Charitable trusts: nature, purposes and regulation Flashcards
(10 cards)
Charities in England and Wales
Charities enjoy substantial legal and financial privileges in this jurisdiction
Charitable sector is an incredibly significant part of civil society. In 2020, the Charity Commission reported that there were 168,033 registered charities, with an annual income of approximately £81bn. - - charities account for a huge amount of economic activity and employment
Charities are also estimated to employ around 900,000 people in the United Kingdom
The Nature of Charitable Trusts – Dingle v Turner [1972] AC 601
two identifiable privileges enjoyed by charitable trusts: (1) privileges as to essential validity; and (2) financial [tax] privileges
(1) Privileges as to essential validity: - legal privileges
- Charitable trusts are for the benefit of ‘purposes’ and not ‘legal persons’ - not enforced by priv beneficiaries but charity commission or attorney general - dont exist to hold property but satisfy charitable purposes they were set up to fulfill
dont req certainty of objects - Re Davis a donor made a gift in his will to ‘Home for the Homeless, 27, Red Lion Square, London’ – an organisation which did not even exist - go to similar recipient as charity is seen as one big pot
cy pres doctrine - go to similar charity
(2) Financial Privileges:
Charities are exempt from tax on income and capital gains from most sources, and may in some cases be exempt from tax on certain trading activities, such as running a charity shop
sections 23 and 76 Inheritance Tax Act 1984, gifts to charities are exempt from inheritance tax
Gift Aid donations, whereby the charity can reclaim the basic rate of tax on the gift
s 43(5) Local Government Finance Act 1988, there is an 80 per cent exemption from non-domestic rates on properties they occupy. - charities that purchase land don’t pay same rates of tax
charities are not exempt from VAT. - standard 20% stands e.g. if buy equipment for employees
The Substantive Law of Charitable Purposes – the ‘exclusively charitable’ rule
Morice v Bishop of Durham - it must be for a purpose or purposes defined as ‘exclusively charitable.’ - if uses wording such as ‘or’, ‘for something else’ implies not exact charitable purpose but wording such as ‘and’ implies primary charitable intention
Re Macduff - if more vague and open ended then less likely to be regarded as charitable trust
Morice - Bishop using money for benevolence at his own discretion invalid
The Substantive Law of Charitable Purposes – defining ‘charity’
The Charities Act 2006 introduced a statutory definition of ‘charity’, which was later amended by the Charities Act 2011
acts dont replace prior law of charitable uses act 1601 and Pemsel case but codifies it into single place - Stamford v Attorney General
Income Tax Special Purposes Commissioners v Pemsel - ‘Charity in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.
The Substantive Law of Charitable Purposes – the Charities Act 2011
Subsections 3(1)(a)–(m) - IMPORTANT
subsection 3(1)(a) the prevention or relief of poverty - poverty = relative not absolute concept - poverty in 1700s meant dying but now if suffer temporary setback law may not regard you as in poverty - if set up trust for ppl living in hard times temp then trust may not succeed - Re Coulthurst
Re Young - gift for ‘distressed gentlefolk’ a valid charitable trust
Re Sanders’ Will Trusts - gift for ‘the working classes and their families’ not deemed charitable, however. - working class is not synonymous with poor
subsection 3(1)(b) the advancement of education:
Independent Schools Council case - rusts for schools, including fee- paying schools, are charitable provided that the school is non-profit-making or uses its profits for school purposes only. - if make profit should reinvest it into the school - must justify they have charitable purpose, for public benefit and not only for political purposes
subsection 3(1)(c) the advancement of religion:
Gilmour v Coats - religion can be regarded benefiical even if beliefs not true or you dont need to believe in it
controversial: vague and almost contradictory definition of religion - don’t need to acc believe in anything - can still benefit from privileges, can also be a religion that does not have a god (in legislation) controversial as most religions do have a god but cults don’t nec need a god, can still potentially as a charity
The Substantive Law of Charitable Purposes – ‘political purposes’
a-c = incorp Pemsel case test
d-m = expanded on it to add additional substantive categories of what a charity is
even if a trust falls within one of these statutory categories, it will still not be deemed charitable if it is for political purposes
Bowman v Secular Society - equity will refuse to recognise as charitable ‘purely political objects. f org exists and its primary purpose is charitable purpose but secondary purpose which overlaps with political purposes e.g. relation with political parties or those working for political parties this is permissible or if divert from charitable purposes and move towards political purpose, charity commission can review their stance and remove their status
McGovern v Attorney General - a trust will be regarded as political if it has as a direct or principal purpose supporting a political party, changing the law, or changing government policy - controversial as changing the law may be easier to ascertain e.g. OXFAM campaigns for change in gov policy
The Regulation of Charitable Trusts – the Charity Commission
historically AG supervised and controlled charities - s.13 charities act 2011 - charity commission = regulatory mechanism - oversees charities and investigates abuses and maintains a register
ss 83-85 Charities Act 2011 - can temp or perm remove trustees from charity
Captain toms daughter got in trouble for using donations to build a swimming pool for herself - not charitable purpose - they were banned and stripped from trustee permission and at time banned from standing as charitable trustees in future
The Regulation of Charitable Trusts – the registration and appeals process
Groups and individuals are required to submit an application to the Charity Commission when seeking to register a charity and acquire charitable status - justify your org is conducting charitable purposes for public benefit, exclusively charitable and not primary political
if commission rejects can fo to first tier tribunal for appeal then can go to upper tier tribunal and lastly high court (only if havent considered stat prov or misinterp stat prov)
The Regulation of Charitable Trusts
Mermaids v Charity Commission for England and Wales - existed since 1995 and got charitable status soon after - charity for a long time and carrying out purposes and purposes for public benefit but in 2019 the LGB alliance formed and successfully attained charitable status 29th april 2021 - mermaids appealed against charity commissions decision to award LGB status and goes to first tribunal and submitted evidence as to why
S.30 charity act 2011 and s.34 deal with decision to register charities with charity commission and decision to appeal a decision - latter in this case - saw them as challenger to their status as go to organisation for gov to look to
he Charity Commission published its decision to register the LGBA as a charity. Mermaids appealed that decision in the First-Tier Tribunal - arg makes media attacks on inds and orgs who support/ work with mermaids and encourages orgs not to support them
arg should be striped of charitable status not that they shouldnt exist
found - just because you have two charities which are antagonistic doesn’t mean one can strip the other from status (paragraph 66)
applying Nickolson case - first tribunal couldnt strip LGBA of status
focus on stat framework and test at law that exists to det charitable status - if satisfies all 4 tests then cannot remove status
The Regulation of Charitable Trusts – amenability for judicial review
Scott v National Trust - exceptional cases - charities may be amenable for judicial review
Those that are held to be amenable would of course be bound by human rights law positive obligations under s 6(1) Human Rights Act 1998, notably the obligation not to act in a way deemed incompatible with the European Convention on Human Rights
