Charitable purpose

It is a well-established rule that the question of whether an organisation is a charity is decided by looking at the purposes set out in its governing document. Recent cases in the tribunal (Helena Partnerships Ltd v Revenue and Customs Commissioners [2010] UKUT 271 (TCC); Full Fact v Charity Commission [2011] Case No. CA/2011/0001; and UTurn UK CIC v Charity Commission [2011] Case No. CA/2011/0006), have followed earlier court rulings about the circumstances in which an organisation's activities can also be taken into account in answering that question.

In each case, the first issue that must be addressed is: what are the purposes of the organisation?

In dealing with that issue, it is necessary to consider how the document would be understood by a reasonable person with relevant background knowledge (which includes everything that would affect the way the document would be understood by a reasonable person). However, the activities in which the organisation has engaged since its formation are strictly irrelevant (because those activities may or may not be intra vires, and because what matters is the scope of what is authorised by the purpose).

Once identified, the next question is whether those purposes are charitable. That involves looking at two issues: (1) Do those purposes fall within the descriptions of purposes set out in section 2(2) of the Charities Act 1993? (2) Are those purposes for the public benefit?

It is here that it may be appropriate to take into account evidence of the activities that have been, or will be, undertaken by the organisation. Deciding whether a purpose is for the public benefit will usually require some consideration of the consequences of pursuing it (especially where the purpose has not yet been recognised as charitable). It will also be necessary to look at activities, in cases of doubt, in order to discover whether a purpose falls within the descriptions of purposes.

Ambiguity

Doubt may arise because the purpose is expressed in a way that is ambiguous or unclear. In UTurn, for example, the organisation had been established to advance citizenship and community development by promoting and activating the 'street association' initiative. There is no settled meaning in law of the term 'street associations', so the tribunal looked at the activities that might be undertaken by street associations. The tribunal concluded that there is a lack of certainty about those activities, and, since the purpose therefore involved promoting activities that were not necessarily charitable, it followed that it could not be charitable.

Vagueness in formulating purposes seems likely to be especially problematic in cases where the relevant description of purpose has not been precisely defined in statute or case law.

In cases where the purpose as drafted is novel, some understanding of the proposed activities will be needed to assess whether they are merely a way of achieving a recognised charitable purpose, or if they constitute a new charitable purpose (that is, one analogous to, or within the spirit of, a recognised charitable purpose). This was the approach adopted by the tribunal in Full Fact, one of whose purposes was to promote informed public debate by making available full, accurate and relevant facts. In the event, having reviewed the activities of Full Fact, the tribunal concluded that, if pursued to the requisite standard, this purpose would fall within the ambit of education, rather than constitute a new charitable purpose.