Charity law is set to be overhauled from this autumn when changes outlined in the Charities Act come into force.
Among the key reforms is giving trustees more say in making payments in disputes around legacy donations.
Rules around paying trustees and concerning property deals are also being revamped.
Meanwhile, other changes take in new powers to amend Royal Charters ,as well as what charities can do when fundraising appeals do not raise enough money, or indeed, raise too much.
Here we outline the changes that are set to take place from this autumn that charities need to prepare for. We will also round up the changes due to take place next year.
What is the Charities Act 2022?
The Charities Act received Royal Assent and became law in February this year. Plans to introduce the legislation were laid out by the government in 2021 with ministers wanting to “address a range of issues in charity law which hamper charities’ day to day activities”.
This week the Charities Bill received Royal Assent and passed into law as the Charities Act 2022.— Charity Commission (@ChtyCommission) February 25, 2022
Find out what happens next, and the key changes charities can expect 👇https://t.co/usgVcx8Osa
The government hopes the Act will save the charity sector around £28m over the next decade.
According to latest guidance published by the Charity Commission this month the changes will begin to take place incrementally, from autumn this year. Further changes will be enacted in spring and autumn 2023.
Paying trustees for providing goods to their charity
Charities can in certain circumstances already pay trustees that are providing a service to the charity beyond their usual duties or for goods connected to that service.
From autumn the Charities Act amends this so that trustees can be paid for just providing goods to the charity that are not connected to a service.
The Charity Commission has outlined typical situations charities may encounter around payment of trustees.
It says that trustees can already be paid for services such as estate agency or IT support, while typical payments already allowed for services and goods could cover plumbing or decorating services, that involve paint or piping, for example.
From autumn it will also apply to payments for goods only, with stationary being a typical expense for trustees that the new rules will apply to, says the regulator.
Payments around disputed legacy gifts
Another key change taking place in autumn is around disputed legacy gifts, when a charity receives a donation in someone’s will, but evidence emerges that the donor had changed their mind this was written. It could be that the person writing the will would prefer no donation to any charity was made, or that it be made to another good cause.
Under the Charities Act 2022 trustees will be able to make payment where they feel there is a moral obligation to do so.
In addition, trustees will be able to delegate decision making around such payments to others within the charity, such as a sub-committee or chief executive.
If the sums involved are below a certain amount, then charities do not need to ask the regulator for permission. However, if they exceed these sums then charities must apply to the Charity Commission for the authority to make the payment.
Charities with an income below £25,000 can make a payment, without Commission authority, of up to £1,000. The maximum payment allowed without seeking permission for charities with an income up to £250,000 is £2,500.
For charities earning up to £1m a year the threshold is £10,000, while for those with an income exceeding £1m the threshold is £20,000.
Fundraising appeal red tape
The Charities Act aims to cut red tape faced by charities when their fundraising appeal either fails to earn enough or raises too much.
In autumn will scrap the current rule that asks charities to wait six months for donors to ask for a refund. In addition, “a simpler process” for obtaining Commission permission to make decisions around unexpected fundraising totals will be introduced.
When more money is raised charities can spend up to £1,000, on different purposes than was originally stated in the appeal, without asking for Commission involvement.
Other autumn changes
Another change coming into force in autumn surrounds red tape for Royal Charter charities. Under the new legislation they will be able to change sections in their Charter that they cannot currently change, as long as that change is backed by the Privy Council.
The Act will also enable corporation status to be conferred automatically to existing and future corporate charities in respect of any trust which the corporation is a trustee of.
Provisions relating to giving public notice of written consents will also be updated. In addition, changes to governing document by parliamentary scheme will be subjected to a “lighter touch” from parliament.
Next year’s changes
From Spring 2023 changes to how charities aimed at making it easier for charities to sell, lease or transfer land will come into force.
Also, next spring changes aimed at giving charities greater flexibility around making use of permanent endowments will be enacted.
Meanwhile, changes to how charities can amend their governing documents will be put in place in autumn 2023.