This information sheet aims to give some guidance as to whether your group should register as a charity. It is intended mainly for smaller community groups although the information is equally relevant to larger organisations in the voluntary sector. If you are setting up a new group with the aim of registering as a charity, this sheet should help you to begin the process.
What is a charity?
What type of charity?
Campaigning and political activity
Which charities need to register?
Main advantages of being a registered charity
Obligations of a registered charity
How to register
Your constitution will list the aims of your organisation and what you want to achieve. The Charity Commission calls these your objects and purpose.
By law, a charity’s stated objects (aims), must fall within the list of ‘charitable purposes’ described below.
An organisation is a charity if it is established for exclusively charitable purposes. This means that a charity can only have charitable object and purposes (aims). It cannot have some purposes that are charitable and some which are not.
A charity must also demonstrate that it exists for the public benefit as well as for a charitable purpose.
It is the law which defines a charity. Your group may well be charitable in the eyes of the law even though you have not yet thought of it as a charity. Registering with the Charity Commission does not make a group into a charity: registering simply turns an existing charity into a registered charity.
It is often assumed that if an organisation is ‘not-for-profit’ it must necessarily be a charity. This is not the case. Clearly a charity must be ‘not-for-profit’, reinvesting any surplus in the organisation. However although a charity does not distribute profits to, say, its members or shareholders, that is not what defines a charity. To be a charity, an organisation must have a charitable purpose as defined by the law and exist for the public benefit.
A charity may make a surplus through charges for its services or through trading activities, but there may be pitfalls. If your charity plans to do this, it is advisable to investigate beforehand to make sure that you do not go outside charity law or incur taxes. When you register, the Commission will ask for details of your activities.
There are 13 broad categories of charitable purpose. A charity’s objects, or aims, as set out in its constitution or other governing document, must fall within one of these categories:
- prevention or relief of poverty;
- advancement of education;
- advancement of religion (which includes religions which involve belief in more than one god, or do not involve belief in a god);
- advancement of health (including the prevention or relief of sickness, disease or human suffering) or the saving of lives;
- advancement of citizenship or community development (including rural or urban regeneration, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities);
- advancement of the arts, culture, heritage or science;
- advancement of amateur sport (sports or games which promote health by involving physical or mental skill or exertion);
- advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
- advancement of environmental protection or improvement;
- relief of those in need by reason of youth, age, ill health, disability, financial hardship or other disadvantage (including relief given by the provision of accommodation or care);
- advancement of animal welfare;
- promotion of the efficiency of the armed forces of the Crown, or the efficiency of the police, fire, and rescue services or ambulance services;
- other purposes currently recognised as charitable under charity law or under s.1 of the Recreational Charities Act 1958, and any new purposes which are analogous (similar) to another charitable purpose
These 13 categories of charitable purpose were introduced on 1st April 2008.Charities registered before that date under one of the four broad heads (categories) of charity below continue to be charitable:
- The relief of hardship
- The advancement of education
- The advancement of religion
- Certain other purposes for the benefit of the community
There are several different forms of charity, and you will need to decide which is most suited to your organisation.
Charitable unincorporated association
An unincorporated association is a membership organisation. It can be whatever its members want it to be, and carry out whatever activity you choose. It is the easiest, quickest and cheapest way for a group to set itself up. This structure is suitable for groups such as playgroups, pensioners associations, film clubs, and arts groups. If your group has charitable aims, this makes you a charitable unincorporated association.
A charitable trust is not a membership organisation but is run by a small group of people, known as trustees. It is set up by means of a trust deed, which can be written in such a way as to allow for members if you choose.
The trustees of an unincorporated association or a charitable trust will be liable for what your charity does. This is because unincorporated charities don’t have legal status – your charity may not be able to employ staff, own land or hold investments in its own name. If you want to do any of these it is worth considering a CIO or charitable company instead.
Charitable Incorporated Organisation (CIO)
This is a new form of charitable organisation which became available in 2013. It gives a charity the main advantages of a charitable company ( a legal personality and limited liability for its Trustees) but it is regulated solely by the Charity Commission.
A charitable company is a limited company with charitable aims. It is an incorporated organisation which means that it has a legal identity separate from its members. In law, a limited company is considered to be a person and it can therefore own land or enter into contracts. It is regulated by both Companies House and the Charity Commission, and annual reports and accounts have to be sent to both bodies.
More information about different legal structures for community groups is available in the Resource Centre information sheet Community and voluntary groups: Finding a legal structure to suit your group.
Your objects describe the aims of your organisation and what you want to achieve.
The Charity Commission provides examples of charitable objects on its website which you may wish to use. If one of the examples describes the purposes of your own charity, you can copy it into your constitution; if you copy it without alteration, the Charity Commission will accept that your group has charitable purposes.
You may also find it helpful to use the Charity Commission website to look at the objects of charities similar to your own. Please see appendix for details.
Exclusively charitable objects
The Charity Commission will look carefully at the objects clauses in your constitution or other governing document to determine whether the purposes of your group are exclusively charitable. If your objects clauses allow your group to do something which the law does not recognise as charitable, your group will not be considered a charity, even if your main objects are charitable.
- A charity must be for the benefit of the community as a whole or a significant part of it. This is not simply a question of numbers and the Charity Commission will assess each organisation on its merits. In broad terms, the community may be a geographical area or a community of interest.
- A charity operating within a geographical area must demonstrate that it provides a benefit to the whole area. If a community association defines its area of interest as a particular electoral ward then it must be open to all who live within the ward.
- A community of interest may, for example, be disabled people, members of a minority ethnic group or people who have a particular illness. In this case, the charity must be open to anyone within that particular community of interest.
- A charity cannot be set up to benefit personally its trustees or employees, though it may of course employ staff. (Trustees are the members of the committee or other body which runs a charity.)
The Public Benefit Test
Charity Commission guidance sets out two key principles of public benefit:
There must be an identifiable benefit or benefits:
- It must be clear what the benefits are
- The benefits must be related to the aims
- Benefits must be balanced against any detriment or harm
Benefit must be to the public or section of the public:
- The beneficiaries must be appropriate to the aims
- Where the benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted either by the ability to pay any fees charged or by geographical or other restrictions
- People on low incomes must not be excluded from the opportunity to benefit
- Any private benefit must be incidental
A charity is not allowed to have directly political objects. However, Charity Commission guidance states:
- “There may be situations where carrying out political activity is the best way for trustees to support the charity’s purposes. A charity may choose to focus most, or all, of its resources on political activity for a period. The key issue for charity trustees is the need to ensure that this activity is not, and does not become, the reason for the charity’s existence.
- “Charities can campaign for a change in the law, policy or decisions where such change would support the charity’s purposes. Charities can also campaign to ensure that existing laws are observed.”
However, a charity cannot support or promote a specific candidate, politician or political party, and must ensure it maintains its independence at all times.
Further details are available from the Charity Commission in Speaking out guidance on campaigning and political activity by charities (CC9).
- All Charitable Incorporated Organisations have to register, regardless of their annual income.
- Every unincorporated charity with a gross annual income of £5,000 or more is required by law to register with the Charity Commission. Once a charity reaches this threshold, it should register in the following financial year. Already registered charities below the £5,000 threshold will remain on the register.
- A charity below the £5,000 threshold may enjoy the benefits of charitable status without having to satisfy the reporting requirements of registered charities. It can apply to the Revenue and Customs (HMRC) for tax relief. Like a registered charity number, an HMRC charity number should be accepted by banks and grant funders as evidence of charitable status. An unregistered charity is still legally a charity and must abide by charity law.
Information on how to register with the HMRC is available on their website.
Although the majority of charities are required to register, there are no financial penalties for not being registered. You therefore have some room to ensure that you register at a time which best fits in with your group’s development. It can take some time for a small charity to adopt a constitution which will satisfy the Charity Commission and develop a good book-keeping system.
NB. There are different regulations (with different income thresholds) covering Excepted Charities, such as churches and the Scouts, and Exempt Charities, such as provident societies.
- It can be easier to obtain grants. Many funders give grants only to registered charities. However, smaller funding bodies usually give grants to small community groups even if they are not registered.
- Registration lets the public know that your group is a legitimate organisation and is being monitored by the Charity Commission.
- You are entitled to tax relief on several taxes and reduced business rates on your premises; and you may reclaim the tax on covenants and other donations by individuals, such as Gift Aid.
- Any charity (whether registered or not) must keep to its charitable purposes at all times and comply with charity law.
- A registered charity must follow Charity Commission rules concerning its annual report and accounts. We look at these rules in our information sheet on Charity Reporting and Accounts
- A registered charity has the same general obligations of any community or voluntary organisation:
- to follow the aims and rules of its constitution;
- to be well run and managed;
- and to act within the law.
To register as a charity you will need to complete the online registration process on the Charity Commission website. If you provide all the information and documents required, and answer all the questions clearly, the Charity Commission state that they will complete the process within 30 days.
Before completing the online form you will need to collect together all the documents and information that you will need. This includes:
A copy of your constitution or other governing document
The Charity Commission produces a model governing document for each form of charity organisation, which you can fill in with details of your own charity. If it suits you to combine a model governing document with one of the example objects referred to earlier, it will speed up and simplify the application process.
If your group has its own governing document, it is essential that it takes account of all the points in the relevant model even if it does not follow the exact format or wording. For more details please see our information sheets on Legal Structures for voluntary and community groups, Legal structure for not-for-profit organisations, and Constitutions.
Trustee Declaration form
This will be signed by all of your committee members declaring that they are willing to act as charity trustees. The governing document of your group will define who your trustees are. They are responsible for the running of your organisation and it is important that they are willing to take an active part in it.
All Charitable Incorporated Organisations must register with the Charity Commission so they will not have accounts information at the time of registration. In this case you will need to provide details of how your CIO will be funded in order to achieve its aims.
Other charities will need to show that their annual income is at least £5000. This will probably be your last set of annual accounts.
You will also have to provide your bank account details.
You will need to provide information to explain:
- how your organisation’s purposes are for public benefit, and how you will carry them out to ensure that you achieve your purposes.
- what your organisation does, who it helps and how it operates
- where your organisation operates: In England and/or Wales; in Scotland or Northern Ireland; or abroad.
- How you can be contacted: postal address, phone, email and website (if you have one)
- Any benefits that Trustees will receive
- Action you have taken to ensure you meet safeguarding requirements if you work with children or vulnerable adults
The Charity Commission guidance Registering as a charity (CC21) provides details on all the preparation you will need to do before registering.
The Charity Commission has detailed guidance on many issues about registering and running charities.
The Charity Commission’s website provides examples of charitable objects under the following headings:
- Advancement of Education
- Advancement of Religion
- Advice and Counselling
- Animal Charities
- Community Amateur Sports Clubs
- Community Capacity Building
- Community Centre
- Community Transport
- Conciliation And Mediation
- Conservation of the environment
- Elderly People
- Equality and Diversity
- Family Planning
- Museum and/or Art Gallery, The Establishment and Maintenance of a
- Promotion of Human Rights
- Promotion of the Law, Police and Crime Prevention
- Racial Harmony
- Recreational Charities Act 1958
- Refugees / Those Seeking Asylum
- Relief of Financial Hardship
- Relief of Sickness
- Relief of unemployment
- Religious Harmony
- Sustainable Development
- Urban or Rural Regeneration
- Village Halls
- Young People
To look at the objects of charities similar to your own, go to the Register of Charities on the Charity Commission website where you can search for a list of charities by object and then look at the details of individual charities.
Updated April 2015