Member Article

New Legislation for Charities

With Watson Burton LLP Law Firm

If you are involved with the management of a charity, you should by now be aware of the Charities Act 2006, which received royal assent on 8 November 2006. The Act will be brought into force in three main stages, and the first tranche became law on 27 February 2007. Two further phases are planned for the second half of this year and early in 2008. This article highlights only a few of the main changes introduced by the Act, and is by no means a comprehensive summary of the legislation.

1. Charitable Incorporated Organisations

This is an entirely new form of legal entity available exclusively to charities. At present, charities which want a corporate structure have to register both as charities and companies, meaning they have to meet the dual regulatory burdens of both the Charity Commission and Companies House. A CIO will just be registered with the Commission and will have the advantage of a corporate structure without the burden of dual regulation, while crucially allowing the trustees to have the protection of limited liability status. The provisions relating to CIOs are expected to be commenced in early 2008, although it is anticipated that additional secondary legislation will be required.

2. Accountancy issues

There are new simplified rules about when a professional audit is required. The thresholds are now based on income or assets only. A charity’s accounts will have to be professionally audited if it has a gross annual income over £500,000, or an aggregate value of assets over £2.8m and gross annual income over £100,000 (or in the case of charities which are companies a balance sheet total of £2.8m). Below that threshold an independent examiner can be used instead of an auditor and an independent examination is not required if the charity’s gross income is £10,000 or less for non-company charities and £90,000 or less for charities which are companies (unless its assets are over £2.8m).

3. Charity Tribunal

Although it is possible to challenge a decision made by the Commission, currently appeals must be taken to the High Court which can be difficult and expensive. The Act creates a new Charity Tribunal to deal with appeals against, and review of, legal decisions of the Commission. It will also take referrals from the Commission or Attorney General which involve the operation or application of charity law. The Tribunal will be established by the Department for Constitutional Affairs, and is expected to take at least a year to set up.

If you have any questions or comments about this article or any other charity law related matter, please contact Claire Waller at Watson Burton LLP on 0191 244 4444 or email claire.waller@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .