14 February 2020 - Article
The PASC has published its highly anticipated report on the regulation of the charitable sector and the impact and implementation of the Charities Act 2006 (the ‘Act’) (now consolidated into the Charities Act 2011), which was launched on 19 July 2012 in the wake of the publication of Lord Hodgson’s wide-ranging review of the Act. The aim of the inquiry was to assess whether the Act had achieved its intended effects and to consider the state of charitable sector regulation.
An extensive consultation was conducted on a range of topics, from the role and funding of the Charity Commission to the rules governing political campaigning by charities. Written evidence was received from a wide variety of sources and the PASC held six public sessions from October to December 2012, taking oral evidence from a range of individuals including leaders in the sector, specialist practitioners, Charity Commission representatives, Lord Hodgson and Nick Hurd MP, Minister for Civil Society. Chris Priestley, a partner in Withers’ Charities and Philanthropy team, chaired the Charity Law Association’s working party that responded to the consultation which is referred to in the report.
The PASC report makes a number of key recommendations which will be of interest and importance to those in the sector. Of particular note is the suggestion that the presumption of public benefit, which was removed by the Act, should be restored, with the report stating that the current public benefit test is ‘critically flawed’. The report recommends that Parliament should revisit the meaning of public benefit rather than leaving this to be interpreted by the Charity Commission.
In terms of the role of the Commission itself, it seems that the report’s findings have been heavily influenced by the breaking of the Cup Trust scandal, which has exposed shortcomings in the regime for preventing tax evasion involving charities. The report reinforces the view that the Commission should stick to the role of ‘policeman’, rather than trying also to act as a ‘champion of charities and the charitable sector’. The report recommends that the statutory objectives for the Commission should be revised to allow it to focus its limited resources on regulatory functions.
Other recommendations include:
- maintaining the status quo in terms of the self-regulation of fundraising, with the report suggesting a review of the position in five years’ time;
- rejecting Lord Hodgson’s proposal to abolish National Exemption Orders for House-to-House charitable collections;
- introducing a requirement for charities to disclose how much they spend on political and campaigning activities;
- introducing a single annual return so that charitable companies can file the same form at Companies House and with the Charity Commission;
- introducing fines for filing late returns to the Commission, but not introducing charges for the registration of new charities or the submission of annual returns;
- rejecting Lord Hodgson’s proposal that large charities should have the right to pay their trustees; and
- introducing a ‘passporting’ system for charity regulation across the UK’s different jurisdictions, with the aim of achieving more ‘joined-up’ regulation for charities operating throughout the UK.
The full report can be read online here.