Charging charities for regulation by the Charity Commission, withdrawing Gift Aid for late filing of accounts and allowing charities with incomes of more than £1m to pay trustees without sanction by the commission are among wide-ranging reforms proposed by Lord Hodgson’s review of the Charities Act 2006.
The review, published today after eight months' work, also recommends raising the income threshold for compulsory registration for charities from £5,000 to £25,000, bringing solicitation of direct debits by face-to-face fundraisers into the local authority licensing regime, and amending the law to put social investment by charities on a firmer foundation.
Hodgson says that the 2006 Act was well-received and succeeded in many way in modernising an arcane and complex area of law. But it missed deregulatory opportunities and his recommendations should be implemented quickly: apart from measures on social investment, they are "evolutionary rather than revolutionary," he says.
Much of the 159-page report, with 113 proposals including 29 needing primary legislation, was welcomed by sector bodies. The National Council for Voluntary Organisations said it was delighted by Hodgson’s social investment proposals and his pressure for the Charitable Incorporated Organisation legal form to be implemented immediately.
But Sir Stuart Etherington, chief executive of the NCVO, also said there were a few "bad apples", including the proposal for automatic payment of trustees, the raising of the threshold for compulsory registration and a system of charging charities for registering and for filing annual returns.
Sir Stephen Bubb, head of the chief executives body Acevo, said the review was a landmark in the modernisation of the charity sector. He was especially pleased by the proposal to allow larger charities to pay trustees if they wished and the recommendation for more liberal rules on social investment.
Peter Lewis, chief executive of the Institute of Fundraising, welcomed the proposal for greater clarity on the role of bodies involved in the self-regulation of fundraising and for a standing committee to push forward an improved and simplified fundraising licensing regime.
But he was concerned by the proposal to abolish national exemption orders, which allow large charities heavily involved in house-to-house collections just to notify local authorities rather than apply for permission each time.
Sam Younger, chief executive of the Charity Commission, said the principles in the report chimed with the results of its recent strategic review."We are also pleased that the report is broadly supportive of the commission and our role as regulator and that some of the specific proposals we made have been reflected."
Other recommendations in the review are:
Trustees should be limited to three terms of three years
A single form should be used for charities to register with the commission and HM Revenue & Customs
There should be a single reporting system for the commission and Companies House
The income threshold for having accounts audited should be raised from £500,000 to £1m
The commission should develop a ‘traffic-light’ system of risk factors to be included in each charity’s entry on its register
The Charity Commission should become the Charity Authority
A central self-regulatory body covering all fundraising should be set up within six months
All parts of the sector should work to increase membership of the Fundraising Standards Board
FRSB membership should not be compulsory, but all charities with income above £1m should be members
National guidelines should be drawn up for regulating public collections, with a standing committee to drive forward changes
Rules under the Trustee Act 2000 should be amended to allow trustees to consider both social and financial benefits of their investments
There should be a power for permanent endowments to be invested in mixed-purpose investments
The government should develop a standard social investment vehicle
The Charity Tribunal
Its jurisdiction should be simplified to allow an appeal against any legal decision by the commission and a right of review of any other commission decision
The commission should be allowed to refer matters of charity law to the tribunal without the Attorney-General’s permission
The tribunal should speed and simplify its procedures