21 March 2019 - Article
Under section 14 of the Charities Act 2011 (‘CA 2011’), one of the Charity Commission’s objectives is ‘to promote awareness and understanding of the operation of the public benefit requirement’. Section 17 CA 2011 provides that the Commission must issue guidance in pursuance of this objective, and that charity trustees must have regard to any such guidance when exercising any powers or duties to which the guidance is relevant.
The Commission originally published its public benefit guidance in January 2008. However, following the 2011 decision of the Upper Tribunal in the Independent Schools Council case, in which the Independent Schools Council successfully challenged aspects of the guidance in relation to fee-charging, the Commission withdrew certain passages from the guidance in December 2011. Interim advice relating to fee-charging charities was published, and the Commission subsequently carried out a consultation on its new public benefit guidance between June and September 2012.
The final version of the revised public benefit guidance has now been published, which replaces all previous guidance. The guidance is divided into three short guides, which are all available online: (1) Public Benefit: the public benefit requirement; (2) Public Benefit: running a charity; and (3) Public Benefit: reporting.
The new guidance reflects the law as set out by the Upper Tribunal in the Independent Schools Council case and is significantly shorter then previous guidance, which should make it more user-friendly.
The public benefit requirement
The guidance in PB1 now refers to the ‘two aspects’ of public benefit as the ‘benefit aspect’ and the ‘public aspect’. It explains that in order to satisfy the ‘benefit aspect’, the relevant charitable purpose must be beneficial and any detriment or harm that results from it must not outweigh the benefit. In order to satisfy the ‘public aspect’ of public benefit, the purpose must benefit the public in general, or a sufficient section of the public, and must not give rise to more than incidental personal or private benefit. The guidance also recognises the Upper Tribunal’s decision that charitable purposes may not exclude the poor but sets out that the meaning of ‘poor’ is relative and does not necessarily mean those who are destitute, but can include those with modest incomes.
Running a charity
In PB2 the Commission focuses on public benefit in the context of running a charity. As a matter of charity law charity trustees must govern the charity and further its purposes for the public benefit.
The third part of the new guidance (PB3) sets out how trustees must report each year in their annual report how they have carried out the charity’s purposes for the public benefit.
There is a separate regime for charities with annual income of more than £500,000 who must provide much greater detail on the strategies and objectives adopted and details of what has been achieved with references to the charity’s purposes.
Charities are not obliged to set out their public benefit in a separate section in their annual report as it is something which can be conveyed throughout.
It is for trustees to decide the level of detail they wish to provide in terms of public benefit reporting but trustees should bear in mind that investing in meaningful reporting will help demonstrate publically the value of the charity’s work and its transparency and accountability.