ABS Accountancy

The Charities Act 2022

The Charities Act 2022 has undergone clarifications by the Charity Commission, particularly regarding selling or leasing charity land and utilising endowment funds. On 1 June, when the regulations become effective. This webpage outlines a tentative schedule for implementing the Charities Act 2022 and fulfilling additional commitments made by the government in response to the Law Commission’s Technical Issues in Charity Law report. The legislation received Royal Assent on 24 February 2022. As individual provisions come into effect, links to any new or updated guidance will be available on the Charity Commission’s Charities Act 2022 information page. The plan is for the provisions to be implemented in three distinct groups, as outlined below. This webpage will be promptly updated if there are any changes to these plans. The Department for Culture, Media and Sport (DCMS) is leading the implementation process in close collaboration with the Charity Commission and other government departments. Specific provisions will necessitate the revision of existing guidance, while others may require developing additional new guidance materials.

Engaging in the sale, lease, or any form of disposal of charitable land.

There have been notable modifications to the rules pertaining to the selling, leasing, or disposing of charity land. Disposal may include selling, transferring, or leasing charity land. Before disposing of charity land, charities must adhere to specific legal obligations. The Act aims to streamline some of these legal requirements. The fundamental changes include:
  • It broadens the range of designated advisors who can advise charities regarding certain disposals.
  • Confirming that a trustee, officer, or employee can provide advice on disposal if they fulfil the relevant requirements.
  • Granting trustees the authority to determine how to advertise the proposed disposal of charity land.
  • Eliminating the need for charities to obtain Commission authorisation for granting a residential lease to a charity employee for a short periodic or fixed-term tenancy.
  The provisions concerning disposals by liquidators, provisional liquidators, receivers, mortgagees, or administrators, as well as the provisions regarding the taking out of mortgages by the parties as mentioned above, along with the changes regarding the content requirements for statements and certificates for both disposals and mortgages, are expected to be implemented by the end of 2023, rather than in June 2023.

Utilising permanent endowment.

In straightforward terms, permanent endowment refers to property that your charity is obligated to retain instead of utilising for expenditure purposes. The Charities Act 2022 will introduce new statutory powers that will allow:
  • Under certain circumstances, charities must spend from a “smaller value” permanent endowment fund of £25,000 or less without requiring Commission authorisation.
  • Certain charities borrow up to 25% of their permanent endowment fund’s value without Commission authorisation. Charities that do not fall under the purview of the statutory powers will still require Charity Commission approval.
A new statutory power will enable charities that have adopted a total return approach to investments to utilise permanent endowment for social investments with potentially negative or uncertain financial returns, as long as other gains counterbalance any losses.

Charity names

Currently, the Commission has the authority to instruct a charity to alter its name if it closely resembles another charity’s name or is considered offensive or misleading. Additionally, the Charities Commission will have the ability to:
  1. Direct a charity to cease using a working name if it resembles another charity’s name excessively or is offensive or misleading. A working name refers to any designation for identifying a charity and conducting its activities. For instance, the charity ‘Charity Projects’ operates under the working name ‘Comic Relief.’
  2. Delay the registration of a charity with an unsuitable name or postpone the inclusion of a new inappropriate name in the Register of Charities.
  3. Utilise its powers concerning exempt charities while consulting with the principal regulator.
  The Commission will be able to exercise its powers regarding exempt charities while consulting with the principal regulator. On 31 October 2022, various adjustments were introduced that affect how charities compensate trustees for their services or provision of goods to the organisation. Trustees now have additional controls to manage trustee expenses and payments. Trustees now have streamlined guidelines in situations where an appeal falls short of raising the necessary funds to accomplish its goals, when there is an excess of funds, or when circumstances arise where donations cannot be used as initially intended. Compensating trustees for services or goods rendered to the charity Charities have now been granted the legal authority to remunerate trustees for exclusively supplying goods to the charity under specific conditions. Through this new statutory power, trustees are eligible to receive payment for the following:
  1. Services alone, such as estate agency or computer consultancy.
  2. Services and related goods, such as plumbing or painting services, along with any associated materials like plumbing parts or pain
  3. Goods alone, such as providing stationery to the charity.

Fundraising campaigns that fall short or exceed the desired target

Trustees now have more straightforward guidelines to adhere to in cases where an appeal fails to raise the required funds to achieve its objective, exceeds the necessary amount, or circumstances change, rendering the donations unusable for their intended purpose. The Fundraising Regulator has produced an article with further details about the changes.

The content provided on this website serves as a guide, reflecting our understanding of current regulations at the time of publication. ABS Accountancy Ltd, does not assume responsibility for actions taken based on this information. It is advisable to seek professional advice. Additionally, external links on this website are provided for informational purposes, we cannot be held liable for the content, security, or any damages resulting from viruses or malware associated with those sites.

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