The Charities Act 2022 updates the 2011 Act and has been designed to simplify certain areas of regulation. Whilst not having a major impact on day-to-day operations, these measures will give trustees more flexibility to manage their charity more effectively.

The first tranche of changes come into force in Autumn 2022 with further updates coming during 2023.

Key changes coming into effect this autumn include:

Payments to trustees

Charities already have a statutory power to pay trustees for proving services beyond their usual trustee duties and for goods connected to that service. This power is being extended to allow for situations where just goods are provided to the Charity. For example, supplying stationery or equipment.

Ex gratia payments

Charity trustees sometimes receive requests to make a moral, or ‘ex gratia’, payment from their Charity’s funds, or to waive their right to receive funds. The most common occurrence is when a charity receives a legacy and there is evidence that the donor had changed their mind since making their will. The new powers introduced enable charities, where trustees could be regarded as being under a moral obligation, to process requests for ‘small’ amounts without applying to the Commission.

There are limits to how much money can be waived, which depend on the gross income of the charity. The cap will be £20,000 for the largest charities, and £1,000 for the smallest.

Trustees will be able to delegate this decision-making process within the charity, for example. to the chief executive or a trustee sub-committee.

Fundraising appeals                 

Where a fundraising appeal raises too much or too little for the intended purpose, under the new provisions there is greater flexibility to reapply donations to similar charitable purposes, rather than returning them to the donor.

This applies in certain situations – including where the donations are small (£120 or less), there is an unreasonable expense to return the donation, or where donors cannot be found or identified (e.g. where donations come from collection tins.)

The complexity surrounding what trustees need to do in these situations has been reduced. Where the donations are less than £1,000 and can be spent on alternative purposes (different to the purposes they were raised for), trustees can act without the Commission’s involvement if they comply with the new requirements.

Some of the additional measures which are planned to take effect in spring 2023 include the following:

Permanent endowments

Most legal restrictions on how Charities can use permanent endowment funds will remain, however there is greater flexibility in some areas. There will be a new power to borrow from a permanent endowment, without the requirement to obtain permission from the Charity Commission. Certain rules will apply, including restricting the maximum borrowing from an endowment fund to 25% of the value of the fund. In addition, there must be arrangements in place to repay the capital within 20 years and the repayment needs to include an element of capital appreciation based on a relevant index such as RPI or CPI.

Charity land

Charities will have access to a wider choice of professional advisors on land disposal and some of the rules on what advice they need to take before buying or selling land have been simplified. In certain situations, external advice from a qualified professional will no longer be mandatory. In addition, if the Charity has a suitably qualified trustee or employee, they may provide the relevant advice without the need to instruct an external professional.

Charity names

Where the Charity Commission deems that a name is the same as or too similar to the name of another charity, it will be able to direct a charity to change its working and legal name and/or delay registration of a new charity.

The Autumn of 2023 is expected to see these further measures implemented:

Charity constitutions

The factors considered by the Charity Commission when a charity requests to change its charitable purposes will be applied consistently. Regardless of its legal status (charitable incorporated organisation (CIO), charitable company or unincorporated charity), the Charity Commission will consider:

  • the original purposes of the charity
  • the desirability of the proposed changed purposes to be similar to the original ones
  • the need for the purposes to be suitable and effective in the light of current social and economic circumstances.

Appointment of trustees

Where there is uncertainty as to whether a trustee was properly appointed, casting the doubt on the validity of such appointment, the Charity Commission will have a new power to make an order to ratify the appointment or election of a trustee.

Incorporations or mergers

When a charity converts to a CIO or merges, the new Act will make it easier to transfer charity assets via a vesting declaration and can remove the need to keep a “shell charity” open to catch any legacies after the event.

For more information, please read the Charity Commission’s update Charities Bill: the next steps and click here to access the full Charities Act 2022.

Sarah Twist is an Associate and charity specialist at A C Mole. Sarah can be contacted at our Taunton office