Charity Commission’s guidance on public benefit

Following the judgment at the end of 2011 by the Upper Tribunal on the Independent Schools Council case the Charity Commission has issued amended guidance on public benefit. The Commission had withdrawn significant elements of its guidance in the aftermath of the judgment.

This amended guidance will be of interest not only to charities registered with the Charity Commission but also to those exempt from registration that need to report annually to their principal regulator on compliance with charity law, in general, and meeting the public benefit test in particular. This includes English universities when providing their annual financial statements to HEFCE.

The Commission has launched a three month consultation period on the revised public benefit guidance. Respondents are able to contribute on the Commission’s website. There is also a live blog on the Commission’s website to which respondents can contribute to. The Commission has also published the legal analysis of its guidance on public benefit.

The format of the Commission’s guidance has changed; it is now in a new online format which is intended to allow easier access for trustees of charities. The Commission is inviting comments on the form of its guidance, in addition to its content, as it is proposing to use this format for guidance going forward.

Some of the key changes to the guidance are as follows:

  • Charities will have to report on public benefit by reference to their charitable purposes rather than their activities.
  • The onus is now on the trustees to demonstrate public benefit. The Charity Commission explains that trustees must decide for themselves how their charity provides for those in need that cannot pay for a charity’s services, acting fairly in the interests of all beneficiaries and taking into account the circumstances of their charity. This was one of the key points the Independent Schools Council raised in the case. They argued that it was for the trustees to determine how they should discharge their obligation to act for the benefit of the public.

It is important to set the revised guidance in context.

Firstly, there is no definition of “public benefit” in charity legislation so it falls to the Commission to attempt to explain the concept which, some would argue, they failed to do adequately prior to the Independent Schools Council case.

Secondly, Lord Hodgson has just undertaken a review of the Charities Act 2006.

There will, no doubt, be a review following the consultation period and we shall report further then.