Public benefit quandary in Northern Ireland

Proposals to exempt religious, education and poverty charities from the requirement to show a public benefit are causing controversy

Stormont: The Northern Ireland Executive is debating the definition of public benefit
Stormont: The Northern Ireland Executive is debating the definition of public benefit

The Northern Ireland Executive is debating whether certain types of charities - which may include religious charities and education charities - should be exempted from a requirement to prove that they provide a "public benefit".

In February, the executive raised the idea of introducing a presumption of public benefit for religious charities. This means it would be presumed that religious charities were providing the public benefit that is necessary for charitable status, and they would not be required to demonstrate it.

Since then the executive has further suggested that charities working for the relief of poverty and the provision of education might also be allowed a presumption of public benefit.

In England and Wales, all charities have been required to demonstrate that they provide a public benefit since the introduction of the 2006 Charities Act. The results have been controversial, particularly in the case of fee-charging charitable independent schools: the Independent Schools Council recently challenged the Charity Commission at the Upper Tribunal over its interpretation of the law on public benefit.

It is still uncertain whether and how the presumption in Northern Ireland would apply, and it is likely to be some months before a decision is made. At present, a transitional provision gives the Charity Commission for Northern Ireland power over the 6,000 charities registered with HM Revenue & Customs, but not others. Until the decision is made, the commission will not be able to begin registering charities.

"The motivation for these changes came from small religious charities that are worried they would not meet the public benefit test," says Roy McGivern, head of charity policy at the Department for Social Development in Northern Ireland. "However, it's likely these organisations would have little trouble. Most provide the opportunity for an act of worship, which is considered a public benefit."

McGivern says that charities would be presumed to be for the public benefit for registration purposes, but that presumption could still be challenged by the Charity Commission if there was evidence that it was not providing benefit.

Lawyers in Northern Ireland believe the concept of demonstrating public benefit is enshrined in case law and that it would therefore be easy to challenge a charity's conduct if it did not provide public benefit.

One lawyer says the presumption of public benefit for fee-charging educational institutions is particularly problematic, given the issues raised in the recent Upper Tribunal ruling, which said that such institutions in England and Wales must show they have more than a tokenistic regard for the poor.

"What effect the ruling would have on the Northern Irish situation is very difficult to say," she says. "What it does is create a layer of complication that's unhelpful."

McGivern says that presumption might also create a tax issue. "HMRC has previously deferred to the regulator on this issue because the regulator is already testing public benefit," he says. "But if no one is testing it, HMRC might decide to do it itself. We could end up with a dual test."

A remaining issue is whether presumption is compatible with other jurisdictions. Many charities in Northern Ireland operate in the rest of the UK and in the Republic of Ireland, which is expected to create its own regulator.

Lawyers in Northern Ireland believe that the potential difficulties caused by working under two different systems might cause some charities from other countries not to operate in the region.

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