Looking forward to 2023 in Charity Law

As 2022 draws to a close it is a good time to look forward to 2023 and changes that will affect charities.

We cannot know what will happen on an economic front, or what course the Ukranian War will take. However there are a number of plans for changes to charity law and regulation for which charities can prepare in good time.

1.    The first tranche of the Charities Act 2022 is now in force, but there is more to come in 2023

The second set of provisions are due to come into force in Spring 2023. These include new rules about permanent endowment, charity land and charity names. 

Permanent Endowment

The Charity Commission defines permanent endowment as property of a charity (including land, buildings, cash or investments) that the trustees may not spend as if it were income. Such property must be held permanently, sometimes to be used in furthering the charity's purposes, sometimes to produce an income for the charity. The trustees cannot normally spend permanent endowment without the Commission's authority.

There are currently some useful provisions for smaller funds to amend their purposes or to spend the whole permanent endowment, without Charity Commission consent. The conditions for these provisions are as follows:
•    To amend objects or to merge funds – the fund must have an income of £10,000 or less; and
•    To spend permanent endowment – the fund must either have an income of £1,000 or capital value of £10,000. 
The Charities Act 2022 is repealing these provisions. In their place a new s.280A sets out a new mechanism for Charity Commission consent to all changes to funds with a capital value of £25,000 or more.
 In recent times with low interest rates the existing rules have been useful, as even quite large funds could have a return of less than £1,000 a year. There are two scenarios where charities should be reviewing their permanent endowment and making changes before the new rules come into force:
•    Small funds, with an income of £10,000 or less that need to be reorganised or merged; and
•    Funds that are worth more than £25,000 but with an income of £1,000 or less will be much easier to spend now than after the changes.
On the other hand, where charities have larger funds with an income over £10,000, it would be advisable to wait until Spring 2023 to make changes as the new amendment power is more straightforward.

Charity Land

The rules for disposals of charity land are being simplified next Spring. The current rules are very prescriptive, with the intention of ensuring charity land is sold for the best terms possible. However, for charities doing small scale deals the complex advice required is disproportionate to the value for the transaction, and for complex transactions the advice required is too constricting.
The rules are being simplified in three ways:
•    A wider group of people can give advice, provided they have the appropriate skills
•    The advice to be given is less prescriptive
•    No prescribed advertising required. 
In summary, the Act simplifies somewhat the rules for property disposals, but in doing so increases the responsibility of charity trustees to satisfy themselves that appropriate appointments have been made, on a case by case basis. 

Charity Names

Under current legislation only the registered name of a charity is protected. If a charity attempts to register with a name that is the same or too similar to an existing charity’s name the Commission will block the name. However, many charities operate under a working name, for example Comic Relief is the working name of Charity Projects. Under the new rules the working name of a charity will have as much protection as the registered name. There is some uncertainty about when a working name comes into existence and whether it must be registered on the Commission’s website to gain protection. It is very important to remember that the best way to protect a charity name is to register a trade mark, rather than relying on a regulator who has many priorities to juggle.

Apart from the Charities Act, other changes are coming in 2023.

Charity Investments

A landmark High Court judgment from May, the case of Butler-Sloss v Charity Commission sets out revised legal principles which describe the investment duties and powers of charity trustees. The legal principles set out in the judgment, handed down on 29 April 2022, apply immediately to all charity trustees when investing. The Charity Commission was partway through updating its investment guidance CC14 when it paused, pending the judgement in Butler Sloss. On 17 November the Commission issued an update explaining that the judgement offers “welcome clarification on how existing legal principles should be interpreted by trustees in a modern context” but that trustees can continue to rely on its current guidance pending revision. The new revised guidance is expected in Summer 2023. The case and surrounding commentary should encourage trustees to review their investment policies and consider whether their charity’s capital could be invested for the good of the world.

Charity Annual Returns

A reminder that charity annual returns are being extensively revised for financial years starting on or after 1 January 2023. See our November blog for more details.

Fundraising Code of Practice

This Autumn the Fundraising Regulator conducted a public call for information seeking views on improvements to the Code of Fundraising Practice. The consultation is now closed, but in Autumn 2023 a public consultation will run for 12 weeks on the proposed new code. The new code will be published in Autumn 2024. The code was last reviewed in 2018 and the Fundraising Regulator has acknowledged that the fundraising landscape has changed in terms of behaviour, legislation and technology. In the next 5 years the Fundraising Regulator will also be reviewing the non-obligatory fundraising levy for its members.

My Charity Account

The “My Charity Commission Account” will be introduced in Spring 2023. The is an account for all trustees in Wales and England. It will have an inbox, an overview of a trustee’s charitable appointments and give users the ability to carry out many actions relating to the charity more easily, such as changing the charity’s registered details or submitting annual returns.

The individuals listed as a charity’s contact will soon or may already have received an invitation to set up their administrative My Charity Commission Account. The administrative account holders will be able to invite trustees to set up their own personal accounts from Spring 2023. The trustee account will allow trustees to access all online services for the charity and edit their own personal details, in addition to any administrative rights that the administrative account holder may give them. It will also be possible to set up a My Charity Account for others, such as employees or professional advisers, with permission from the administrative account holder.

European Not for Profits

In the Autumn the European Commission ran a call for evidence on the creation of a bespoke legal entity called the European Association, with common minimum standards for not-for-profits across Europe. The aim is to harmonise rules on establishment, governance and administration, to “enable charities to fully benefit from the freedoms of the single market”. The motivation for the proposed changes are described by the European Commission: “The obstacles associations face when operating across borders may have a negative impact on their ability to carry out their work. As a result, those obstacles restrict the space for civil society across the EU.”
Obviously this will not be an option for UK charities, but it is possible that charities that are currently based in the UK but work mainly across Europe might find the European Association an attractive option.