Keep it legal: Charity Commission reform

The first tranche of the Charities Act 2006 was brought into force on 27 February (Third Sector, 21 February), including the reform of the Charity Commission itself.

The provisions in this first tranche deal with reform of the Charity Commission, registration and audit thresholds, and some new powers for charity trustees. Further aspects of the act will be brought into force over the next two years.

The reform of the commission has the effect of making the regulator a statutory corporation with a new constitution and new duties. It also acquires some new powers, such as the ability to decide who is a member of a charity and to remove people from membership. The power to give formal advice to trustees is extended to cover "any matter relating to the proper administration" of charities.

The commission also acquires the power to obtain warrants to gain entry to charity premises to search for and seize evidence, but it says that it will use this power sparingly.

Previously, charities were required to have an audit either if their income was more than £250,000 or if they had assets in excess of £1.4m.

Both of these thresholds have doubled. That should reduce costs for thousands of charities. The new thresholds apply to financial years beginning on or after 27 February 2007.

The good news for unincorporated charities is that, if they do not currently have a constitutional power of amendment, they can now alter their powers and procedures without the need for commission consent. These powers were previously available only to the smallest charities. And in cases where the commission exercises its scheme-making powers, it has discretion about whether public notice is required, thus reducing red tape.

Another measure that could prove useful is the reform of section 38 of the Charities Act 1993. Previously, charities could follow a self-certification route only when granting a mortgage over charity land in order to secure a loan. That regime is now extended to security for grants and other transactions.

Finally, from the beginning of April, only charities with incomes above £5,000 will be required to register with the commission. There are more than 30,000 charities with incomes below this threshold on the register; although they will be able to request removal from the register, they will not be forced to deregister.

Charlotte Watts is an assistant solicitor in the charities department at Wilsons.

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