The forthcoming review of the Charities Act 2006 is an opportunity to amend and improve charity law - but what should be on the agenda, and what can realistically be achieved? Kaye Wiggins investigates
The Charities Act 2006 contains the unusual requirement that it has to be reviewed after five years. Before November this year, the Office for Civil Society must appoint someone to lead the review and consider which parts of the law have worked and which should be changed.
The Liberal Democrat peer Lord Andrew Phillips says the requirement for a review was an amendment proposed by him. "It's very rare to have this downstream review," he says. "But I was concerned that the legislation would create a mass of additional bureaucracy for charities and this would make giving and volunteering more difficult."
Phillips says this is why there is a requirement for the review to consider the bill's effect on volunteering and charitable giving (see Ticking the boxes, below).
However, Ann Phillips, the new chair of the Charity Law Association (see interview), says the review will be useful in a much broader sense and might make the law work more effectively. "It's remarkable how things have changed in five years," she says. "Now we've seen how it works in practice, it will be valuable to revisit the legislation."
There are doubts, however, about whether the review will lead to much change. Nicola Evans, a senior associate at Bircham Dyson Bell, says: "Some of the recent indications from the Cabinet Office seem to be about managing expectations. It has indicated there is unlikely to be time to consider any revising legislation in the current parliament."
The subjects below will form part of the review, according to the OCS.
THE TO-DO LIST
- The Charity Tribunal
Created by the act, it was intended as a cheap, accessible way to appeal Charity Commission decisions. But there are extensive restrictions on the kind of decisions that can be considered by the tribunal. Conservative peer Lord Hodgson, who chaired the OCS's Big Society Deregulation Taskforce, says: "It is now almost impossible to find a case that fits within the tribunal's narrow parameters. They should be removed."
- The Charity Commission
The OCS says the review "may well include proposals to streamline some of the commission's existing responsibilities". Lawyers are suggesting the removal of the act's requirement that a charity must get the regulator's permission to sell land or make ex-gratia payments.
- Fundraising rules
The act contains powers for the Charity Commission to regulate public charitable collections, including face-to-face fundraising, but these have not been implemented. With shrinking resources, the regulator would not be able to take this on. Some lawyers expect these provisions to be removed, but others argue they could be reformed.
- Thresholds for charitable registration and submitting accounts
Charities with annual incomes of less than £5,000 are not required to register with the commission. The commission's chief executive, Sam Younger, says he would welcome an increase in the threshold, but many small charities say they want charitable status because of its reputational benefits. The OCS says the various other financial thresholds that apply to preparation, scrutiny and submission of accounts and reports might also be considered.
- Public benefit
The act removed the long-standing presumption that charities advancing education and religion or relieving poverty are of public benefit, and says all charities must be able to demonstrate that they provide public benefit. But the act did not give a definition of the term, instead asking the Charity Commission to interpret it and provide guidance. Lawyers doubt the commission will lose this responsibility. There have been calls for the government to define public benefit in law, but this would be difficult and controversial.
THE WISH LIST
Charity lawyers and others have identified a number of reforms they would like to see. The Office for Civil Society has not said whether they might be considered.
- Relationship with HM Revenue & Customs
Since the act was introduced, HMRC has acquired new powers over charities. It has introduced a 'fit and proper persons test', which allows it to deny a charity tax breaks if it has links with a person whom HMRC suspects is involved in fraud.
A report last month by the National Council for Voluntary Organisations said that the act should be amended to allow the Charity Commission to receive information about charity trustees' personal tax from HMRC. Ann Phillips, chair of the Charity Law Association, says the commission should also be given powers to suspend a charity trustee if HMRC suspects they may not be a fit and proper person.
- External fundraisers
A consolidated version of the charities acts, currently before parliament, does not include the 2006 act's requirement that professional fundraisers must tell potential donors how much they are being paid. Jonathan Burchfield, a partner at law firm Stone King, argues that this rule has been relegated to a "second division of legislation". The review of the act could address this.
- Cash collections
Sam Gyimah, the Conservative MP for East Surrey, has taken up the case of an 87-year-old constituent who has been collecting cash for the Royal Air Forces Association for 25 years but says the act makes this difficult by requiring him to apply to the local authority for permission each time he makes a collection and to have the total amount audited. Gyimah says he has asked ministers to simplify the system. Lord Hodgson, former chair of the Big Society Deregulation Taskforce, says this might be possible with clearer guidance rather than legislative change.
- Royal charter bodies
Alice Faure Walker, a consultant at the law firm Bates Wells & Braithwaite, says there is uncertainty about whether the act allows charities that have been founded by royal charter to spend their permanent endowments. "We would like the act to make it clear that this is permitted," she says.
- Register of mergers
The Charity Commission's register of mergers was set up in 2007 to make sure legacies to charities that had merged would go to the new organisation, but lawyers say the wording of the law is not strong enough to override clauses in wills that say a charity should receive a legacy only if it still exists on the person's death. The review could strengthen the wording to avoid confusion.
TICKING THE BOXES - WHAT THE LAW SAYS
The act stipulates that the following must be covered by the review:
1. Excepted charities - The act said some charities excepted from the requirement to register with the Charity Commission, such as churches and armed forces charities, would have to register.
2. Public confidence - The act gave the commission a statutory objective to "increase public trust and confidence in charities".
3. Charitable donation levels - One of the concerns in parliament was that the requirements of the act would reduce giving.
4. The willingness of individuals to volunteer - Some parliamentarians were also concerned that the new law might depress volunteering.
See Interview with Ann Phillips