Cross-border regulation

Andrew Studd, a partner in the charity team at Russell Cooke LLP, explains the challenges

Andrew Studd
Andrew Studd

The Calman Commission's recent observations on the effects of Scottish devolution highlighted the regulatory impact that the Charities and Trustee Investment (Scotland) Act 2005 has had on 'cross-border' charities that operate in England and Wales and also in Scotland.

Calman's observations reflected the concerns that a number of commentators have raised since the act's conception. Since 2006 and the creation of the Office of the Scottish Charity Regulator, cross-border charities have faced two different regulatory regimes.

This will be complicated further with the passing of the Charities Act (Northern Ireland) 2008, which established the Charity Commission for Northern Ireland. The OSCR says that of the 3,000 charities it has assessed, 530 are cross-border charities.

This is a relatively small proportion, given the number of charities on the Charity Commission's register. Presumably they are also some of the sector's larger organisations, so they should be in a better position to deal with the administrative requirements. But there are certainly challenges.

There are differences not only in the law in England and Wales, Scotland and Northern Ireland - such as the meaning of 'charity' and 'charitable purposes' - but also in the application of regulations, such as reporting and accounting requirements. In England and Wales, the promotion of the armed forces can be 'charitable', but this does not apply in Scotland or Northern Ireland.

The provision of recreational activities is not expressly charitable in England and Wales or Northern Ireland, but it is in Scotland. In Northern Ireland, the act specifically expands "the advancement of human rights, conflict resolution or reconciliation" to include the advancement of peace and good community relations.

As if this were not confusing enough, an additional meaning of 'charity' and 'charitable purposes' is applied by HM Revenue & Customs throughout the UK for tax purposes. As the Calman Commission pointed out, this could technically lead to a body being registered as a charity in one jurisdiction but not in another, with its tax status determined by yet another body according to different criteria.

There are also some real practical issues. Many charities are thinking of merging because of the economic climate. Although consent to merge is not required by the Charity Commission, registered Scottish charities will need the consent of the OSCR, an additional administrative burden that will need to be taken into consideration.

Other differences, such as the need for the OSCR to consent to a change of name, could also mean additional hassle.

One area where considerable concern might arise is the difference in the scope for trustee remuneration under English and Welsh and Scottish legislation. A mistake in understanding the Scottish legislation - such as the condition that there be written agreement and the fact that 'trustee' includes any connected person - could be of great concern to trustees, because the OSCR has no power retrospectively.

The Calman Commission recommended a one-size-fits-all definition of 'charity' and 'charitable purposes', and for charities to be subject to only one UK regulator. It is already too late to learn from this recommendation as far as Northern Ireland is concerned.

Primary legislation might now be required to ensure reporting requirements are consistent within the UK. Unless such changes are adopted, however, charities may well follow the approach of the newly merged Age Concern and Help the Aged, which have formed a separate charity in each jurisdiction - not only to create a national voice in each devolved jurisdiction, but also to minimise the regulatory overlap.

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