The Aim of the Charities Act 2006 - Term Paper Example

Introduction Meaning and definition of charity A charity is a special form of deliberate organisation1. A charitable organisation will have a distinct legal structure along with an unusual tax status. In the UK at present there are around 500,000 voluntary organisations. Out of these charitable organisations less than 200,000 are registered charitable organisations. A charitable organisation is set up for benevolent, communal philanthropic or for any other purposes (Institute of Fundraising, 2009). These organisations are not for profit organizations. They have to use their surplus or any profit for the purpose of the organisation. Such charitable organisations do not belong to or do not form a part of any government department, local agency or other legal body (NCVO Voluntary organisation, 2005). Actually all the charities in UK are voluntary organisations, but the same thing cannot be said of all voluntary organisations as being charities. Charities can be formed in different ways. They are: i. An unincorporated association, ii. A trust iii. A company limited by guarantee. A charity formed in different ways will have different structures of management. For instance when a charity is formed as a company which is registered then it will have a board of directors to look after the functions of the charity. If a charity is set up as a trustee then it will be managed by a board of trustees. What ever be the form of a charity it is a must that they must have a document which lays down the objects of the charity and how it will be administered. Purpose of a charity If a voluntary organisation wants to function as a charity then it must have objectives which must be charitable. Each and every purpose or objective of the charity has to be charitable because a charity cannot have some of its goals as charitable while some which are not (Charity Commission for England and Wales, retrieved December 12, 2009). According to the Charities Act 2006 the following are the list of charitable purposes: 1. “the prevention or relief of poverty 2. the advancement of education 3. the advancement of religion 4. the advancement of health or the saving of lives 5. the advancement of citizenship or community development 6. the advancement of the arts, culture, heritage or science 7. the advancement of amateur sport 8. the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity 9. the advancement of environmental protection or improvement 10. the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage 11. the advancement of animal welfare 12. the promotion of the efficiency of the armed forces of the Crown or of the police, fire and rescue services or ambulance services 13. Other purposes currently recognised as charitable and any new charitable purposes which are similar to another charitable purpose” (Charities Act 2006). Apart from the above said purposes a charity has to render for a public benefit as well.2 Prior to the enactment of the Charities Act 2006 the explanation of charity was derived from a listing of charitable aims in the Charitable Uses Act 1601 which was also termed as the Statute of Elizabeth. Lord McNaughten3 acknowledged four classes of charity which was possibly pulled out from the Charitable Uses Act. This was the assumed explanation of a charity organisation before the Charities Act 2006. Findings Historical Background The Prime Minister in July 2001 ordered his Strategy Unit to conduct a reappraisal of the law and ordinance of charitable and other not-for-profit organisations.  This review, which was known as the Private Action, Public Benefit (PAPB), was brought out in September 20024.  The review was actually a SW (Strengths and weaknesses) analysis of the present legal and regulative setup. The review was also followed by a sequence of 61 proposals for alteration recommended to the Government. After some public consultation in July 2003 the Government released Charities and Not-for-Profits: A Modern Legal Framework5.  This document contained summaries of the respondent’s comments and also had the acceptance from the government of all the recommendations made in the PAPB. It also contained the intentions of the government to move things forward. In May 27th 2004 the Act was issued as a draft bill. This was done for inspection by a joint committee prior to making it legislation. The report of the joint committee was issued in September.6 The government’s opinion was published in 20047. Even though the Bill was introduced in the House of Lords but failed to be issued as the Parliament was dissolved in 2005. But it was re-introduced again and the Parliament passed the bill in the year 2006. It received a Royal acquiescence on 8 November 2006. The governing body is the Charity commission. It is established by the Act and will be a corporate body. The objectives and functions along with the general duties will be set out. The commission also should consider the principles of best regulatory practice (http://www.ncvo-vol.org.uk/policy-research-analysis/policy/charity-law-regulation/ charities-act-2006-briefing retrieved 11 December 2009). Key provisions of the Act   The definition of charity now is as follows: “In order to be a charity, an organisation must have purposes that are recognised as charitable in law and must be able to demonstrate that it exists to benefit the public in some way”. The charitable purpose which was previously under four heads is now being replaced by a new list consisting of 12 purposes.  All the organisations which have a charitable purpose should also include and also exhibit that they exist for the benefit of the public (http://www.ncvo-vol.org.uk/policy-research-analysis/policy/charity-law-regulation/charities-act-2006-briefing retrieved 11 December 2009). The Act now formulated a new autonomous Charity Tribunal which will follow-up any determination taken by the Charity Commission. This for instance can be a decision not to recognise a specific reason or aim as charitable in law. This will be valuable and will enable public to plead against such decisions not having to argue in the High Court as it is at present (http://www.ncvo-vol.org.uk/policy-research-analysis /policy/charity-law-regulation/charities-act-2006-briefing retrieved 11 December 2009). The Charities Act 2005 has brought in the following reforms (Mark Johnson, 2007). 1. From now on charities must manage themselves more effectively and they must be more efficient in their operations. 2. Regulations governing the sector will be reduced and this is applicable for smaller charities. 3. A clear cut emphasis is placed on the requirement for all charities 4. The role of the charity commission can be modernized. Provisions of the Act with regard to Schools The focus of the Act has its impact on independent fee-charging schools. Suggestions have been put forward stating that such schools may resist to authorise the public benefit “test”. On the other hand, the explanation in the regulation is comparatively assuring. The Charity Act of 2006 has made it compulsory that independent schools in England and Wales must prove how they render a public profit if they desire to keep their charitable grade. The key doctrine of the Act is that there must be a certain advantage to at least one segment of the public especially to people on low incomes and they must be provided with the access to the charity's services (www.mills-reeve.com accessed December 21, 2009). Dame Suzi Leather, who is the Charity Commission's chairwoman, remarked that: "The issue of public benefit is at the heart of the implied covenant between charities and society - in return for having purposes which are charitable and provide public benefit, charities may enjoy the benefits of charitable status. We believe that every charity should be able to show a real benefit to the public - not just private interests - and that people on low incomes should be able to benefit. All charities should report what they do for public benefit. We think that those which charge high fees where the public benefit may not be obvious should assess and report the value of the benefit they provide alongside the value of the benefits they receive - including of course the tax breaks." (http://news.bbc.co.uk /2/hi/uk_news/education/6424171.stm accessed 20 December, 2009) Conclusion The Charities Act 2006 aims to (www.cabinetoffice.gov.uk/media/.../third.../charities _act_web.pdf Retrieved 2009-21-12 ). 1. Make life less complicated for charity trustees with more suppleness and less official procedure with specific regard to smaller charities. It extends novel and simpler modes for charities to formulate alterations to their functions, social system and governance. New terms are laid down to transfer assets, wind up, altering objectives and reconciling. Prior to this Act the gains derived out of incorporation had to deal with two sets of rules and regulations that is they had to follow both as a charity as well as a company. A new legal structure for charities has been introduced that is the Charitable Incorporated Organisation (CIO). 2. Develop the explanation of charity and emphasise the necessity that all charities must turn in public benefit and; The Act assures that the proof of ‘public benefit’ stays as a keystone of charity. The Act underlines the need that all charities must have public benefit as its main objective and the public must be made aware of the modes through which they can be benefited through charities. The Charity Commission will be held responsible to deliver this and make this happen. 3. Reinforce the charity sector's answerability and lucidity as assurance in charity is essential, and this confidence cannot be taken for granted. The Act is supposed to bring about 13,000 big charities, which were formerly excused onto the record of charities. It thus assures that these charities are viewed at a similar angle like other charities. [Word Count: 1,601] Reference 1. Institute of Fundraising What is a charity or voluntary organization". http://www. Institute-of-fundraising.org.uk. Retrieved 2009-11-12.  2. NCVO Voluntary organization definition. http://www.ncvo-vol.org.uk/about. Retrieved 2009-11-12.  3. Charity Commission for England and Wales." http://www.charitycommission.gov.uk/ registration/faqpage.asp#2. Retrieved 2009-11-12.  4. Charities Act 2006". http://www.opsi.gov.uk/acts/acts2006/ukpga_20060050_en_1. Retrieved 2009-11-12.  5. http://www.ncvo-vol.org.uk/policy-research-analysis/policy/charity-law-regulation/charities-act-2006-briefing retrieved 11 December 2009. 6. Mark Johnson, 2007, The Projects Partnership Limited 7. www.cabinetoffice.gov.uk/media/./third./charities_act_web.pdf Retrieved 2009-21-12 8. http://news.bbc.co.uk/2/hi/uk_news/education/6424171.stm accessed 20 December, 2009 9. www.mills-reeve.com accessed December 21, 2009 Read More