ࡱ> %` Abjbj 4̟̟^"000099989:t|u;:N;d;d;d;C<C<C<ttttttt$^why` u-\>?<C<\>\> u00d;d;6u$D$D$D\>0Rd;d;t$D\>t$D$Dn"sd;; `/9>qqLt,Lu0|uq&z@&zss"&zsC<L<6$D<,<kC<C<C< u uC^C<C<C<|u\>\>\>\>$&- -000000 Charity Registration What is a charity? Charities exist and have special status because they are there to benefit others. What does this mean in practice? 1. Charities are organisations that are set up with purposes that are exclusively charitable Charitable purposes are set out in the Charities Act 2006. The aims of a charity will be set out in its objects or aims in its governing document and must fall under one or more of the following: a) the prevention or relief of poverty; b) the advancement of education; c) the advancement of religion; d) the advancement of health or the saving of lives; e) the advancement of citizenship or community development; f) the advancement of the arts, culture, heritage or science; g) the advancement of amateur sport; h) the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity; i) the advancement of environmental protection or improvement; j) the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage; k) the advancement of animal welfare; l) the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services; m) other purposes currently recognised as charitable and any new charitable purposes which are similar to another charitable purpose. There are restrictions over how far charities can trade or campaign. All charities must be able to demonstrate that they benefit the public. For a charity to benefit the public it must be able to demonstrate two things: firstly, that it provides a clear, identifiable benefit related to its aims, and secondly that the benefits are to the public, or a section of the public, and that there not unreasonable restrictions such as high fees preventing any opportunity to benefit. Any private benefit is incidental to a charitys work In a charity, the trustees are legally responsible for running the organisation and ensuring everything it does is charitable. There are restrictions over how far trustees can benefit personally from a charity. For example, it is very unlikely for a trustee to be paid to be a trustee, or an employee of the charity; but it is more common for a trustee to receive a one off payment for a service they provide to the charity. This also means that charities must be not-for-profit or non-profit making they cant distribute their profits to those who are responsible for the organisation. An organisations charitable status and legal structure are different An organisation will firstly establish itself with a legal structure, such as a company or association structure (see below). This involves adopting a governing document. Then, if the organisation then meets the criteria for registering as a charity, it will then be expected to apply for charitable status (see 5. below). This means that it is common for an organisation to be both a charity and a company at the same time. This is sometimes a cause of confusion. Organisations must register as a charity is they meet the criteria and they are of a certain size To register as a charity, you need to apply to the Charity Commission. The Charity Commission exist both to register and regulate charities. If your organisations income is over 5,000 per year and you meet the criteria for registration then your organisation must register. What is not charitable? An organisation is not charitable if: It is set up to benefit its trustees a named person a specific group of individuals with the exception of the relief of financial hardship (for example, employees of a company) its purposes are illegal it is created for the specific purpose of carrying out political or propagandist activities its purposes are not in the public interest Therefore the following purposes are not charitable: entirely enclosed religious orders membership-only sports clubs (rather than sporting facilities open to the public or specific sections of the public) raising funds for other charities where the organisers do not have any say over how the funds are spent organisations set up to promote friendship or international friendship (eg. town twinning associations) self-help groups (if membership is open then charitable status could be theoretically possible but there would have to be a large enough number of beneficiaries for it to be considered in the public benefit rather than the private benefit of the members of the group) Your organisations structure Before registering as a charity, your organisation will need to be formally established with a governing document and a governing body: The governing document is the rule book for an organisation sometimes called a constitution or Memorandum and Articles of Association, depending on your organisations legal structure The governing body are legally responsible for the activities of the organisation sometimes called a trustee board or management committee. They are formally elected or appointed according to the terms of the governing document and often consist of honorary officers who take on the specific roles of chair, secretary and treasurer, plus other governing body members. A governing body usually consists of at least 3 people. When you register as a charity the governing body become known as trustees. Find out more about governing documents and governing bodies in CLBs Running Your Own Group pack. Your organisations objects The most important part of deciding whether an organisation is charitable or not are the objects. The objects, which will be listed in your governing document, set out the overall aims of the organisation. Your objects can fall under one or more of the charitable purposes listed above but they must be exclusively charitable, and they must be for public benefit. Objects are not simply a list of your activities - there is an important difference between objects and activities. Your objects are your overall aims. To identify these, think about the overall need. What does your group want to achieve or improve? Look at the definitions of charitable status they are all very broad, such as the relief of poverty or the advancement of education. How does your organisation fit in with these definitions? Identifying your activities is more straightforward these are the specific projects or services you want to set up, in order to achieve your aims. For example, lets say you wanted to set up an after-school club for children. Your activities would be provision of an after-school club. However, this is not your object your overall object would be something like to advance the education of children under the age of 16. The Charity Commission will need to be confident that you can work towards your objects so you need to think carefully about what activities and projects you will carry out, and how they will contribute to your objects. If you are working in a specific area, this also needs to be in your objects (It is a good idea to add and elsewhere to your geographical remit, in case you go over the boundary!) Dont just put everything in your objects just in case! The broader your objects are, then the less restricted you are in your activities. The good news the Charity Commission have a list of example charitable objects on their website that you can adapt for your own needs Examples of objects: to advance the education of young people under the age of 25 by the relief of sickness of persons with (illness/disability) to give advice and information to people with physical disabilities, sensory impairment, learning difficulties and older people Why should our organisation register as a charity? Registering as a charity brings a number of benefits: An improved public image registered charities have a charity number and an official mark of respectability which often means funds can be raised more easily There are a number of financial benefits to becoming a registered charity registered charities are also registered with the Inland Revenue for relief on various taxes. Charities do not normally have to pay income tax, corporation tax (in the case of certain types of income), capital gains tax, inheritance tax, and stamp duty; pay no more than 20% of normal business rates on the buildings which they use and occupy to further their charitable purposes; and can have special VAT treatment in some circumstances Charities can seek advice and information from the Charity Commission However it is very important to remember that a charity is be subject to charity law. Key responsibilities include: Ensuring that everything the charity does the money it spends, the services it provides, and so on is exclusively towards its charitable purposes. If money is spent on anything else, then the charity could be held in breach of trust and the trustees could be required to pay the money back. Becoming a registered charity could restrict your planned activities. Strict controls on political campaigning, trading, and trustees receiving financial benefits. Conforming to accounting rules under charity law. For more information, see below under once you are registered. Is charitable status right for us? When considering applying for charitable status, you should think practically about how successful your organisation will be: Have you thought carefully about the specific activities you will provide? Are there other organisations in your area carrying out similar activities? Are you confident you will be able to raise sufficient funds from the public? Are you sure you and your prospective trustees are ready to take on the responsibilities of running a charity and working in the public benefit? Are you sure that the rules governing charities will not unduly restrict your organisation in meeting its aims (eg restrictions around campaigning or payment of trustees)? Responsibilities of charity trustees When your organisation is registered as a charity, the members of the governing body (see above) are known as trustees. You may use some other term in your governing document, such as management committee or directors. The important point is that, no matter what you call your governing body, they are the trustees. They are still legally responsible for the organisation but take on additional duties of a charity trustee. Their duties include: Ensuring that the charity works to further its objects as set out in its governing document, and that it acts in the interests of the charitys beneficiaries Ensuring that the charity has enough resources to carry out its work, and that all resources and assets are well-managed and used to meet its objectives Regularly attend trustee board meetings, and take decisions working jointly with other trustees Keeping informed of the charitys activities, and providing proper reports to members and supporters particularly annual reports and accounts Ensuring that all the rules in the governing document are followed (eg. elections, changes to the governing document) Ensuring that the charity meets all its legal responsibilities such as Health and Safety, equal opportunities, insurance, and employment laws Ensuring that the Charity Commission is kept informed of changes to the trustee body and approves key changes to the governing document Who cannot be a trustee? The following people cannot generally become trustees: Anyone convicted of an offence involving dishonesty or deception (unless spent) for example, theft, fare evasion or falsely claiming benefit Anyone who is an undischarged bankrupt Anyone who has formal arrangements with creditors which have not been discharged Anyone who has previously been removed by the Court or by the Charity Commission from being a trustee Anyone who is under a disqualification order under the Company Directors Disqualification Act 1986 (even if the charity is not a Company) People under the age of 18 (unless the charity is also a Company) The Charity Commission also say that a trustee must be able to manage and administer his or her own affairs. If someone is unable to do so because of a mental disorder, illness or injury, then that person cannot be a trustee. There are also restrictions on who can serve as a trustee of a childrens charity. Trustees personal liability Your trustees must be aware of their responsibilities and personal liability. The trustee board has overall responsibility, and there is sometimes some concern about how far trustees can be held personally liable for the work of the organisation. Reassurance! It is very unlikely any liability will arise if you: Act reasonably Take professional advice when necessary Follow the requirements in your governing document and in the law Regularly review practices like policies, procedures and insurance What protection is there? The Charity Commission say that if trustees act prudently, lawfully and in accordance with their governing document then any liabilities they incur as trustees can be met out of the charity's resources The Charity Commission now have powers to remove / excuse the liability of trustees in certain areas where they have acted reasonably and in good faith. Insurance can cover the organisation for many liabilities, including for the acts of trustees themselves Becoming a company limited by guarantee can cover the organisation for ordinary debts (* see below) But best practice taking advice, reviewing procedures, acting prudently is the most effective (*) What about liability for debts? If your organisations legal structure is unincorporated (not a company), then in law the trustees are jointly and severally (i.e. individually) liable for any agreements contracts, tenancies, repair obligations, debts which the organisation has entered into. Trustees will be personally liable for fulfilling these contracts. This means that, should the organisation get into significant debt, there is a risk that trustees may be held personally financially liable. Unincorporated organisations could include a clause in contracts which limits liability to the extent of the organisations assets. Also, your trustees should keep their contractual responsibilities and financial position under review and avoid taking undue risks. If your organisations legal structure is formed as a Company limited by Guarantee, trustees (or Directors) do not normally have personal financial responsibility for contracts and debts incurred, and are not normally individually liable for negligence. Members of a company agree to pay a nominal sum, eg 5, if the organisation becomes insolvent. What about liability for breach of trust? Under charity law, trustees regardless of the legal structure of your organisation - may be held personally liable for breach of trust. This includes where a trustee has acted fraudulently, if the trustee has been seriously negligent, if a trustee has gained some personal benefit from the organisation, or if trustees have allowed the charity to carry out activity not permitted under the terms of the governing document. It is therefore essential that all prospective trustees are aware of their responsibilities and their duty to fulfil your organisations charitable objects. However, Charity trustees may only be financially liable for breach of trust if there was some financial loss incurred. Trustees should be aware that they can now apply to the Charity Commission as well as to the court for relief from personal liability for breach of trust or duty if they have acted honestly and reasonably. Furthermore, it is now easier for trustees to purchase trustee liability insurance that may cover losses of this type. Remember that on the whole, charity trustees are expected to act prudently in the best interest of the organisation in achieving its objectives, and should not take financial risks. What about liability for negligence, breach of statutory duty of reckless disregard? All trustees, regardless of an organisations legal structure can be held personally liable for such breaches. Does the ultimate responsibility role of trustees sound scary? It shouldnt! An effective trustee board will: work together as a team with other trustees and with staff and volunteers make decisions based on advice from staff, volunteers and advisors put in place plans and policies to govern the organisations work bring different skills, knowledge and qualities to the trustee board A trustee board that operates like this is very unlikely to run into any difficulty. The charity registration process To be ready for registration, you need to have: A name for your organisation which is acceptable and will not cause confusion with another charity An agreed contact person Adopted your governing document, which includes a set of objects or aims in your governing document that you are confident are charitable Appointed or elected the governing body and made sure they are aware of their responsibilities as charity trustees (they will sign a declaration to this effect see below), should the organisation be registered Thought carefully about and decided on your organisations proposed activities how you will carry out your objects Opened a bank account Financial information either accounts or projected income An annual income of at least 5,000 per year The Charity Commissions website contain all the forms and guidance notes you need to register. The form will ask you to provide information about: administrative details: the proposed name of the charity, contact details, financial information, and questions ensuring that your organisation meets the minimum requirements for registration Your objects and how you will carry out your activities. Remember the difference between objects and activities. You must think carefully about how your activities will further the objects you have set out in your governing document. How your proposed charity will benefit the public Information about child or vulnerable adult protection, including confirmation that criminal record checks have taken place on trustees if necessary A declaration by trustees When you have submitted the application, the Charity Commission may ask for further information or changes required. This could include: amendments to the governing document, either to adminstrative provisions or to the objects themselves clarification on how your charity will carry out its activities Remember the Charity Commission need to know what you intend to do; how you will do it; how you will pay for it; and what you have already achieved. The Charity Commission state that registration takes an average of 40 days. Checklist Are your objects worded as charitable? Do your activities achieve the stated objects and are they acceptable for a charity? (the Charity Commission will want to be confident that you will be able to achieve your stated aims and activities. Do you have sufficient income? Are your aims too ambitious?) You have formally adopted your organisations governing document There is no obvious conflict of interest between members of the trustee body If the charity will be working with children and/or vulnerable people, there is evidence that there are safeguards in place and the organisation is aware of regulations There are adequate financial systems in place There is nothing suspicious about the trustees or their motives in establishing the charity The minimum requirements for registration are met Trustees have signed a declaration of their willingness to become a trustee For childrens charities, trustees have undergone the required criminal record checks Once you are registered Once you are registered as a charity, there are certain requirements which you must follow. Changes to the governing document Any changes to your charitys name, objects or provisions affecting how the charitys money or assets are distributed, need to be approved by the Charity Commission beforehand. For very small charities, there is a fast track approach. Annual return You must submit an annual return to the Charity Commission detailing any changes to your organisation. Larger charities are required to submit a more detailed annual return. Accounts All charities must prepare a set of annual accounts and make them available to the public on request. The rules governing the format of accounts, filing with accounts with the Charity Commission and external scrutiny of accounts vary depending on a charitys income and assets level and legal structure. The rules cover: Whether or not accounts need to be filed with the Charity Commission The format of annual accounts whether on a receipts and payments or accruals basis How much detail is required in a trustees annual report and accounts how far charities must follow the SORP (Statement of Recommended Practice) governing charity accounts and how much detail is required The level of scrutiny required of a trustees annual report and accounts whether a professional audit is required, or an independent examination, or no scrutiny (*) (*) Even if your charity is not required to have a professional audit, it is sometimes found that a professional audit is required in your governing document. Even if it is not the minimum requirement by law, you must follow what your governing document says - or consider changing your governing document. A professional audit may also be a requirement of your funder if this is the case, it must be followed regardless of the legislative requirements. The independent examination is designed to give small to medium-sized charities a way of scrutinising their accounts, but without the formality of having a professional audit. The regulations have specific requirements over who can carry out an independent examination, and the type of report. There is more information about the accounting requirements for charities in the Charity Commissions publication Charity reporting and Accounting: the Essentials (CC15). Further information The Charity Commissions website is a very useful source of information for charities. The website includes guidance on the charity registration process along with a wide range of publications and guidance notes. Please visit  HYPERLINK "http://www.charitycommission.gov.uk" www.charitycommission.gov.uk. Or call 0845 3000 218 The most relevant pages include: About charities information about the charity registration process Publications and guidance a detailed list of publications and operational guidance. Useful publications include: CC3 The essential trustee information about the duties and responsibilities of trustees CC15 Charity reporting and accounting: the essentials guidance for charities on the requirements around annual reports and accounts Other useful reading, available from the Community Links Bromley resource library: Voluntary But Not Amateur: A guide to the law for voluntary organisations and community groups, Jacki Reason and Ruth Hayes, 8th edition due out Spring 2009, Directory of Social Change Charitable Status: a Practical Handbook, Julian Blake, Bates, Wells & Braithwaite, 6th edition, 2008, Directory of Social Change The Charity Treasurers Handbook, Gareth Morgan, 2nd edition, 2008, Directory of Social Change The Good Trustee Guide, Peter Dyer, 5th edition due out Autumn 2008, NCVO For more information We provide information, guidance and signposting on all aspects of running a voluntary and community organisation. For more information, see our website at  HYPERLINK "http://www.communitylinksbromley.org.uk" www.communitylinksbromley.org.uk Peter Dyer, Head of Organisational Development tel: (020) 8315 1917 fax: (020) 8315 1924 email:  HYPERLINK "mailto:peterd@communitylinksbromley.org.uk" peterd@communitylinksbromley.org.uk     Community Links Bromley Information Sheets Community House, South Street, Bromley BR1 1RH Tel: 020 8315 1900 Fax: 020 8315 1924 Email:  HYPERLINK "mailto:admin@communitylinksbromley.org.uk" admin@communityli*+}? 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