The Charities Act 2022 received Royal Assent on 24th February 2022.
The Act amends the older version from 2011 and is implemented in stages starting autumn 2022 and rolling through 2023 and 2024. Some changes came into force last summer, some were introduced this spring 2023 and the final set of changes will come into effect later in 2024.
DCMS (the Department for Digital, Culture, Media and Sport), in conjunction with The Charities Commission, will lead the implementation.
So what has already changed - some changes that came into force:
Allowing charities the power to pay trustees for providing goods to the charity
Currently, under certain circumstances, a trustee may be paid for providing services (including associated goods). These could include computer consultancy services, estate agency fees or painting and decorating. Under the new provisions it would also be possible to pay a trustee for providing goods such as stationery.
Making a moral or ‘ex gratia’ payment from charity funds
Charity trustees occasionally receive a request to make a moral or ‘ex gratia’ payment from the charity funds or property or to waive their right to receive funds or property. This happens most frequently where there is evidence that a donor of a legacy had changed their minds since drawing up their will.
Currently the trustees would need to apply to the Charity Commission for permission to proceed. Under the new regulations it will be possible for the charity to make a payment subject to the thresholds below.
- Charity gross income up to £25,000 with the maximum individual payment is £1,000
- Charity gross income between £25,001 and £250,000 with the maximum individual payment is £2,500
- Charity gross income between £250,001 and £1m with the maximum individual payment is £10,000
- Charity gross income over £1m with the maximum individual payment is £20,000
- If the payment exceeds £20,000, application must be made to the Charity Commission.
Fundraising appeals that do not raise enough or raise too much money
The changes in the Act will reduce the complexity for dealing with the situation where an appeal fails to raise the amount required to deliver the aim, or there is an excess of funds raised and the charity cannot use them.
Publications from the Government summarise these as:
- the current requirement in some circumstances for charities to wait six months for donors to ask for a refund will no longer apply
- there will be a simpler process for obtaining our authority; this will replace the need for the Commission to make a scheme
- if the donations can be spent on new purposes (different to the purposes you raised them for) are less than £1000, trustees can act without the Commission’s involvement if they comply with the new legal requirements
Power to amend Royal Charters
Charities with Royal Charters will be able to change sections in their Charter which they cannot currently change. Any change would need to be approved by the Privy Council. Additionally changes include:
- Authorise the Charity Tribunal to issue "authorised costs orders" upon an application by a charity.
- Allow the Charity Commission to create schemes for charitable companies.
- Automatically assigning trust corporation status to existing and future corporate charities in respect of any charitable trust of which the corporation is (or, in the future, becomes) a trustee.
- Updating procedures for public notification regarding written consents and orders from the Charity Commission under the Charities Act 2011.
- Ensuring that parliamentary schemes to amend a charity's governing document under section 73 of the Charities Act 2011 will undergo a streamlined parliamentary process known as the negative parliamentary procedure by default.
Selling, leasing, or disposing of charity land
The Charities Act 2022 simplified legal requirements for charities regarding land disposal. Notable changes include expanding the pool of designated advisers, allowing trustees, officers, or employees to provide advice on disposals, granting trustees discretion in advertising proposed land disposals, and removing the need for Commission authority to grant residential leases for short periods to charity employees.
Using permanent endowment
The Act introduced new powers allowing charities to spend from "smaller value" permanent endowment fund of £25,000 or less, without Commission authority and borrow up to 25% of the value of their permanent endowment fund without Commission authority. Additionally, charities that have opted into a total return approach to investment can now utilise permanent endowment for social investments with uncertain financial returns, provided losses are offset by other gains.
Charity names
The Commission gained authority to direct charities to cease using misleading, indistinguishable or offensive working names and delay registration or entry of unsuitable names onto the Register of Charities. This ensures clarity and appropriateness in charity identification and operations.
Changes that came into force on 7 March 2024
Making changes to governing documents
Trusts and unincorporated associations can now utilise a new statutory power to amend their governing documents. However, they must obtain the Commission's approval for certain "regulated alterations" in the same way as charitable companies and Charitable Incorporated Organisations (CIO). Therefore the process for passing trustee and member resolutions when using the new power, as well as the legal criteria for Commission approval, has been standardised across charitable companies, Charitable Incorporated Organisations (CIOs),and unincorporated charities changing their charitable purposes. The Commission also gained the ability to issue public notices regarding regulated alterations. Certain statutory powers for small unincorporated charities to alter their governing documents have been revoked.
Selling, leasing, or otherwise disposing of charity land
Provisions regarding land disposals by liquidators, receivers, mortgagees, or administrators are now in effect. This includes regulations on mortgages taken out by these entities and requirements for statements and certificates in disposal and mortgage processes.
Charity mergers
New regulations allow most gifts to charities resulting from mergers to be treated as gifts to the merged charity. The statutory process for certain small unincorporated charity mergers has been abolished
Other provisions
The Act grants the Commission authority to authorise payments to trustees for completed work under certain circumstances and to confirm or rectify potentially defective trustee appointments.
We will be updating this article with the changes which will be implemented later in 2024.
More information is available from this link to Government Website.
