The basic law on the charitable status of religious organisations in England & Wales is something we have not previously addressed. This attempts to remedy that omission: but it’s a very complex issue and comments/corrections would be particularly welcome.
The meaning of “charity”
The legal underpinning of churches’ charitable status In England and Wales is partly the law of trusts and partly the various successive Charities Acts. In the Charities Act 2011:
- s 1 (Meaning of “charity”) states that “For the purposes of the law of England and Wales, ‘charity‘ means an institution which—
(a) is established for charitable purposes only, and
(b) falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities”.
- s 3(1)(c) defines “the advancement of religion” as a charitable purpose.
Therefore, an organisation whose objects are exclusively charitable is, in law, a charity and, crucially, charitable status is not dependent on registration with the Charity Commission for England & Wales. If someone (“the settlor”) establishes and endows a trust that has an exclusively charitable purpose, it may be regarded a charity even if it is not clear that the settlor had intended it to be so regarded. (And if the settlor does not wish to set up a charitable trust, s/he had better make sure that the objects of the trust are not exclusively charitable).
It should also be emphasised that charitable status is just that – a status. It is emphatically not a legal form: the forms of governance of individual charities are extremely various. At one extreme, a charity may consist, corporately, of all its individual members, each of whom may be a trustee by default (which used to be the situation in the vast majority of Quaker Monthly Meetings). At the other, a charity may be governed by a group of trustees who are collectively responsible under a detailed governing document for its activities and its compliance with the law.
Exception: and legal status as a charity
The situation is further complicated by the fact that a large number of church charities with an income below £100,000 are still excepted from registration with the Charity Commission by statutory instrument: the current list of excepted denominations can be found here.
Excepted status is being gradually nibbled away by inflation; but it is still perceived in some quarters as a problem, partly because some think that it is anomalous. There is also an issue when, as sometimes happens, a granting body asks an applicant charity for its registration number: excepted charities do not have registration numbers precisely because they are excepted from registration. But perhaps just as big an issue is this: excepted status was not intended to be permanent and is currently due to terminate in 2021; but to bring it to a sudden end would cause a major administrative headache for the Charity Commission, which simply does not have the resources to cope with a sudden flood of new registrations.
Part of the problem, also, is the legal status of church congregations as charities. The Commission accepts that Church of England parochial church councils (all of which are individual charities) are sui generis in legal terms because they are governed by Measure – which is fully part of the secular law. However, the internal rules of other religious organisations in England and Wales do not have the same secular legal status as the law of the Church of England because all of them are regarded, in principle, as voluntary associations. And that is the case even though some of the Churches whose congregations are excepted from registration, such as the United Reformed Church, are creatures of statute. Nor could it possibly apply in the case of the Church in Wales: see the Welsh Church Act 1914.
So the position is that there is a multiplicity of small independent church charities that are currently excepted from registering with the Commission until 2021 and which operate under documentation that probably varies from the very detailed, in the case of the major denominations, to not much more than the back of an envelope in some of the smaller ones.
A further issue is the fact that s 2(1) the 2011 Act states that, in order to be charitable, the activities of a trust must fall within the descriptions of purposes in s 3(1), and be “for the public benefit”. The Charities Act 2006 that was consolidated into the 2011 Act removed the presumption of public benefit; but because it did not at the same time define precisely what constituted “the public benefit”, the issue has since been left to the Charity Commission and the courts to determine case by case, on the facts. And that is why the case of the Preston Down Trust (a trust of the Exclusive Brethren) generated so much interest, not to say controversy.
During Dame Suzi Leather’s time as Chair, the Charity Commission published a sectoral guide on the issue, The Advancement of Religion for the Public Benefit; but although the guide remains on the Commission’s website, it now carries a disclaimer:
“This guidance is currently under review. It no longer forms part of our public benefit guidance and should now be read together with our set of 3 public benefit guides. It will remain available to read until we publish replacement guidance”.
It was published originally in December 2008 and last amended in December 2011. We are still waiting for its replacement.
Charities and local authority grants
The issue that occasioned the original query was a problem relating to eligibility for grant-aid from the public sector in the case of a church charity that (understandably) did not have a governing document of the kind that the granting body could understand; and my guess is that there may be a suspicion in some quarters that that there is something inherently anomalous about excepted status and, indeed, about religious charities generally. And there may indeed be an issue here: there is always a danger that churchpeople in positions of trusteeship will view matters, first and foremost, in terms of faith rather than of charity law – which is why we were moved to post on the Commission’s publication, Charity trustee meetings: 15 questions you should ask.
Moreover, public sector bodies that make grants to charities often expect the recipient charity, as a condition of grant, to have in its governing document specific provisions that it may simply not have included – or which its parent body would not allow it to include. For Churches established or reconstituted in their current form by specific Acts of Parliament, though each of the Acts is different, each lays down some aspects of the constitution of the Church in question and provides a mechanism for drawing up some kind of governing document: see, for example, The Constitutional Practice and Discipline of the Methodist Church. In most cases, those governing documents cannot be drawn up or amended by local congregational trustees but are subject instead to regulation at a higher level within the denomination concerned. In some cases, no local constitution or governing document exists as such, because as each congregation is obliged to operate under a constitutional document determined centrally.
Charities, external influence and the duties of trustees
There is a particular problem when a local authority wishes (no doubt for reasons that its elected members regard as entirely reasonable and proper) to exercise some measure of control over a charity, as the following example demonstrates.
In 2014, Croydon Council proposed to become a majority member of recreation and leisure charity Fairfield (Croydon) Limited, which maintains and manages the Fairfield Halls. The charity and the Council had agreements in place under which Fairfield leased the premises from the Council and the Council made grants to Fairfield that paid the rent under the lease. So far, so good; but in order to safeguard significant funding for planned refurbishments to the Halls, the Council proposed becoming a corporate member of Fairfield and taking 75 per cent of the voting rights.
The Charity Commission was extremely unhappy with the proposal and investigated the situation. In the resulting operational case report, it became apparent that the Council had decided to withdraw the membership proposals. The trustees confirmed that the relationship between the Fairfield charity and Croydon Council would be dealt with by lease and grant agreements. The Commission advised the trustees that surrendering the lease agreement – even if it was replaced by another one – would be tantamount to a disposal of charity land; and it was likely that such a disposal could not be done without the express authority of the Commission. The moral, said the Commission, was this:
“Charities are run by their trustees for the benefit of the charity’s beneficiaries. An organisation cannot be a charity if it is run in the interests of anyone beyond the charity, including private individuals and public bodies such as local authorities”.
If nothing else, the Fairfield Halls case demonstrates that trustees must be mindful of charity law and, where necessary, seek specialist advice when negotiating relationships with third parties. But it also raises the more general issue of what I tend to think of as “sweetheart charities”: where the Government, in a desire to get a non-departmental public body off the Civil Service books, hives off all or part of it as a charity.
That happened recently when English Heritage was split into two:
- a regulatory and advisory body, Historic England (which advises on listing, planning, grants and heritage research and advice – and which, incidentally, is one of the amenity societies consulted under the C of E faculty jurisdiction); and
- a slimmed-down English Heritage (which is now a charity running its predecessor’s historic buildings portfolio).
Fine: but what would happen if the trustees of the new-style English Heritage were to decide that it was in the interest of the charity to sell a couple of historic properties and ministers at DCMS disagreed? In principle, it is a matter for the trustees’ judgment as to what is in the charity’s best interests and for no-one else.
In 2013 we posted about the decision of the the Congregation of the Daughters of the Cross of Liège to selling St Anthony’s Private Hospital in Sutton to a private company and the demand of the then local MP, Paul Burstow, that the Vatican intervene in the case. We suggested that if the Vatican were, in fact, to order the trustees not to sell the hospital and the trustees were, nevertheless, of the considered view that selling it was in the best interests of the charity, then their duty under charity law would be to sell the hospital. The possibility of religious sanctions against them would not be a relevant consideration in secular law. In the event, St Anthony’s was sold to Spire Healthcare.
The bottom line
Though it may seem gratuitous (not to say blindingly obvious) to point this out, charities are bound by charity law; and the fact that a charity is too small to register with the Charity Commission or is exempted or excepted from doing so does not relieve its trustees of the overriding duty to act prudently and within the law. And the overwhelming majority of charities do operate within the law: year on year, without a hitch.
However, trustees sometimes take their collective eye off the ball, either because they simply forget that there is such a thing as charity law at all, because they feel that their duty to some other cause – loyalty to their friends and colleagues, what they perceive as the interests of their charity’s beneficiaries, or their own religious or philosophical views – ranks higher, or because they feel that it’s more important to be out there doing “good things” than to be fussing about mundane matters like administration and financial control. But once trustees start ignoring good practice the result can be a disaster. Think Kids Company…