When a ‘charity’ isn’t a charity

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The Commission recently published a  thematic report on charity registration refusals and why they were refused.

Since December 2013, when the process of registering charities commenced, the Commission has registered over 5,700 charities and refused just 40. While it’s rare that an organisation coming forward to register as a charity is not a charity, it’s important to understand why registration is sometimes refused.

Prior to 2008, charities in Northern Ireland were largely self-regulating with no mandatory registration and minimal regulation by statutory authorities. The granting of charitable tax status by HMRC was discretionary and those who received an HMRC number used it as proof that they were a charity.

The Charities Act (Northern Ireland) 2008 modernised the legal definition of a charity, ensuring that public benefit must be demonstrated in all cases. When a body comes forward to be registered the Commission, using the new legislation, is seeking to ascertain three things. Briefly they are:

Is it an institution?

An institution is an independent body, the hallmarks of which include control over its governance and resources. An institution can be incorporated or not. For example, the legal structure of a company represents an incorporated institution. A trust deed or constitution represents an unincorporated institution. A project might be refused registration as a charity because it is not an institution.

Is it established for charitable purposes only?

The 2008 Act lists 12 descriptions of charitable purposes with the twelfth description being ‘any other purpose’ to allow flexibility.

To be a charity an institution’s purposes must fall into one of the 12 descriptions and be for the public benefit. Public benefit has two distinct elements. Firstly, the nature of the purpose has to benefit the community. The benefit must flow from the charity’s purposes, be capable of being demonstrated and be beneficial, not harmful. Secondly, those who might benefit from the carrying out of the purpose should be easily identified as ‘the public’.

To satisfy the public element the purpose must be for the public, or a section of the public, and not provide private benefit to individuals unless that private benefit is an unavoidable by-product of the purposes.

An organisation that benefits a restricted group of people, who do not constitute a section of the public, might be refused registration.

Is it subject to the control of the Court in Northern Ireland?

To be a charity, the organisation seeking to register must be subject to the law of Northern Ireland. If its headquarters are situated outside Northern Ireland, or its assets are held in a different legal jurisdiction, an institution generally won’t be able to register as a charity in Northern Ireland.

What if it all goes wrong?

Those that don’t meet the legal requirements (about 0.7% to date) face a choice. They can either reconstitute so that they meet the legal definition of a charity and reapply or carry on operating as a non-charity but remove all reference to being a charity from their literature. Those who choose the latter but still hold charitable property must make sure that that property is only used for charitable purposes.

Reviewing your governing document prior to submitting an application, to ensure it complies with the definition of a charity under the law, will save a lot of time and ensure a smooth transition on to the register of charities.

You can read the report on the Commission’s website.

Author: Punam McGookin

Punam McGookin has been the Commission’s Head of Charity Services since 2010. Her role is to develop and manage the registration, policy and legal functions of the Commission.

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