Pothecary Witham Weld Solicitors

We are a religious charity with substantial assets but our membership is gradually dwindling in numbers. We are currently in a position which allows us to make our presence known in the community and are concerned that in future we will have to demonstrate a public benefit. Is it likely that we will have to do this and what can a charity in our position do?

Answer

As of now charities involved in relieving poverty, advancing education and advancing religion are presumed to benefit the public. However, the Charities Act 2006 includes a requirement that all charities must prove public benefit. The relevant provisions of the Act have not come into force yet but are expected to do so in the first quarter of 2008. The Act does not contain a definition of public benefit and the problem of providing guidance for charities on the issue has been left with the Charity Commission. The Commission published a consultation paper on public benefit some time ago and received a large number of responses, many from religious charities. The Commission is now trying to finalise its guidance which is proving difficult in light of the issues involved and the responses to the consultation.

The short answer to the question is, therefore, that a charity in these circumstances will need to demonstrate public benefit once the Act is in force. Now is a good moment to prepare for the new law by undertaking an audit of what the charity actually does which could be said to be of public benefit. Each member of the charity could be asked to fill in a questionnaire to this end. The likelihood is that the charity will then find that it does actually fulfil the public benefit test. The important point is not to panic about being able to demonstrate such benefit. The mere fact of dwindling numbers is not a problem in itself. If such a situation does lead to a perception that public benefit is limited then consideration should be given to taking on other activities or possibly transferring assets to another charity. The important point to note is that public benefit will be considered in a proportionate way to a charity’s size.

In its consultation the Charity Commission suggested that it would expect charities below the audit threshold to include a short statement about public benefit in their annual report. Charities above the audit threshold are likely to have to go into much more detail to demonstrate the public benefit objectively.

For religious charities there is a particular issue connected with demonstrating public benefit. Such charities should not just be looking at ‘works of charity’ which are objectively assessable in terms of public benefit. There is also spiritual benefit provided by such charities so you should be considering this and how to describe what benefit your charity can be said to have in terms of spirituality.

Charities will have to tackle the issue of public benefit and cannot regard voluntary de-registration as an option!