Charity FAQ

What is the Code of Governance for the Voluntary and Community Sector?

What are Charitable Incorporated Organisations (CIOs)?

Can you give me guidance on public benefit?

When do Charities have to report on Public Benefit?

What are the rules for Reporting and Accountability?

How can I Register my Charity?

What is the Charity Commission's telephone number?

What is a Conflicts of interest?

Can you make payments to your charity’s trustees?

Can a trustee resign?

What are Community Interest Companies?

Do we need to be a registered charity to get a lottery grant?

What information regarding my charity’s status should appear on its documents?

What is the Code of Governance for the Voluntary and Community Sector? 

The Code of Governance for the Voluntary and Community Sector is a practical and easy-to-use guide to help charities develop good practice and is primarily aimed at the trustees of voluntary and community organisations, which have ultimate governance responsibilities. It will help them to lead their organisations through example, and to achieve excellent governance. The code is also aimed at chief executives, who provide the bridge between trustees and staff, and have a central role in ensuring good governance.

The Charity Commission has contributed to the development of the code in partnership with NCVO, ACEVO, Charity Trustee Networks and ICSA. They fully endorse the code, and would encourage all charities - from large to small - to use it.

The code is based on six key principles that have been designed to apply to any charity:

  • Understanding their role
  • Ensuring delivery of organisational purpose
  • Working effectively both as individuals and a team
  • Exercising effective control
  • Behaving with integrity
  • Being open and accountable

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What are Charitable Incorporated Organisations (CIOs)? 

Charities which want a corporate structure currently have to register both as charities and as companies. The Charities Act 2011 introduces a new legal form of incorporation which is designed specifically for charities, the Charitable Incorporated Organisation (CIO).

The CIO will combine the advantages of a corporate structure, such as the reduced risk of personal liability for trustees, but without the burden of dual regulation. This will bring numerous advantages for charities which choose a corporate structure, including:

A single registration

A charity which is also a company (a charitable company) has to register with the Registrar of Companies at Companies House and the Commission. A CIO will only need to register with the Charity Commission.

Less onerous requirements for preparing accounts

Small CIOs will be able to prepare receipts and payments accounts, larger charities will prepare accruals accounts.

One annual return

Charitable companies have to prepare an annual return under company law and (normally) a separate return under charity law.  CIO’s will only require one return.

Reduced filing requirements

CIOs will only have to send accounts, reports and returns to the Charity Commission. Charitable companies have to send these to both the Charities Commission and to Companies House.

Lower costs for charities

The Charity Commission will make no charges for registration and filing of information, whereas Companies House does.

Simpler constitutional form

There will be model forms of constitution which will include fewer fixed governance provisions than is the case with companies.

More straightforward arrangements for merger and reconstruction

The Charities Act 2011 contains a number of provisions designed to facilitate merger and reconstruction which are not available to charitable companies.

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Can you give me guidance on public benefit? 

Following the Charities Act 2011, all charities are explicitly required to have charitable purposes which are for public benefit. That includes charities that advance education or religion or relieve poverty, which the law previously presumed were established for public benefit.

The Act gives the Charity Commission a new objective to promote awareness of the public benefit requirement, and requires them to consult on public benefit guidance for charities. They will then make their decisions on public benefit based on existing case law.

The Commission have published guidance to enable charities and charity trustees to read and consider the guidance and decide what it will mean for them.  They also published guidance on:

  • The Advancement of Education for the Public Benefit
  • Public Benefit and Fee-Charging
  • The Prevention or Relief of Poverty for the Public Benefit
  • The Advancement of Religion for the Public Benefit

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When do Charities have to report on Public Benefit? 

The public benefit reporting requirement began for charities with financial years starting on or after 1 April 2008.

All charities must prepare a Trustees’ Annual Report (TAR). The public benefit reporting requirement means that any TAR which covers any period starting on or after 1 April 2008 must include both:

  • a report of those activities undertaken by a charity to further its charitable purposes for the public benefit; and
  • a statement by the charity trustees as to whether they have complied with the duty in section 4 of the Charities Act 2006 to have due regard to public benefit guidance published by the Commission.

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What are the rules for Reporting and Accountability? 

Charities have a duty to be transparent and accountable to donors, beneficiaries and the public, and are required by law to provide certain documents to the Commission and to keep their information on the public register up to date.

Annual Returns

Trustees of every registered charity with an annual income exceeding £10,000 are required to complete an Annual Return form and submit it to the Commission.  This must be done within 10 months of the end of the charity’s financial year.

Trustees' Annual Reports and accounts

Trustees of every registered charity with an annual income exceeding £10,000 are also required to send their Trustees' Annual Report (TAR) and accounts to the Commission.  All CIO's must complete an annual return regardless of their income.  This must also be done within 10 months of the end of the charity’s financial year.

Annual Updates

Charities with an annual income of £10,000 or less do not have to complete an Annual Return but all charities are required to keep their register details updated and so we ask smaller charities to complete an Annual Update form.

Information from the Annual Return and Annual Update is used to maintain charities’ details on the register of charities and is taken as evidence of their continued existence. 

What happens to charities failing to file on time?

All charities have 10 months from the end of their financial year to file their documents and we can offer advice and guidance on how to meet the deadline.  Charities that have not sent their annual accounts and returns on time will be listed as defaulters on the register and could risk facing bad publicity and potentially a loss of support from donors and funders.

The Charity Commission also has a statutory duty to maintain an accurate register of charities and to remove any charities that have ceased to operate or exist.  Charities failing to provide evidence of their activity and existence by submitting accounts, Annual Returns or Annual Updates will receive a series of reminders for the overdue information.  If the Commission has not received a charity's outstanding documents at the end of this process, the charity concerned may be removed from the register.

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How can I Register my Charity? 

To register your organisation as a charity you will need to make a formal application to the Charity Comission. This is done online via www.gov.uk and searching for The Charity Commission. There are also a number of resources available to ensure that adequate information is provided.

 Please note that they no longer accept applications submitted on previous versions of the application form - such applications will be returned to you automatically.  You may find it easier to let Plummer Parsons form your charity for you.

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What is the Charity Commission's telephone number? 

They have one main telephone number for Online Services being, 033 066 9197.

Staff are available to take your calls between 0900-2400hrs (Monday to Friday), except national holidays.

In addition to these numbers they have a Texbox service for hearing and speech impaired callers on 0845 3000 219 available during the same hours and a fax number (0151 703 1555).

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What is a Conflicts of interest? 

A conflict of interest is any situation in which a trustee’s personal interests, or interests which they owe to another body, and those of the charity arise simultaneously or appear to clash.

The Commission recognises that it is inevitable that conflicts of interest occur. The issue is not the integrity of the trustee concerned, but the management of any potential to profit from a person’s position as trustee, or for a trustee to be influenced by conflicting loyalties. Even the appearance of a conflict of interest can damage the charity’s reputation, so conflicts need to be managed carefully.

For further details on conflicts of interest and how to manage them please see A Guide To Conflicts of Interest for Charity Trustees on the Charity Commission web site.

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Can you make payments to your charity’s trustees? 

Trusteeship is normally a voluntary role, however, if it becomes necessary to pay some of your charity’s trustees, you will firstly need to ensure you have the authority to do so. Sometimes this authority is in the charity’s governing document and you will need to comply with the terms set out there.

This is an area which has been affected by new provisions introduced by the Charities Act 2006. Voluntary trusteeship still remains a key principle of charity but trustees can now pay an individual trustee for providing an additional service to the charity – if they think it’s in the best interest of the charity – without having to go to the Commission for authorisation to do so. Provided certain conditions are met, the new power allows trustees of all types of charity (or individuals or businesses connected with them) to receive payment for providing any professional or business services or supplies to the charity over and above normal trustee duties.

This would include, for example:

  • the delivery of a lecture;
  • a piece of research work;
  • the use of a trustee's firm for a building job;
  • the use of a trustee's premises or facilities;
  • entering into a maintenance contract with a trustee's firm;
  • providing curtains or decorating materials for hall premises;
  • providing timber for a building; or
  • providing specialist services such as estate agents, land agents, management and design consultants, computer consultancy, builders, electricians, translators, and graphic designers.

Payment for services includes the supply of goods, and payments “in kind” – eg use of free or reduced rate accommodation by a trustee or person connected with a trustee. The power cannot, however, be used to allow payment for auditing services as a trustee cannot legally act as an auditor for his or her charity.

If there is no authority in the charity's governing document - and the payments cannot be made using the new provisions set out above - then you will need to apply for the Commission’s authority using their application form.

Further information about payments to charity trustees is contained in the Commission’s publication CC11- Trustee Expenses and Payments. 

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Can a trustee resign? 

Yes- it is usually straightforward for a trustee to resign but in some situations, especially with unincorporated charities, it is important to check the charity’s governing document carefully. Sometimes legal advice will be needed to ensure that things are done properly.

There may be provisions in the governing document to cover the resignation of a trustee and the appointment of a successor. If there are not, then the law provides that where a trustee wants to be discharged from his duties, the remaining trustees can appoint a new trustee in his or her place. Basically, therefore, you can resign at any time although you should make sure that you give sufficient notice to the remaining trustees.

Maintaining a balance between existing experience and new recruits

A charity can consider devising a rota of resignations and successions to allow for experience and to prevent a vacuum from developing. This rota system is particularly suited for charities that appoint their trustees by elections which are contested each year. Any rota system must not be inconsistent with any existing provisions either in the governing document or in law, and it may be necessary for the trustees to consider amending the governing document in some cases. A fixed term of office, of for instance a period of 3 years, can be included as a provision within a governing document.

What should the remaining trustees do when a trustee leaves office?

Where the trustees of a charity hold property in their own individual names, it is particularly important to ensure that such property is transferred into the sole names of the continuing trustees since this will not be automatic but needs some further action taken. The procedure for effecting such a transfer will either be set out in the governing document or in the general law. The remaining trustees will now have to consider the terms of the governing document and then, as appropriate, carefully choose, appoint and train a new trustee.

Incorporated charities

It is generally straightforward for a trustee of an incorporated charity to resign, unless the number of trustees would then drop below the minimum set out in the governing document. In such cases, a new trustee must first be appointed to replace the outgoing one. In all cases the charity should check the terms of the governing document.

Unincorporated charities

In the case of an unincorporated charity, the situation can be more complicated. As above, any resignation must be handled as set out in the governing document. If the governing document does not say anything about this, a legal framework is set out (in the Trustee Act 1925), for how trustees may deal with the situation. Trustees should get proper advice to ensure they act correctly.

Title deeds to land

If the resigning trustee’s name appears on the title deeds to land owned by the charity, then this must be changed, following a set legal procedure. Again, trustees should obtain proper advice to ensure this is done properly.

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What are Community Interest Companies? 

The government has introduced legislation to provide for the creation of Community Interest Companies ('CICs').  A CIC is a type of social enterprise company for those who want to use their profits and assets for the public good rather than being driven by the need to maximise profits for shareholders and owners.

An organisation cannot be both a charity and a CIC but a charity may operate a CIC as a trading subsidiary. Charities must be established for purely charitable purposes but a CIC can be established for any lawful purpose, as long as its activities are carried out for the benefit of the community. A charity's trading arm, for example a charity shop, could be a CIC if all trading profits were passed back to the charity. 

Social enterprises are already active in a range of areas, such as childcare and social housing. Some incorporate as companies, others take the form of industrial and provident societies. In the voluntary and community sector less formal legal structures, such as unincorporated associations, are often used.

Charitable status is appropriate for organisations that wish only to pursue charitable purposes and there are also significant tax benefits that are only available to charitable organisations. Because of these benefits, charities are subject to more onerous legislation than CICs.  Where an organisation wishes to benefit the community using the relative freedom that is available to a non-charitable company but with a clear assurance of not-for-profit distribution status, the CIC structure will be more suitable. A CIC can pursue a wide variety of social objectives such as environmental improvement, community transport, fair trade etc.  Not all activities that can be said to benefit the community in some way will fall within the legal definition of a charitable purpose. 

CICs have their own regulator and work within the limited company framework. 

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Do we need to be a registered charity to get a lottery grant? 

No, organisations do not have to be registered charities to be accepted for a lottery grant. There are many different lottery grants distributors and each have their own grant eligibility requirements.

For more information visit The Big Lottery Fund  and National Lottery Good Causes.

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What information regarding my charity’s status should appear on its documents? 

Trustees of registered charities with a gross income of £10,000 or more in the last financial year must state, on a range of official documents, that they are a registered charity.

The documents on which the statement must appear include notices, advertisements, material placed on web sites, and other documents issued by or on behalf of a charity intended to persuade the reader to give money or property to the charity. This includes the solicitation of membership subscriptions.

Any of the following terms would be acceptable:

  • A Registered Charity
  • Registered Charity No (followed by the charity’s number)
  • Registered as a Charity
  • Registered with the Charity Commission

The statement must be made in English and in legible characters. We recommend that charities consider the needs of people with less than perfect vision by using a font and point setting that is easy to read.

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