This website uses cookies

This website uses cookies to ensure you get the best experience. By using our website, you agree to our Privacy Policy

Keith Wallace

Partner, Reed Smith

Quotation Marks
The Charity Commission's strategy for 2024-2029 prioritises fairness, transparency, and robust enforcement

Navigating the evolving landscape of UK charity regulation

Business
Share:
Navigating the evolving landscape of UK charity regulation

By

Keith Wallace gives an overview of key legal developments shaping the future of the UK charity sector

The UK charity sector is subject to a rigorous and evolving regulatory framework. Charities in England and Wales are primarily regulated by the Charity Commission, which operates under the Charities Act 2011 and subsequent amendments, including the Charities (Protection and Social Investment) Act 2016 and Charities Act 2022. These legal frameworks set out the duties, powers, and responsibilities of charity trustees and the obligations of charities to the public.

The Charity Commission

The Charity Commission for England and Wales is the principal regulator for charities in these two countries. Established by the Charitable Trusts Act 1853, the Commission has undergone several reforms, most notably under the Charities Act 2006, which redefined its structure and powers. It is tasked with ensuring that charities meet their legal obligations, remain transparent in their operations, and use their resources effectively to benefit the public. The Commission also maintains a public register of charities, investigates cases of mismanagement, and issues guidance on charity governance.

Recently, the Commission has focused on increasing public trust in the sector, promoting transparency, and improving the regulatory framework. In recent years, the Commission has embraced a proactive approach to regulation, focusing on using data and technology to identify emerging risks in the sector. The Commission’s five-year strategy for 2024-2029 prioritizes fairness, transparency, and robust enforcement, aiming to address concerns swiftly while supporting charities to meet their legal obligations.

The past few years have seen several significant legal changes impacting the charity sector. One notable reform is the implementation of further provisions under the Charities Act 2022, which simplify rules on property transactions, charity mergers, and the management of permanent endowments.

These changes aim to reduce bureaucratic burdens on charities, making it easier for trustees to manage their assets and operations effectively.

Charities must comply with various legal obligations laid out in the Charities Acts, Trustee Acts, and the Companies Acts.
Another important legal development is the Supreme Court’s ruling in London Borough of Merton Council v Nuffield Health, which clarified how the public benefit test applies to charities operating fee-charging facilities. That case has highlighted the importance of ensuring that all charitable activities, including even those involving fees, meet the criteria for public benefit.

Key legal obligations

In terms of fundraising, the Fundraising Regulator provides an additional layer of oversight, ensuring that charities adhere to ethical fundraising practices in compliance with the Code of Fundraising Practice. Trustees must also ensure that their charities operate within the bounds of political activity regulations, trade laws, and taxation rules.

Recent legal developments have reshaped the regulatory landscape. In 2023, further provisions of the Charities Act 2022 came into force, making it easier for charities to dispose of land and manage their permanent endowments.
This decision impacts how charities can claim tax relief on premises that charge fees, even if those fees might exclude individuals of modest means.

Moreover, trustees are legally responsible for ensuring that their charity operates in accordance with its governing document and meets its obligations under charity law. They must also submit annual reports and accounts to the Charity Commission, adhere to the Statement of Recommended Practice (SORP), and comply with specific rules on political activities, fundraising, and trading.

Still, the regulatory framework for charities is constantly evolving to address emerging challenges. For example, the National Security Act 2023 introduced the Foreign Influence Registration Scheme (FIRS), which has implications for charities with international connections. Trustees of charities involved in political influence activities directed by foreign powers may need to register under this scheme.

Moreover, the Charity Commission’s strategy has emphasised technological innovation and the use of data to prevent misconduct and ensure compliance. The Commission has committed to supporting trustees while taking robust enforcement action where necessary.

Historical evolution of charity regulators

Historically, charity regulation in England and Wales dates back to the Statute of Charitable Uses 1601, but it was not until the mid-19th century that a more structured regulatory framework emerged with the creation of the Charity Commission under the Charitable Trusts Act 1853. Early attempts at charity regulation were often ineffective due to resistance from powerful interest groups such as universities and the church.

The role of the Commission was significantly expanded in the 1960s with the passage of the Charities Act 1960, which introduced new responsibilities for determining charitable status and managing public trust in charities. The modern Commission, reconstituted by the Charities Act 2006, has continued to evolve, balancing the need for oversight with the independence of the charity sector.

Although the Charity Commission for England and Wales is the primary regulator, charities operating in Scotland and Northern Ireland are overseen by separate bodies: the Office of the Scottish Charity Regulator (OSCR) and the Charity Commission for Northern Ireland (CCNI), respectively.

OSCR is responsible for regulating charities in Scotland under the Charities and Trustee Investment (Scotland) Act 2005. It manages the public register of Scottish charities, monitors their compliance with charity law, and provides guidance to trustees.

Recent initiatives by OSCR focus on improving financial transparency and promoting best practices in governance, particularly in the wake of challenges such as fraud and digital fundraising.

The Charity Commission for Northern Ireland, established by the Charity Act (Northern Ireland) 2008, performs a similar role in Northern Ireland, ensuring that charities operate legally and deliver public benefit. CCNI's recent initiatives include streamlining the registration process and enhancing collaboration with other UK regulators.

In addition to these territorial regulators, the Fundraising Regulator oversees the fundraising activities of UK charities. Established as an independent body, it enforces the Code of Fundraising Practice, ensuring that charities adhere to ethical fundraising standards. The regulator has also focused on emerging issues such as digital fundraising, data protection, and the ethical use of social media in fundraising campaigns.

Other key regulatory bodies

Beyond the Charity Commission, other regulatory bodies play vital roles in ensuring that charities comply with specialised legal requirements. Several other bodies play crucial roles in regulating specific aspects of charity operations:

  • Information Commissioner’s Office (ICO): Responsible for overseeing compliance with data protection laws, including the General Data Protection Regulation (GDPR) and the Data Protection Act 2018, which are particularly relevant for charities managing donor information.
  • HM Revenue & Customs (HMRC): Oversees the tax aspects of charities, including Gift Aid and other tax reliefs. Charities must comply with tax regulations to benefit from these incentives.
  • Equality and Human Rights Commission (EHRC): Regulates non-discrimination and human rights issues, ensuring that charities comply with equality legislation in their operations.

Conclusion

The charity sector in the UK is subject to a comprehensive regulatory framework that ensures transparency, accountability, and public benefit. The Charity Commission for England and Wales, along with OSCR, CCNI, and the Fundraising Regulator, plays a central role in maintaining the integrity of the sector.

Charity regulators in the UK also face some challenges, including resource constraints and the need to adapt to new technologies. As digital fundraising and online governance tools become increasingly prevalent, regulators must continually update their practices and provide charities with up-to-date guidance.

Looking ahead, charity regulation in the UK is likely to focus on several key areas, including sustainability, the use of technology, and global cooperation. Regulators are expected to prioritize initiatives that enhance the long-term viability of charities while ensuring that they continue to meet their legal and ethical obligations.

The charity sector in the UK operates under a complex and comprehensive legal framework designed to ensure transparency, accountability, and public benefit. The Charity Commission plays a pivotal role in regulating this sector, adapting its approach in response to emerging challenges and legal developments.

As the regulatory environment continues to evolve, practitioners must stay informed to help charities comply with their legal obligations, so that they can maintain public trust and deliver their charitable missions effectively.