMRC in order to claim tax back on Gift Aid donations.
- Applying to register as a charity involves submitting a detailed application to the Charity Commission, which will set out further information on the proposed activities of the charity. You will also be required to explain how the charity’s purposes will be for the public benefit.
- The Charity Commission can take several months to register charities, and their advisers may request further information on matters such as the proposed activities of the charity and further detail on how it will operate. For example, if it is to be a grant making charity, the Charity Commission may want to explore the process involved when making grants to the various organisations.
- Once the charity is registered, it will be issued with a registered charity number and it will have its own online record on the Charity Commission’s website.
Once the charity has been set up, the trustees will need to ensure that they meet the Charity Commission’s filing requirements. For example, they will need to file documents with the Charity Commission such as an annual report, a set of accounts and an annual return. However, it is important to note that the Charity Commission’s filing requirements differ depending on the size and type of charity.
Emma Hurrell, Associate, Fladgate LLP (email@example.com)