Consultation starts on new public benefit test for charities

02 July 2012

The Charity Commission has proposed a new test of charitable status based on the Charities Act 2006's public benefit criterion.

Last October the test originally used by the Commission was ruled invalid in an Upper Tribunal judgment concerning independent fee-charging schools. The Commission had previously considered removing the charitable status of some such schools, on the basis that they did not offer enough free places to satisfy the public benefit test. The Independent Schools Council (ISC) then launched a judicial review to challenge the wording of the Commission's test, claiming that it did not reflect the 2006 Act. This review was later referred to the Upper Tribunal by the Attorney-General.

To a large extent, the tribunal agreed with the ISC. Its ruling stated that a charity that charged its beneficiaries could still satisfy the public benefit test if it ensured that ‘the poor can benefit in a way that is more than minimal or tokenistic’. However, the tribunal gave no specific advice to trustees on how to do this.

Following the ISC decision, the Commission issued interim guidance for trustees of fee-charging charities, warning them to have regard to the Tribunal's ruling. In the meantime it has been developing a complete review of its public benefit guidance for trustees. This has now appeared on the Commission's website.

The Commission has chosen not to put the proposals in a single document but has scattered them about as a complicated set of interlinked consultation pages, which interested readers will have to navigate for themselves. The key section dealing with fee charging-charities is on the page ‘Charging for services: restrictions excluding the poor’. The new guidance advises trustees of fee-charging charities that they must not be run in a way that excludes the poor from benefit. They must provide at least a minimum level of provision for the poor, this minimum level being ‘more than minimal or tokenistic’ - the words used by the Tribunal in the ISC judgment.

Where a charity provides expensive ‘luxury’ or ‘gold-plated’ services or facilities, it will be even more necessary for the trustees to be able to show a real level of benefit for the poor, says the guidance.

However, charities that only charge ‘low fees’ are not in danger of failing the public benefit test and the trustees do not have to make any special provision for the poor. Examples of such fees are small charges for event tickets or club membership fees that anyone with ‘modest means’ can afford.

The consultation is open for three months. Firm guidance is expected to be released by the end of this year.

 

Sources

Charity Commission (announcement of proposed new guidance)

Charity Commission (guidance on fee-charging)

BAILII (ISC judgment, see paras 215 & 222)

 


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