Editorial: Is tax relief really a charitable purpose?

The Charity Commission's most recent contribution to the debate about public service delivery by charities was a policy statement last year, writes Third Sector editor, Stephen Cook.

This relied heavily on the so-called Trafford and Wigan decision, which the commission made in 2004 but did not publicise until 2005. Maybe that delay was partly because the commission was steeling itself for the dissent it foresaw from charity lawyers and commentators to the most contentious part of the decision. This was the proposition that it is a legitimate use of charitable funds to reduce the burden on local or national taxation, even if the relief of taxation is not a stated objective of the charity concerned.

There were important caveats: the decision stated that the commission would normally expect a public service delivered by a charity to be fully funded if a public authority had a statutory duty to provide it, as opposed to discretionary powers to do so; and that any subsidy of a public service with charitable funds should always be in the interests of the charity's intended beneficiaries.

But these caveats did not forestall the disquiet of experts. One senior charity barrister told Third Sector at the time: "I think it is questionable that a charity that is not set up to relieve the taxpayer may nevertheless apply its funds to that purpose." And now there are signs that the commission, shaken by the results of its own research - reported on today's front page - is beginning to shift its position.

The text of the speech by commission chair Dame Suzi Leather to the NCVO today mentions the caveat that any subsidy must be in the interest of beneficiaries. It continues: "Well, that's not what's happening here.

I am concerned that some local authorities may believe the impact of Trafford and Wigan is that they can now expect charities to provide public services or fund gaps in provision.

"With 88 per cent of charities failing to achieve full cost recovery for service delivery - statutory services or not - can we really sustain the belief that this can be in the best interests of charities, beneficiaries or the sector as a whole?"

As Leather herself says, the new research is a wake-up call to the sector and to commissioning authorities. Her wide-ranging speech reasserts that public service delivery raises vital regulatory questions, and reminds trustees to preserve their independence and beware of mission drift: it's an important beacon beside a still murky path.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Cyber and data security - how prepared is your charity?

With a 35 per cent rise in instances of data breaches in Q2 and Q3 last year, charities must take cyber security seriously

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now