Proposed changes to charity law


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The Government has just published its response to the Law Commission's recommendations regarding technical issues in charity law.

The Law Commission's recommendations were published in 2017 and came out of the review that Lord Hodgson carried out of the Charities Act 2006 (as it then was) back in 2011. These changes have therefore been under consideration for quite some time.

The original Lord Hodgson report ran to 160 pages, and the Law Commission made a total of 43 recommendations for approval. Of these the Government has accepted 36 recommendations.

Although a lot of the recommendations do deal with technical matters, such as inconsistencies between legislation, there are some important points which will impact the sector going forward. Some of the most notable recommendations that are made are:

  • Changes to the requirements relating to disposals by charities which would allow more people (not just those that meet the strict definition of Qualified Surveyor) to provide the necessary advice and for the format of that advice to be more streamlined and less prescriptive.
  • Changes to the rules on disposals to connected persons, so that short term leases to employees are not caught and would not require Charity Commission consent. However, disposals by charities to their subsidiaries would still be considered a disposal to a connected person.
  • Further relaxation of the rules around permanent endowment, allowing corporate charities to make use of a statutory power to release funds from the restriction, and for that power to be freely available for all permanent endowment funds up to a value of £25,000.
  • Trustees to be given a statutory power to borrow funds from permanent endowment and to allow them to make social investments which may see a negative financial return.
  • The statutory power for charities to remunerate trustees for the supply of services provided to the charity should be extended to also cover goods provided to the charity.
  • The Charity Commission to be given a statutory power to require a charity to remunerate a trustee for equitable reasons.
  • A new statutory power to allow trustees to make ex-gratia payments without requiring Charity Commission approval up to a specific level (set as a sliding scale on the basis of charity size). That power would be able to be delegated rather than the decision having to be made by trustees themselves.
  • A lease with an absolute prohibition on assignment would be excluded from a statutory vesting of assets by way of a vesting declaration.
  • Amendment of the rules around the register of mergers which should remove the need for charities to maintain a shell entity to receive ongoing legacies.
  • Trust corporation status to be automatically conferred on corporate trustees however they are appointed. Trust corporation status is important for corporate trustees to be able to deal with land and at the moment can only realistically be obtained by appointment by Charity Commission scheme.

The Government now intends to "bring forward legislation to implement these recommendations when parliamentary time allows". Given everything going on in the world right now, time for parliament to meet is quite limited, so it may still be some time before we see these recommendations come into force. Nevertheless they will be welcomed when they do.

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