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Charities Act consolidation bill a missed opportunity

Lawyers concerned forthcoming review won’t address key sector challenges

27 September 2011

Charity lawyers have renewed their concerns over the lack of joined-up legislation in their sector as a consolidation bill promising clarification reached a key stage in parliament last week.

Drawn up to bring together disparate provisions in various Acts of parliament, the charities bill has been criticised as a missed opportunity taking up valuable parliamentary time which could be more usefully spent on the detailed review of the 2006 Charities Act due to start in November.

The consolidation has been presented as aiming to make charity law more easily accessible to members of the public and third-sector organisations that do not have the time or skills to look for or understand how charity law operates.

But charity lawyers are sceptical the objectives will be achieved.

Leading the charge during a committee debate last week, Lord Phillips of Sudbury sought to introduce an amendment harmonising the definition of ‘charitable purposes’.

Two clauses in the bill used different definitions, said the founder of specialist charity firm Bates Wells and Braithwaite, as he invited fellow peers to make the definition clause “a little more understandable”.

Baroness Verma, who is piloting the bill, agreed there was a case for simplification but that the forthcoming review of the Charities Act was “the right place” to consider substantive changes to the law.

Lord Phillips retreated but not without raising a further discrepancy. “It is another measure of what a nonsense we have got our affairs into – that last year the Finance Act created an entirely new definition of ‘charitable purposes’ with a schedule extending that definition that runs to eight pages,” he said. “I am afraid our legal system has burgeoned out of all sense and has become counter-productive.”

Talking to Solicitors Journal, Lord Phillips said his proposed amendment was “a utilitarian measure” to assist those who needed to access that law. “Given how ineffably complicated the law has become, my self-appointed role was to make sure the consolidation simplified things as far as was possible.”

He went on: “The one thing that still seems to me to be a basic impediment to understandability is the definitions. To have one definition in one clause and another definition in another clause is a recipe for utter confusion.”

“I am worried that it will be forgotten in the review,” he confessed.

Lord Phillips isn’t the only one to regret the seemingly disjointed approach to law making.

Jonathan Burchfield, head of the charity team at Stone King, said it would have made more sense to roll the consolidation and the 2006 Charities Act review into one.

Burchfield also said he was disappointed the consolidation has left out provisions of the 1992 Charities Act and that the regulation of fundraising has so far been left out of the debate.

Chris Priestley, a partner in the charities team at Withers, agreed, saying the consolidation was a missed opportunity. “If the aim was to bring big chunks of charity legislation in one place, it’s failed miserably, because large chunks are being left out, including fundraising,” he said.

Clarifying fundraising rules in particular was seen as a major challenge. With relevant provisions of the Charities Act 1992 never brought into force and the requirement for pre-registration in the Charities Act 2006 not implemented either, charities were left facing a mosaic of rules. Some were simply unsuitable for modern day practices such as face-to-face fundraising. “Charities have to rely on old laws like the Police, Factories, etc Act 1916 or the House-to-house Collections Act 1939,” Priestley said.

“Fundraising is the big issue,” added Catherine Rustomji, senior solicitor at Hempsons and head of Third Sector North. “It’s not helpful in terms of public trust and confidence that the rules cannot easily be found in one place. Charities shouldn’t have to look around to find out whether they’re complying. Unfortunately, there is no indication that this will be considered in the review.”

Dual registration

The absence of a single definition for ‘charitable purpose’ was also a “real problem when dealing with HMRC”, according to Jonathan Burchfield, with charities having to register first with the Charity Commission and then with HMRC. “This element of dual registration doesn’t fit comfortably with the principle of deregulation,” he said.

Chris Priestley said the issue didn’t arise before the Finance Act 2010. “You just needed to register with the Charity Commission, now you need to register with HMRC as well if you want to benefit from the tax breaks. We hope there will be some movement on that in the review.”

Catherine Rustomji also hoped there would be an opportunity in the review to look at a more joined-up approach. Her concern was that the consolidation was “a distraction”. “If we’re getting parliamentary time now there is a risk we won’t have the necessary time and attention later over the review.”

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