Charity Commission advises on setting up a charity

The Charity Commission has published advice on what to consider when starting a charity, including a set of guidelines and requirements, and legal restrictions on an organisation's aims and operations

In its guidance, the Commission makes it clear that a charity must have a 'charitable purpose' which it defines as one that falls within 13 criteria for the public benefit, including 'the advancement of education', 'the advancement of amateur sport', and 'the prevention or relief of poverty'. In cases where the remit of the proposed charity does not fulfil these criteria, the Commission suggests that a 'community interest company', a limited company with special additional features, is founded instead. Alternatively a ‘named fund’ or trust, which may be more suitable for a one-off event, or a social enterprise, for the purposes of tackling community or environmental issues, may be more suitable.

The Commission states that any charity founded needs to abide by charity law, which includes governance requirements and accounting standards. It has previously issued guidelines to this effect, including CC8: internal financial controls for charities. It strongly recommends that charities follow its guidance in instituting internal financial controls which meet the legal requirements in order to safeguard the charity’s assets and administer the charity’s finances in a way that identifies and manages risk.

The Commission also makes it a requirement that the founder or trustees of a charity cannot receive personal benefit from their work at the charity unless it is ‘incidental’. It defines this as meaning that ‘any personal benefits people receive…are no more than a necessary result or by-product of carrying out the purpose’.

It also states that charities must make independent decisions about what work they will carry out, with trustees acting in good faith and only in the interests of the charity. Trustees are expected to make sure that they are sufficiently informed on matters pertaining to the charity, taking account of all relevant factors and ignoring irrelevant issues when making decisions. They must be able to show they follow these interdependent principles in order that the charity complies with the law.

Charities are prohibited from carrying out certain political activities. While campaigning and political activities ‘can be legitimate and valuable activities for charities to undertake’, and ‘there may be situations where carrying out political activity is the best way for trustees to support the charity’s purposes’, it can only be taken in the context of supporting the charity achieve its aims.

This can include helping achieve a change in the law or government policy, but the charity is required to stress its independence and behave in a politically balanced way. Trustees are required to prevent a charity being used ‘as a vehicle for the expression of the political views of any individual trustee or staff member (in this context the Charity Commission means personal or party political views)’.

Check if a new charity is the best option is here

Report by James Bunney



James Bunney

James Bunney, Accountancy magazine and Accountancy Daily...

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