Charities Act 2022 implementation plan published

Charities Act 2022 implementation plan published

The DCMS has published its implementation plan for the Charities Act 2022 which received Royal Assent in February. Implementation is expected to take place in three phases; Autumn 2022, Spring 2023 and Autumn 2023 which could have consequences for estate planners.

The implementation of changes to the Act is not a major overhaul of charity law, but will introduce slight changes with the purpose of reducing “unnecessary bureaucracy in current processes”.

A summary of the changes is set out below, with provisions less likely to need adjustment and planning being introduced first in earlier phases, and those requiring more guidance being introduced later.

Autumn 2022:

  • Failed charity appeals – simplifying the statutory provisions to allow more flexibility for funds to be applied for other charitable purposes, with due oversight and regard to donors’ intentions.
  • Ex gratia payments:
    • a new power for charities to make small ex gratia payments (within limits set out in the Act) without Charity Commission authority; and
    • a new test for making ex gratia payments designed to confirm that charity trustees can delegate the function of deciding whether to make such a payment.
  • Payment of charity trustees providing goods to charity – expanding the existing statutory power to pay charity trustees for services (and for goods in connection with those services), subject to appropriate safeguards, to allow payment for goods.
  • Trust corporation status – automatic conferral on a corporate charity acting as trustee of a charitable trust, thereby removing practical problems which can arise currently where this technical point is missed.
  • Royal Charter corporations – a new power for charities established by Royal Charter to amend their Charter where they do not have an express power to do so.
  • Statutory charities – a small amendment to make the process (by Parliamentary scheme) for amending constitutions of charities established or regulated by statute a little easier.
  • Power of the court and the Charity Commission to make schemes – clarification that the power extends to charities other than charitable trusts.
  • Tribunal proceedings – a new power for the tribunal (First-tier and Upper) to make an “authorised costs order” (ACO) to give advance assurance for charity trustees that they can pay reasonable costs out of charity funds.
  • Public notice of Commission orders etc – to extend the Commission’s power to give public notice (or require public notice be given) in certain circumstances.

Spring 2023:

  • Permanent endowment:
    • the definition of “permanent endowment” under the Act will be simplified;
    • the existing wide statutory power to spend the capital of permanent endowment will be simplified and the process streamlined;
    • a new power to borrow from permanent endowment will be introduced, bringing more options for charity trustees; and
    • for charities which have opted in to investing on a total return basis, there will be more flexibility for investing permanent endowment in social investments with the introduction of a new power to do so where there is an anticipated negative financial return.
  • Charity land – making tweaks to the current statutory regime for disposals and mortgaging of charity land:
    • to clarify the scope of the regime so that it is clearer when it will, and won’t, apply;
    • to expand the exceptions from the restrictions to cover liquidators and receivers, among others;
    • to clarify the current exception for certain dispositions to another charity (so that dispositions to another charity where price is a factor will not be excepted);
    • to streamline the statutory “self-certification” process for dispositions of charity land;
    • to widen and clarify who can advise on dispositions/mortgages of charity land and make the requirements for the report on dispositions more relevant;
    • to exclude from the meaning of “connected person” in this context a charity employee where the disposition is a short fixed-term or periodic tenancy to use as a home (so that a Commission order will no longer be required); and
    • to clarify the wording required in relevant documents and remove the current requirement for a certificate to be given by the charity trustees where the charity is corporate.
  • Charity names – to expand the Commission’s current power to direct charity name changes, including to enable it also to direct a charity to stop using a “working name”.
  • Definition of “connected person” – to modify the definition and make provision for easier future changes by regulation.
  •  Amendments of the Universities and College Estates Act 1925 – replacing numerous complex powers there with a consolidated general power in relation to land and removing certain consent requirements and restrictions.

Autumn 2023:

  • Amending constitutions of charitable companies and CIOs:
    • to amend the current ‘regulated alterations’ regimes for amending their constitutions, broadly for clarity and to align them more closely together; and
    • to introduce new criteria to which the Commission must have regard when deciding whether to consent to changes to the objects of a charitable company or a CIO.
  • Amending constitutions of unincorporated charities – introducing a new wide power to amend their constitutions, subject to Commission consent for certain changes – the aim being to bring the regime more into line with those for charitable companies and CIOs, to make it less confusing and hopefully easier to apply.
  •  Charity trustees:
    • introducing a new power for the Commission to confirm a trustee’s appointment where there is doubt or a potential defect in an appointment/election process. This can often be a problem which can be difficult, and expensive, to sort out, so this power has the potential to be very useful; and
    • giving the Commission a new power to authorise a trustee payment, or retention of payment for work carried out, where it would be inequitable not to do so. At present, only the court can provide such authority. Such a power will be useful, although will not, of course, be a substitute for obtaining proper prior authorisation for trustee benefits.
  • Charity mergers – the Act will also amend some of the provisions related to ‘relevant charity mergers’ (which can also include incorporations) in current legislation, including to correct a defect in the current provision designed to ensure that subsequent gifts to a transferor charity will pass to the merged charity (or a successor) after a relevant charity merger.

Reviews

DCMS has stated that it will complete a review of the Act within the statutory review period of 3-5 years following Royal Assent. DCMS has also committed to reviewing the financial thresholds set out in the Charities Act 2011 to consider whether they should be increased in line with inflation.

DCMS also commented:

“We are also working to implement those non-legislative changes that were recommended in the Law Commission’s report, which were accepted by the government but did not form part of the Charities Act 2022. These changes include updating existing guidance to provide more clarity to the sector. We aim to carry out this work concurrently with the implementation of the legislative provisions detailed above.”

 

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