Changes to the Public Benefit Requirement under the Charities Act 2006 - Coursework Example

< Charities Act 2006> by Abstract The essay details the changes to the public benefit requirement that have been brought about in the Charities Act 2006, and the repercussions those changes have caused in the charitable organizations and the charitable sector of the UK. Introduction The Charities Act of 2006 defines charity as a trust’s which is intended for charitable purpose and provides a number of benefits to the public. The act is one of the important acts of the United Kingdom’s parliament and is an amended version of the Charities Act of 1993. There are thirteen primary charitable purposes which are listed in the act. Alastair Hudson states ‘A charity is defined in the Charities Act 2006 as being ‘an institution which established for charitable purposes only’ and which falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities.’1 Before the act was implemented, there were four charitable purposes known as heads. These heads are the advancement of education, the advancement of religion, the relief of poverty and the benefit of the community. The new act of 2006 aims to reinstate the obligation that are laid charities had of been able to show that their charities directly benefit the public. One of the important purposes of the charities act of 2006 has been Public-benefit requirement. All charitable organizations in the United Kingdom must be able to demonstrate and provide evidence that they have been able to successfully benefit the public. In England and Wales, there are almost 600,000 organizations which includes about 200,000 registered charitable organizations which to not fall under the profit sector. The UK has always been known for having a strong tradition of charitable activities. Other organizations which are most common throughout the world have modern concerns and seek to make a profit whereas charitable organizations have been around for the last 400 years in England and has been constantly trying to change the area of public benefits. However in the last 400 years, the society in the UK has gone through a number of important changes end there for charitable needs to be abreast with the changing societal patterns in the UK. The Changes in the Act The voluntary sector has played a major role in the charities of the UK. They have always been the subject of reviews by the government and have worked in close partnership with local and central governments. The Charities Act Of 2006 has therefore been able to provide the voluntary organizations with a much better legal framework for carrying out the charitable work in the UK. There have been five major changes implemented in the 2006 Charities Act. Five main areas of the change include the modernization of charitable objects; the changes in the function as well as composition of Charity Commission, the formation of the charity tribunal; major changes in the legal framework that guides charitable organizations and most importantly, the obligation of charities to guarantee that their work is providing Public-benefit. About a year ago, the Charities Commission has put forward guidance for all the charity organizations regarding public benefit requirements. These changes pertaining to Public-benefit requirements were effective from first of April, 2008. After the date, all charities need to convince the commission that aims of their work is for Public-benefit only. There are two important guidelines or principles for Public-benefit which is laid down by the new commission rules of 2008. Principle one states that the benefits of the charitable work must be identifiable. Moreover, the benefits should outweigh any detriment or harm. This would have a major impact on schools which are considered as charitable organizations. Now the schools which have the charitable tag on them need to be aware that if it’s premises are used by some cricket coaching camp or some judo coaching camp, the school was not get any points for credit whatsoever from the commission, as far as its charitable work is concerned. However, if this course insists on providing free education to children under eighteen and advance a certain religion which is considered as a minority religion, the school would be getting more acknowledgements from the commission. Another point that charitable organizations and schools especially must be bearing in mind is that, the Memorandum and Articles of the Charities Act of 2006 can be only amended after getting approval from the Charities Commission. Hence, the charitable institutions and trustees need to be very alert of the new public benefits requirement of the act. The second important principle which is laid down by the 2008 amendment is that the benefits that public get must profit section of the public. Furthermore, such a benefit would not be hindered by the job graphical location of the section of a public, nor should the benefit the exchanges are by the inability for the public to pay any charges of fees to the charitable organizations. Principle 2-c of the act also says that the people of the section of people who are considered to be in poverty should not be excluded from the benefits of the work by the charitable organizations. Furthermore, the private benefits by the charitable organizations would only be incidental and not intentional. The Effects of the Act The principles laid out by the new changes, would have a significant effect on the educational institutions which are tagged as charitable organizations as well. One of the major issues would be regarding the fee structure. The schools which provide a number of facilities to children of wealthy parents now need to be aware of the kind of facilities they’re providing. This is because they now need to facilitate the children of parents who are not that well off. It would also mean a revision in the fee structure so as to facilitate children from the lower income group for children who can be classified as poor. Even regarding scholarships, the schools need to create a plan which benefits both the poor and the well-off. Charitable organizations such as schools and even other organizations now need to define what exactly they would consider as poverty. Therefore, it is now more important for charitable organizations to properly demarcate and define the social categories and clearly understand the different structures and classes in the society, so as to generalize their work for the section of the people who require and need charity. In the UK, there are about 75 thousand charities which are involved in the field of education, 30,000 religious charities and almost 25,000 charities which focus on preventing poverty. Hence, all these organizations would be affected by the public benefits requirement. It has been found that the most affected sectors in the charities have been the ones which are involved in advancing of religion and education, and also the charitable organizations which charge fees. There were a number of responses that the commission had received from the independent schools that charge fees, as well as the organizations which attempted to advance religion. Earlier to the changes, the charitable organizations have required to prepare a report in the trustees’ annual report which would detail the public benefit work. However with the changes in the public benefit requirement, the need to be more specific and show more examples of how their works have been successful in meeting the objectives of the charities’ public benefit drive. It is also expected that the new changes would compel the charitable organizations to show much more details about their income to the commission, regardless if the charities are below £500,000 income threshold or above. Assistance Provided By the Charities Commission The Charities Commission believes that the Public-benefit reporting should be uncomplicated and thus a number of examples are being provided the charitable organizations as well, which would help them prepare their reports better and get a better understanding of what exactly is expected of the reports. Alastair Hudson states ‘The requirement for public benefit is generally conceptualized in the cases by considering what will not constitute a public benefit.’ 2Although the provision of sample reports may lead to template reporting by some charitable organizations, that is believed that the benefits of providing sample ports far outweighs the risks. It is also promised that the charitable organizations will be provided with supplementary guidance with the help of Public-benefit assessments and decisions along with the new Charity Tribunal. A number of actual Public-benefit reports of charities will be provided as well and all it is expected that this change would be evolving and us to be challenging for all the charitable organizations. It is also important for existing charitable organizations that the exercises the Public-benefit test. Public-benefit test is a new kind of test which is applied during the time a charitable organization registers; furthermore the Public-benefit test is a continuous assessment which evaluates the day to day activities of charitable organizations. Have all charities are expected to take advantage of the tax exemptions which are being granted to the cattle organizations. Once they operate for the Public-benefit, they can automatically take advantage of the tax exemptions. Another great change that has come about is that in this new public benefits requirement, the presumption of Public-benefit which was earlier attached with the charitable organization has been completely removed. It has been replaced by testing the actual activities of charitable organizations. When measuring the benefits to the public, it will not be the quantity of benefits which would be the only measurement for gauging the success of a charitable organization, a number of qualitative judgments would also be made which would give a clear picture of the magnitude of Public-benefit a charitable organization is rendering. However it is certain that new changes will not count the benefits to specific individuals by a charitable organization. The Organizations Affected The charitable organizations or charitable sectors which would require changing its overall structure would most probably include private hospitals, independent schools, and charities like opera houses as well as private homes. All these organizations are known for charging substantial fees which would most probably exclude the sections of people who could be regarded as economically backward. Hence the fee structure of these institutions would be greatly changed by the changed Public-benefits requirement. A few of the methods which organizations can adopt for increasing the chances of succeeding in the public benefits test include increasing of public access to facilities and subsidizing the fees for low income groups while keeping the same fee structure for high income groups. In case charitable organization fails to pass the Public-benefit test and convince the Charity Commission, it would have a great risk of being removed from the Register Charities. However the than using is that the Charity Commission will not be taking extremely stringent measures at the outset. Hence the probability of a large scale change is very unlikely. The Charity Commission will be consultative at the outset which would allow the organizations to adapt to the changing requirements. Trustees are expected to take a brand new role in ensuring that their charity organization provides more benefit to the public. Conclusion All in all, these sweeping changes to the public benefit requirement under the Charities Act 2006 are completely transforming the way charitable organizations in the United Kingdom operate. The nonprofit sector and the Public-benefit organizations are therefore expected to adapt to these new changes in order to if be considered a charitable organization and ensure that they are not removed from the Register of charities. Once the charitable organizations are assured of the Public-benefit status, they’ll be eligible for better tax exemption policies as well as a marked leniency in the stiff accountability requirements which would otherwise be required. The charitable organizations of the UK thus should be trying its best to bring about a shift in their thinking process for remaining with the Register of Charities. Bibliography Anheier, H. and Leat, D, Creative Philanthropy (London: Routledge, 2006) Frumkin, P. Strategic Giving: The Art and Science of Philanthropy(Chicago: University of Chicago Press, 2006) Garner, B. A. Blacks Law Dictionary (St. Paul: West Group, 1999) Hudson, A. Understanding Equity & Trusts (London: Routledge, 2004) Hayton D.J. & Marshall O.R., Hayton & Marshall: Commentary and Cases on the Law of Trusts and Equitable Remedies (London: Sweet & Maxwell, 2005) Maudsley R.H. & Burn E.H., Maudsley & Burns Trust & Trustees: Cases and Materials (London: Butterworths, 2008) Office of the Third Sector, Charities Bill Background, [Accessed 26 December 2009]  Read More