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Charities The Public Benefit Test
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It has become well established in English law that for an organisation to enjoy the benefits of charitable status it must exist for a purpose which is beneficial to the community – for example the relief of poverty or to promote education.
Now Charities must show that their aims are to be for the public benefit.
The law in this area is about to undergo a major codification with the introduction of the Charities Act 2006.
To gain charitable status an organisation must:
(a) exist for the public benefit and
(b) have one or more of the following as its purpose:
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relief of poverty |
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advancement of education |
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advancement of religion |
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advancing health/saving lives |
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promoting community interests |
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advancing the arts, heritage or science |
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advancing amateur sport |
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promoting the environment/or animal welfare |
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assisting the young/aged or disabled |
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promoting efficiency of police/ambulance/armed services |
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any other purpose which is “reasonably” analogous or within the spirit of the headings above |
The key change is that now every charity must prove that its purpose is for the public benefit – known as the “public benefit” test.
New requirements for reporting public benefit in the charity’s Annual Report
Annual Reports must now include:
- A report of those activities undertaken by the charity to further its charitable purposes for the public benefit;
- A statement by the charity trustees as to whether they have complied with the duty in s.4 of the Charities Act 2006 to have due regard to public benefit guidance published by the Commission.
Approach taken by Charity Commission
The guidance given by the Charity Commission explains two key principles which need to be met in order to show that the charity’s aims are for the public benefit. These principles are:-
Principle 1: There must be an identifiable benefit or benefits and
Principle 2: Benefit must be to the public or a section of the public
Within each principle there are some important factors that must be considered in all cases. These are:
Principle 1: There must be an identifiable benefit or benefits
Principle 1a: It must be clear what the benefits are
Principle 1b: The benefits must be related to the aims
Principle 1c: Benefits must be balanced against any detriment or harm
Principle 2: Benefit must be to the public or a section of the public
Principle 2a: The beneficiaries must be appropriate to the aims
Principle 2b: Where the benefit is to a section of the public, the opportunity to benefit
must not be unreasonably restricted:
• • by geographical or other restrictions
• • by ability to pay any fees charged
Principle 2c: People in poverty must not be excluded from the opportunity to benefit
Principle 2d: Any private benefits must be incidental
The Charity Commission demonstrates in a number of examples how certain charities have addressed these two principles. They set out information which would already have been included in a charity’s Annual Report before the public benefit reporting requirements were introduced and present it in a way which makes clear what the benefits were and who was able to benefit.
We are able to offer specialist advice.
Call 01323 720142 now for a consultation with a specialist Solicitor or a Lawyer at Lawson Lewis & Co.
Please contact:
Lucy Robinson (Eastbourne) (01323) 720142 - E-mail
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