Charities Act 2022 - how will it help your charity?
The Charities Bill received Royal Assent on 24 February 2022, and has been brought into law as the Charities Act 2022.
The changes introduced by the new Act are largely enabling and empowering for trustees, smoothing and simplifying the processes trustees may use in the management of their charity. It has been called a “moment for celebration” by the Charity Commission.
- The ability to pay trustees for goods provided to the charity. Previously the Charities Act contained powers for trustees to be paid for services in certain circumstances, even if not expressly stated in the charity’s governing document. The new Act will expand this permission to goods as well as services.
- Charities will be able to take advantage of simpler and more proportionate rules on failed appeals. For example, if a charity appeal raises too little money, the charity will be able to spend donations below £120 on similar charitable purposes without needing to contact individual donors for permission. However we believe charities should always make it clear in fundraising literature that any funds raised which cannot be applied to the appeal’s aims will be applied to the charity’s general purposes – this makes it much more straightforward to deal with any unused funds.
- Relaxed requirements on the disposal of property. Rather than having to engage a RICS-qualified surveyor to produce a detailed report on a property to be sold, trustees will be able to take advice from a wider pool of surveyors, and where the charity has a suitably qualified trustee or employee, they will not need to engage external advice at all. Further, the rules on what the report should cover is now more straightforward, which may save time and money when selling property.
- Easier to amend the charity’s governing document, particularly for unincorporated charities. The Charities Act 2022 will harmonise the rules for charities when amending their constitution. Regulated amendments (i.e. changes to the charity’s objects, trustee benefit provisions and dissolution provisions) will still require Charity Commission approval, but the Commission will now apply the same test for all charities wishing to make such amendments. This should make the process quicker and easier and will be of particular help to unincorporated charities who previously had to rely on Charity Commission exercising its powers if they wished to make changes other than to the charity’s powers and procedures.
- More flexibility to use permanent endowments. Currently, where a charity held permanent endowment (i.e. funds or property to be held and not spent), trustees faced a number of restrictions in their ability to borrow or invest those assets. Under the 2022 Act, trustees will be permitted to borrow up to 25% of the value of their charity’s permanent endowment, and to use permanently endowed funds to make social investments with a negative or uncertain return (rather than being required to invest only for the best financial return).
- Relaxed rules around ex gratia payments. Ex gratia payments are payments by charities which they feel morally obliged to make, but for which there is no legal basis. Currently charities must seek Charity Commission approval for all ex gratia payments, but the Charities Act 2022 will permit charities to make payments up to a certain amount without Charity Commission consent (between £1,000 and £20,000, depending on the charity’s income). The decision as to whether or not to grant an ex-gratia payment will be able to be delegated to those which manage the charity on a day-to-day basis, rather than sitting with the trustees. This should reduce both time delays and the associated costs.
What happens next
The Act is now in force, however, many of the provisions will only become effective once the necessary secondary legislation is passed to implement them. The Charity Commission say that the implementation of the 2022 Act will happen on a staggered basis over the next 12 to 18 months between now and autumn 2023. The Commission will also need to update their Guidance to reflect the Act.
The changes will not be relevant to all charities, and relate to matters unlikely to occur frequently. This is not a radical change to charity law. However the new Act has been broadly welcomed by the sector and will make a positive, practical difference to charities and particular points in their development, giving sensible additional freedoms and powers to trustees to manage their charity’s assets and activities.
If you’d like to discuss this in more detail, please get in touch with your usual Larking Gowen contact. You can find contact details in the Our People section of our website. Alternatively, call 0330 024 0888 or email firstname.lastname@example.org.
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