Legal Practice Notes

Many charities, from the smallest to the largest, turn to lotteries to generate funds, and they become especially crucial in times of recession when donations are scarce. Yet lotteries are, by their very nature, a form of gambling and, for that reason, they are subject to safeguards and other rules. For an overview of gambling law and lotteries, see the Practice Note Gambling law—at-a-glance guide. Trustees of charities that run, or are considering running, lotteries should understand these requirements before launching any lottery initiative. This calls for a working grasp of the Gambling Act 2005 ( GA 2005) and awareness of the Gambling Commission’s role in such activities. In short, lotteries are unlawful unless licensed by the Gambling Commission and registered with the local authority, or are exempt. Charity trustees should also consult the Fundraising Regulator’s Code of Fundraising Practice, which provides...

Identifying charity land Charity land may be owned by any individual or group. What classifies it as charity land is the purpose for which it is held. Often, such property is held by a registered charity. Yet a company (limited by shares or by guarantee), a local authority, a body of trustees, or an unincorporated association could be holding land on the terms of a charitable trust without even realising. See below for the statutory definition of 'charity land'. Different types of charity for the purpose of land transactions For disposals there are three categories of charity, each requiring a different process: exempt charities—any charity named in Schedule 3 to the Charities Act 2011 ( CA 2011) is exempt (this covers academies, foundation and voluntary schools, sixth form college corporations and most universities, certain museums and galleries, and various charitable societies, eg housing...

This Practice Note concerns the law and procedure in England and Wales and should not be treated as a definitive account for every nation within the UK. In the end, trustees of a charity carry the duty to ensure fundraising is undertaken properly and lawfully. The Charity Commission sets no detailed fundraising rules; therefore trustees must look to both self-regulation and statutory regulation. In practice, self-regulation is the greater consideration, as legislative controls have only limited application to fundraising. Self-regulation Charitable fundraising operates within a self-regulatory framework that sets, and polices, clear standards of conduct. Trustees may devise their own policies, but they should pay close attention to the principles and codes developed by the Chartered Institute of Fundraising ( CIo F) and the Fundraising Regulator (formerly the Fundraising Standards Board and the Public Fundraising Association). These bodies enable fundraising...

Overall Purpose The first issue is to define the overarching purpose and vision for the charity from the outset. Will it operate as a service-delivering body or concentrate on grant-giving? Does it address a particular local concern or a nationwide cause? Is the ambition long-term or tied to a specific event? Charitable Objects Under UK law, a charity must: have charitable purpose(s) set out in the governing document, and meet the public benefit requirement The Charity Commission provides precedent clauses. Careful consideration should be given to whether benefit is restricted at all. Legal form of the charity The legal form of the charity will need consideration. The available options include: Charitable trust Charitable company incorporated by guarantee Charitable incorporated organisation ( CIO) Unincorporated association Other structures Charity created under a Will or inter vivos trust A charitable trust can be simpler, yet may not be...

A charity is a corporate or unincorporated body whose objects are, in law, exclusively charitable. Those objects must be legally enforceable, and a charity has no power to undertake anything that does not advance, or help to advance, a charitable purpose. Charitable purposes The Charities Act 2011 ( CA 2011) provides a catalogue of purposes regarded as charitable when aimed at benefiting the public rather than particular individuals or private groups. The catalogue is not exhaustive. It includes a sweeping clause embracing purposes already recognised as charitable, though not itemised, together with purposes of a similar nature. Public benefit is crucial, but on its own it does not secure charitable status. It has recently been determined that, to satisfy the public benefit test, the purposes of an independent school require that the educational advantages extend not only to those who can pay the fees but also, in a...

Initial points The audit and accounting framework changes over time. For guidance on the rules, see Practice Note: Charity reporting and accounting and the resources highlighted at the start of that note. Much of the information in a charity’s accounts filed with the Charity Commission appears on the Commission’s public register, while confidential items such as bank details are normally withheld. Example forms, an annual return template and completion guidance are on the Charity Commission website. On annual returns, see section 169 of the Charities Act 2011 ( CA 2011). Reporting A fuller note on charity reporting is in Practice Note: Charity reporting and accounting. In summary: Trustees of a registered charity must produce an Annual Report and Accounts and provide copies to the public on request. This duty also applies to trustees of charities with income under £5,000 that have registered...

A charity might engage in a construction project: to advance its charitable aims (for example, the delivery of social housing) to obtain office space or other premises that support its main charitable purposes, or as an investment prospect General issues on construction projects Anyone procuring a construction project should be aware of the following overarching and relevant matters: the distinct responsibilities and obligations of the developer, professional advisers, contractors, sub-contractors and suppliers the requirement for collateral warranties from, or reliance on rights under, the Contracts ( Rights of Third Parties) Act 1999 in respect of key members of the professional and construction teams the various alternative procurement routes the range and suite of standard-form construction contracts and appointments, and the appropriate, typical amendments applied to them the function of professional indemnity insurance,...

Overview of the public and community benefit sector in England and Wales This sector is made up of organisations outside the public sphere that exist, in whole or in part, to deliver public or community benefit, rather than to maximise and distribute profits to owners or shareholders. It is commonly labelled in several ways, including: ‘the not-for-profit’, more precisely the non-profit distributing sector ‘the third sector’, separate from both private and public spheres ‘the voluntary’ or ‘community and voluntary sector’ It is also widely described as the ‘charity sector’, which more accurately encompasses thousands of charities registered with the Charity Commission for England and Wales, together with charities expressly exempt or excepted from registration—such as statutory further education colleges, mainstream universities and registered places of worship—and numerous small charities below the £5,000 income threshold for formal...

For an overview of the Bribery Act 2010 ( BA 2010), consult Practice Note: The Bribery Act 2010—an introductory guide. The Ministry of Justice has likewise issued guidance on the BA 2010. At first glance, linking charities with bribery may appear odd, yet every organisation, since the Bribery Act 2010 ( BA 2010) took effect on 1 July 2011, must take care not to fall foul of its broad scope. Charities may incur liability because BA 2010 provides that a relevant commercial organisation can commit an offence. A commercial organisation is described (inter alia) as: (a) a body incorporated under the law of any part of the United Kingdom which carries on a business (whether there or elsewhere), (b) any other body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the United Kingdom… and, for the...

NOTE: Unless stated otherwise, the law referred to in this Practice Note applies to England and Wales only. There is no straightforward method of identifying a charity. Some will be registered by the Charity Commission, yet many will not. Defining a charity A sensible starting point is the statutory definition applicable to England and Wales (for the purposes of England and Wales), which treats a charity as an institution that (a) is established solely for charitable purposes, and (b) falls within the control of the High Court when it exercises its jurisdiction concerning charities. Accordingly, to be a charity there must be: an institution established for charitable purposes subject to the control of the High Court All three elements must be present. It is clear there is no reference to ‘registration’, as registration is neither an inherent characteristic nor a requisite of being a charity, and therefore charitable status does not depend on...

The starting point It is a well-established principle that promoting a political cause or activity cannot amount to a charitable purpose, for the following reasons: charities are subject to the supervisory jurisdiction of the courts it falls to the courts, as a question of law, to determine whether any particular purpose is charitable in reaching such a determination, the court must decide whether the purpose provides a benefit to the public however, it is not for the courts to adjudicate on whether a political cause or activity benefits the public On this basis: organisations whose stated object is the upholding or maintenance of the law may qualify as charitable organisations that seek to promote or to prevent a change in the law, whether in the UK or abroad, do not political parties cannot be charities, nor can organisations whose purpose is to support a political party or a candidate for...

FORTHCOMING CHANGE: The Trusts and Succession ( Scotland) Act 2024 gained Royal Assent on 30 January 2024, marking the most significant reform of Scottish trust law in more than a hundred years. Once commencement orders are issued, this Practice Note will be revised to align with the new legislation. A trust is one of several legal forms available to establish a charity in Scotland. By definition, charitable trusts are governed by both charity law and trust law. Of roughly 24,600 entries on the Scottish Charity Register, about 3,000 operate as charitable trusts (2025 figures). Many bodies are colloquially called ‘trusts’ despite being constituted as companies limited by guarantee, Scottish Charitable Incorporated Organisations ( SCIOs), or created by Royal Charter or Act of Parliament. This Practice Note concerns charitable trusts in the strict sense, not other structures that merely include ‘trust’ in their...

Although wide-ranging reforms were proposed in the Charities Act 1993 and, later, the Charities Act 2006, neither set of provisions has been commenced, nor are they expected to be in the near term. As a result, rules on public charitable collections—meaning raising funds from the public for charitable or similar aims—remain rooted in statutes from 1916 and 1939. The Charities Act 2022, implemented in phases from Spring 2023, leaves the regime for charitable public collections untouched. current legislative framework Section 5 (as amended) of the Police, Factories, etc ( Miscellaneous Provisions) Act 1916 ( PFE( MP) A 1916), together with the Street Collections ( Metropolitan Police District) Regulations 1979 ( SI 1979/1230) and any regulations made under that provision, governs collections carried out in the street (which includes a shop doorway or shopping precinct). This framework overrides street trading rules, even where funds are raised by...

A testator may have countless motives for earmarking a share of their estate for a charity within their will. Some intentions are simply altruistic; however, it is also fairly typical to use a charitable legacy to garner goodwill from relatives during one’s lifetime. Whatever the motive, leaving gifts to charities on death carries several fiscal advantages over non-charitable institutions and organisations. Notably, because such legacies are generally exempt from inheritance tax (see section 23 of the Inheritance Tax Act 1984 ( IHTA 1984)), they can be a powerful tax-planning measure for many estates. The relief previously applied to EU charities, but from 6 April 2024 this is withdrawn, and protection will apply solely to UK-based charities in future. Qualifying organisations will appear on the central register of charities maintained by the Charities Commission. Note that not every charity is...

It has been Government policy for centuries to encourage charitable giving. Tax relief is central to achieving this aim. Charities—being either incorporated entities with purely charitable aims, or bodies of trustees holding property on charitable trusts without legal personality of their own—are exempt from tax on the income and capital gains they receive, provided those funds are applied to charitable purposes only, i.e. used directly to advance the charity’s purposes or invested for the charity. Charitable donations are therefore often worth considering as part of lawful tax planning. Lifetime gifts may attract relief from income tax or corporation tax (cash via Gift Aid and, for works of art, land or shares, under Qualifying Investment Donation Relief ( QIDR)) and from capital gains tax (or corporation tax on chargeable gains). Where a gift is made by Will (or otherwise as a transfer of value) it is...

Charitable incorporated organisation ( CIO) Only charities can adopt the charitable incorporated organisation ( CIO) structure. A CIO is a corporate body, though it is not a company. This Practice Note outlines the legal regime governing CIOs and the reasons a charity might opt for a CIO in place of a trust, an unincorporated association, or a company limited by guarantee. CIOs have been available since 2 January 2013. The legislation underpinning CIOs comprises: Part 11 of the Charities Act 2011 ( CA 2011) as amended by the Charities Act 2022 ( CA 2022) Charitable Incorporated Organisations ( General) Regulations 2012, SI 2012/3012 (the General Regulations 2012) Charitable Incorporated Organisations ( Insolvency and Dissolution) Regulations 2012, SI 2012/3013 Charitable Incorporated Organisations ( Consequential Amendments) Order 2012, SI 2012/3014 The Charity Commission has also issued comprehensive guidance on CIOs. The CIO model was...

The lifetime inheritance tax ( IHT) charge arises when an individual makes a ‘transfer of value’ or other ‘disposition’ so that, as a consequence, the estate’s value is lower after the step than it was beforehand. This concept embraces straightforward gifts of property and also deemed or notional dispositions. Where lifetime transfers are taxable, the applicable rate is 20%. This Practice Note sets out how to determine the tax payable under the lifetime charge. In broad terms, the lifetime charge generally concerns those who place property into a trust falling within the relevant property regime. By contrast, outright gifts to individuals, and transfers into a disabled person’s trust, are treated as potentially exempt transfers ( PET) and therefore do not trigger a lifetime charge. See Practice Note: Potentially Exempt Transfers ( PETs). The calculation of tax due under the additional charge and the estate...

The issue of sham Claims of sham most commonly arise from the settlor’s creditors or an ex‑spouse in matrimonial litigation, asserting that property placed with the trustees in truth remains the settlor’s, and is therefore reachable to satisfy a court order. Where a trust is declared a sham, it will typically be void and the trust fund will revert to the settlor. A sham is a pretence: the settlor and, potentially, the trustees do not possess the requisite intention to establish a genuine trust. Instead, they aim to project to outsiders and to the court that a valid trust exists by ostensibly conveying legal title to the trustees and the equitable interest to beneficiaries, whilst in fact the settlor keeps ownership, aided—knowingly or not—by the trustees acting as principal and agent or nominee under a bare trust for the settlor. The decisive element is the...

This Practice Note sets out an overview of the Cayman Islands in the context of offshore trusts. For general information on the Cayman Islands, see Practice Note: Private client— Cayman Islands— Q& A guide. Government The Cayman Islands is an autonomous British Overseas Territory, operating as a parliamentary democracy. It has a Governor, appointed by the Government of the United Kingdom. The Islands have their own Constitution, with the latest version taking effect on 6 November 2009, by which a Bill of Rights was brought into force as the ‘cornerstone of democracy’ in the Islands (see paragraph 1(1) of the Bill of Rights ( Laws of the Cayman Islands)). The Constitution was amended in 2016 to, among other things, increase the retirement age for judges of the Grand Court and remove the Governor’s power to exercise disciplinary control over the Chief Justice and the...

For general information about the Cayman Islands, see Practice Note: Private Client— Cayman Islands— Q& A guide for an overview of the jurisdiction. Part VIII of the Trusts Act The Cayman Islands recognises a distinctive form of non-charitable purpose trust known as a ‘ STAR Trust’. The framework enabling STAR Trusts was introduced by the Special Trusts ( Alternative Regime) Act 1997, which is the origin of the ‘ STAR’ acronym. That regime is now set out in Part VIII of the Trusts Act (2021 Revision) (the Trusts Act). This alternative regime was incorporated at Part VIII of the Trusts Act (2021 Revision), referred to here as the Trusts Act. Under section 96(1) of the Trusts Act, a STAR trust can only be established by a written instrument that expressly states Part VIII of the Trusts Act applies. An illustrative clause might read: ‘ It is...