Charity Registration

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.

This sheet outlines the current legal situation.  However new legislation, called The Charities Act 2006, will make considerable changes to charity law.  These changes will be introduced in stages during 2007 and 2008.  Many details and precise dates are yet to be worked out.  This sheet refers to the most significant changes which affect charity registration; they are shown in the boxes.

Contents

• What is a charity?
• Charitable purposes
• Categories of charitable purpose
• Public benefit
• Objects
• Which charities need to register?
• Main advantages of being a registered charity
• Obligations of a registered charity
• How to register
• Further information

What is a charity?

• An organisation is a charity if it is established for exclusively charitable purposes, ie if its objects are exclusively charitable. The objects, or aims, of an organisation are set out in its constitution or other governing document.
• From early 2008 every charity will have to prove 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.

Charitable purposes

An organisation will almost certainly be a charity if it meets the following four conditions:

1. Its objects fall under one of the four broad heads (categories) of charity which are
   • The relief of hardship
   • The advancement of education
   • The advancement of religion
   • Certain other purposes for the benefit of the community.
2. Its objects must benefit the community or a significant part of it.
3. It has not been set up to undertake political or propaganda activities or regular trading activities, though charities may carry out some trading in order to raise funds.
4. It has not been set up to benefit personally its trustees or employees, though it may of course employ staff. The trustees are the members of the committee or other body which runs the charity.

It is often assumed that if an organisation is ‘not-for-profit’ it must necessarily be a charity.  This is not the case.  Although a charity is established for a purpose other than making a profit for its shareholders and owners, 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.

In the second half of 2007 the four heads of charity listed above under (1.) will be replaced with 13 charitable purposes which are set out below.

Broad headings of charitable purpose

1. The relief of financial hardship

Financial hardship is not defined by any specified amount of money but there must be genuine financial need on the part of the people who receive help from the charity. This heading also covers help to people suffering from the effects of old age, sickness, disability or social isolation where there is also financial need. Help may include money, food, housing, and advice or other services.

2. The advancement of education

This is not limited to formal education but includes playgroups, organisations providing work-related training and some recreational activities which are considered educational (eg chess). Education in the charitable sense must not be propaganda or party political, but a charity may campaign around an issue relevant to its aims in order to inform the public.

3. The advancement of religion

The general assumption is that the advancement of any religion (with one or two exceptions) is charitable.

4. Certain other purposes for the benefit of the community

A wide range of objects are considered charitable, including

• promoting urban and rural regeneration
• promoting racial harmony
• the provision of recreational facilities open to everyone (eg a sports centre)
• the promotion of human rights

These are some examples of certain other purposes for the benefit of the community.  The Charity Commission website has many more examples.

Charitable Purposes

In the second half of 2007 the four heads of charity listed above will be replaced with 13 purposes:

• 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

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.

The Charity Commission provides examples of charitable objects on its website which you may wish to copy.  Please see appendix for details.

Public benefit

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 or members of an ethnic group or people suffering from a particular illness. In this case, the charity must be open to anyone within that particular community of interest.
• There is one exception to the rule of public benefit: charities whose object is the relief of financial hardship may define their beneficiaries in a more restricted way. For example, they may limit their help to everyone with the same employer.

The Public Benefit Test

From early 2008, every charity will have to prove that it exists for the public benefit. Every new charity will have to meet the public benefit test and existing charities will be reviewed. The Charity Commission is developing guidance on this issue.

Which charities need to register?

By law every charity (with a few exceptions) must register with the Charity Commission if it:

• has a gross annual income of more than £1,000, or
• occupies or uses rateable land, or
• has a permanent endowment (ie. money which cannot be spent but is invested to produce an income).

A charity which is not required by law to register may do so voluntarily.

From early 2007 the rules are simpler

• (with a few exceptions) every charity with an annual income of £5,000 or more must register with the Charity Commission.
  (The land and endowment conditions will no longer apply)
• a charity below the £5,000 threshold may register voluntarily
• an unregistered charity remains a charity and must abide by charity law

While the vast majority of charities are obliged to register, there is no deadline for doing so and 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 very small charity to adopt a constitution which will satisfy the Charity Commission and develop a good book-keeping system.

Main advantages of being a registered charity

• It is easier to raise funds. Many funders give grants only to registered charities, although very small community groups are usually eligible even if they are not registered.
• 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.
• Registration lets the public know that your group is a legitimate organisation and is being monitored by the Charity Commission.

Obligations of a registered charity

• 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 Reports and Accounts - available in print or on our website.
• 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.

How to register

The Charity Commission provides a clear Registration Application Pack containing an application form with notes and a trustees' declaration form. You may phone the Commission to obtain a copy or download one from their website.

You will need to send the Charity Commission:

• The completed application form
• A copy of your constitution or other governing document;
  NB. the Charity Commission produces a model governing document for each form of of charity organisation; it is essential that the governing document of your own group 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 and Constitutions - available in print or on our website.
• The Trustee Declaration form signed by all of your committee members declaring that they are willing to act as charity trustees .
  NB. the governing document of your group will define who are your trustees; they are responsible for the running of your organisation and it is important that they are willing to take an active part in it.
• A copy of your accounts, or other financial information if you are a new group.
• Background information, such as publicity material or newspaper articles, which give a picture of your group's activities.

If the Charity Commission accepts your application, your group should be registered within 3 weeks. You may be asked to provide further information, in which case the process will take quite a lot longer. If the Commission turns you down, they will explain in writing why your group is not considered charitable and you will have the right to ask for a review of the decision.

Further information

We have been able to give only a basic outline of the legal framework and of the issues which you need to consider when deciding if your group is a charity. The Resource Centre has more detailed information on charity registration and on the general running of community and voluntary organisations. The Charity Commission provides booklets and guidance notes on every area of charity law, most of which are available on its website.

Appendix

Objects

To be a charity the Objects of your organisation must be 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.

The Charity Commission's website provides examples of charitable objects.  If one of these examples describes the purposes of your own charity, you can copy it into your constitution; the Charity Commission will then accept that your group is set up for charitable purposes.

The example objects are at www.charitycommission.gov.uk/registration/exobjintro.asp under the following headings:   

• Advancement of Education
• Advancement of Religion
• Animal Charities
• Carers
• Community Amateur Sports Clubs
• Community Capacity Building
• Community Transport
• Conciliation And Mediation 
• Conservation of the environment
• Disasters
• Elderly People
• Family Planning
• Museum and/or Art Gallery (the Establishment and Maintenance of)
• Promotion of the Law, Police and Crime Prevention
• Recreational Charities Act 1958
• Refugees / Those Seeking Asylum
• Relief of Financial Hardship
• Relief of Sickness
• Relief of unemployment
• Urban or Rural Regeneration

You may also find it helpful to look at the objects of charities similar to your own.   Go to www.charitycommission.gov.uk/registeredcharities/default.asp where you can search for a list of charities by object and then look at the details of individual charities.  

Updated January 2007