In order to meet the legal definition of a charity, it needs to meet certain rules and regulations. As such, all charities registered in the United Kingdom must:
- Have aims that fall into charitable categories according to the laws for charities. Examples include relieving poverty or science advancements.
- Have a sole purpose of being a charitable organisation.
- Be established exclusively to provide ‘public benefit’.
- Not make a profit (the money raised should go towards achieving the charity’s aims).
- Not allow owners or shareholders to benefit from funds raised.
Most charities will register with the Charity Commission. Thus, they need to state what their charitable objectives are and use annual reports to explain how they are meeting them.
Note: The annual reports issued by registered charities are available for public viewing in the United Kingdom.
Definition of Public Benefit
According to the laws of charitable organisations, the term ‘public benefit’ means the charity must:
- Be of Benefit: Meaning it needs to do positive things. As a general rule, its positive work must outweigh any negative side-effects or adverse consequences.
- Benefit the Public: Meaning everyone in a geographic area or everyone with a specific characteristic. Typical examples include people suffering with cancer or those working in teaching.
The Charity Commission decides whether an organisation passes the test of meeting ‘public benefit’ or not. The commission uses its own guidance and previous case laws as part of its decision making.
Note: This section focuses on charity rules and regulations in England and Wales. Some variances may apply to charity law elsewhere around the United Kingdom.
ALSO IN THIS SECTION
Charities and Tax
Most ‘recognised’ charities will qualify for certain types of charity tax exemptions and reliefs. The business section explains the treatment of charities and taxation by HMRC in the United Kingdom.
As an individual, you may qualify for tax relief when you donate to a charity in the UK. Tax relief on charity donations can occur through schemes like Gift Aid, Payroll Giving, or when gifted in a will.
Note: You can search the charities register to find details and information about the registered charities in England and Wales.
Complain about a Charity
There is a set procedure to complain about a charity or to report them for misconduct. You can also file a complaint to the regulator if the charity fails to deal with the situation ‘appropriately’.
How to Claim Gift Aid
There are certain conditions to meet before claiming Gift Aid as a charity or a CASC. The section explains what Gift Aid is and how to claim this type of tax incentive in the United Kingdom.
Note: You can also make a donation to support members through the armed forces charities (e.g. Army, Armed Forces Day, Navy, RAF, Royal Marines, Operations Welfare Fund).
Preparing a Charity’s Annual Accounts
You can prepare the right annual accounts for the structure and income of your charity online. Different guidance applies to charities that are exempt (not regulated by the Charity Commission).
Note: You must send a charity’s annual return if its income is over £10,000. You would need to remove your charity from the charities register if you dissolve it (close it down).
Reporting Changes to Charity Details
UK law requires you to keep your charity details up to date with several government organisations. Thus, reporting changes to your charity’s details is an important part of running one.
Note: You can change the details of your charity (e.g. its name, bank details, or the governing document) with the Charity Commission online.
Starting Up a Charity
Even though setting up a charity has its advantages, it may not be right for your organisation. The guide will help you to determine whether becoming a charitable foundation it is the best option.
Charities need authorised officials and responsible persons to manage tax with HMRC. Part of running your charity’s finances involves choosing ‘fit’ people to manage and control it.
Note: As a charity, you will be exempt from paying VAT when buying certain types of goods and services. Find out more in a section explaining how VAT affects charities in the United Kingdom.