Charity Law

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.

The law in this area has undergone 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:

• relief of poverty
• advancement of education
• advancement of religion
• advancing health/saving lives
• promoting community interests
• advancing the arts, heritage or science
• advancing amateur sport
• promoting the environment/or animal welfare
• assisting the young/aged or disabled
• promoting efficiency of police/ambulance/armed services
• 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:

1. A report of those activities undertaken by the charity to further its charitable purposes for the public benefit;
2. 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 of the charity

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