Charity Commission for England and Wales publishes guidance on the Charities Act 2022
The Charity Commission for England and Wales (CCEW) has published guidance on the Charities Act 2022, highlighting changes to charity law which will come into force in autumn 2022 and throughout 2023.
About the Charities Act 2022
Key provisions in the Charities Act 2022 include reforms relating to:
- Paying trustees for providing goods to the charity
- Making moral or ‘ex gratia’ payments from charity funds
- Fundraising appeals that do not raise enough or raise too much
- The power to amend Royal Charters
Further commentary on these reforms and other changes brought about by the 2022 Act are covered by the CCEW’s guidance.
The 2022 Act gives effect to the Law Commission’s recommendations to reform various technical issues in the law governing charities in England and Wales. While the 2022 Act does not apply in Scotland, ICAS members based in Scotland who advise cross-border charities should familiarise themselves with the changes.
Cross-border charities are charities based in England and Wales which are required to register with OSCR due to undertaking activities in Scotland.
The 2022 Act primarily amends the Charities Act 2011 which came into force on 14 March 2012. The purpose of the 2011 Act was to simplify the structure of existing legislation and it did not change existing law or introduce new policy. For example, the 2011 Act restructured the requirements for the preparation of charity annual reports and accounts making them easier to understand.
Paying trustees for providing goods to the charity
Charities have an existing statutory power, under section 185 of the 2011 Act, that they can use, in certain circumstances, to pay trustees (and persons connected to trustees) for providing a service to the charity beyond usual trustee duties, or goods connected to that service.
This statutory power is being changed by the 2022 Act so that charities will be able to pay trustees in certain circumstances for just providing goods to the charity.
Provisions relating to payment for providing goods are expected to come into force in autumn 2022. Other provisions relating to the remuneration of trustees for work already done are not expected to come into force until autumn 2023.
It is important to note that payments to trustees can only be made if the charity’s constitution does not prohibit such payments.
Making moral or ‘ex gratia’ payment from charity funds
Moral or ‘ex gratia’ payments are made when a charity does not have a legal obligation to make a payment but its trustees feel morally obliged to do so.
Also, charities may be able to waive their right to receive funds or property. This occurs most frequently when a charity receives a legacy and there is evidence that the donor had changed their mind since making their will.
The 2022 Act introduces new powers enabling:
- Charities to make ‘ex gratia’ payments for ‘small’ amounts without applying to the CCEW, where trustees could reasonably be regarded as being under a moral obligation, to process requests without applying to the CCEW, based on certain factors. ‘Small’ is defined with reference to the gross annual income of the charity in the previous financial year. For example, a charity with income of £25,001 to £250,000 may be able to make a payment of £2,500.
- Charities to waive their right to receive funds or property of ‘small’ amounts without applying to the CCEW, based on certain factors. ‘Small’ is defined as it is for ‘ex gratia’ payments.
- Trustees to delegate the decision-making for ex gratia payments to other individuals or groups within the charity. For example, the chief executive or a trustee sub-committee.
These powers will also be available to Royal Charter and statutory charities and are expected to be available from autumn 2022.
Fundraising appeals that do not raise enough or raise too much
Fundraising appeals may not raise the amount needed to deliver an aim of the charity or may raise more than needed so that there are funds leftover. Also, circumstances may change and the charity cannot use the donations as intended.
The 2022 Act reduces complexity surrounding what trustees need to do in these circumstances. For example:
- Charities may not need to wait six months for donors to ask for a refund before applying the funds to other aims.
- A simpler process for obtaining permission to spend funds on other aims from the CCEW.
- Donations of less £1,000 can be spent on different aims without the CCEW involvement, if trustees comply with new legal requirements
The power to amend Royal Charters
Charities operating under Royal Charters will be able to use a new statutory power to change sections in their Royal Charter which they cannot currently change provided that change is approved by the Privy Council.
This new statutory power is expected to be available from autumn 2022.
The Department for Culture Media and Sport has undertaken to complete a review of the 2022 Act within the statutory review period of 3-5 years following Royal Assent.
Click here to read the CCEW’s guidance on the Charities Act 2022