Policy paper

How the Charity Commission makes charity registration decisions

Published 23 May 2013

Applies to England and Wales

1. The purpose of charity registration

It’s the Charity Commission’s role to only register organisations that:

• meet the legal test for charitable status, and
• are required to register

Registration is also the start of the commission’s relationship with a charity as the charity regulator. It needs to make sure the trustees understand their role and responsibilities so that, once registered, the charity will comply with its legal requirements.

The commission decides:

• whether an organisation is set up as a charity
• if it should register it
• if it should monitor it after registration

This decision is based on whether the information provided by the applicant demonstrates that it:

• satisfies the legal definition of a charity in the Charities Act
• is required to register
• will operate as a charity once registered

At registration the commission also checks the organisation satisfies other requirements for charities relating to:

• its name
• its governing document
• its trustees
• its finances

2. The legal definition of a charity

Satisfying the legal definition of a charity means the commission must be satisfied that the organisation:

• is subject to the control of the High Court’s charity law jurisdiction – which generally means it is based in England and Wales
• is established for charitable purposes only

If an organisation applies to the commission to register as a charity, the commission must make a decision about whether each of its purposes is charitable.

Based mainly on the information provided in the registration application, it decides whether a purpose is charitable in the same way that the law decides it.

This means the commission must decide:

• what the purpose is
• whether the purpose falls within the list of 13 descriptions of purposes in the Charities Act
• whether the purpose is for the public benefit

3. The steps the commission takes when making registration decisions

The commission takes the following steps when deciding whether an organisation is a charity and can be registered:

1. decide if the organisation is based in England and Wales
2. decide if the organisation is required to register
3. decide what the organisation’s purposes are
4. decide if each purpose falls within the descriptions of purposes
5. decide if each purpose is for the public benefit
6. assess if each purpose will be carried out for the public benefit
7. decide whether to register

The commission refers to the legal framework when considering every application to register a charity. It uses the information provided in the registration application to make a decision about whether an organisation should be registered as a charity.

Its decision will be based mainly on the information the applicant supplies but in some cases the commission may consider other relevant background information, such as information on the charity’s website, or information sent to it by third parties or other regulators.

3.1 Step 1: decide if the organisation is based in England and Wales

The commission can’t register a charity that is subject to another country’s jurisdiction.

To be able to register a charity, it must decide whether it’s based in England and Wales (so that it falls within the High Court’s charity law jurisdiction).

The following factors can indicate that an organisation is based in England and Wales:

• its governing document adopts the law of England and Wales to govern it
• most of the trustees live in England and Wales
• most of the organisation’s property (including its funds and main bank account) is in England and Wales
• the organisation’s centre of administration is in England and Wales

3.2 Step 2: decide if the organisation is required to register

When assessing an application for registration, the commission first considers whether the organisation is required to register, if charitable.

A charitable incorporated organisation (CIO) must have only charitable purposes that are for the public benefit. All CIOs must register to come into existence.

All other types of charity will have to provide evidence to show that it has an income of more than £5,000 a year to be required to register.

If its income is below £5,000 it can apply for voluntary registration. The commission will only consider an application for voluntary registration in exceptional circumstances, which the applicant will need to specify in their application.

If the organisation is an excepted charity the commission won’t register it whilst it’s excepted.

If the organisation is an exempt charity the commission can’t register it.

3.3 Step 3: decide what the organisation’s purposes are

An organisation’s ‘purpose’ is what it’s set up to achieve.

Before the commission can decide whether a purpose is charitable (that it falls within the descriptions of purposes and is for the public benefit), it must first be clear what the purpose is.

The objects clause

The commission’s starting point is to look at how the purpose is expressed in the organisation’s governing document (the legal document that creates a charity and says how it should be run).

The purposes are usually written in the ‘objects clause’ of the governing document. But the commission looks at the whole of the governing document such as powers, trustee benefit and dissolution clauses, as this can help it identify the organisation’s purpose.

To be charitable, a purpose must be ‘certain’ so that, if necessary, it could be enforced by the court.

If the wording used to express a purpose in a governing document isn’t clear, or if the scope or meaning of the purpose isn’t clear, then the purpose might not be ‘certain’. In these circumstances, the commission can consider relevant background information, including the organisation’s activities, to help it identify the organisation’s purposes.

Relevant background information

The commission considers the nature and scope of the purpose as the law would, that is as a ‘reasonable person with relevant background knowledge’ would.

‘Relevant background knowledge’ includes everything that would affect the way the purpose would be understood by a reasonable person. The purpose is what this ‘reasonable person’ would say it is.

In many cases the commission finds that the purposes aren’t capable of being charitable, but the information provided in the application clearly shows that that the organisation carries out charitable purposes for the public benefit. In such cases, where appropriate, it may advise on changes to the wording of the objects so that they express only charitable purposes.

The commission must consider what could be done under the purpose, not what is currently being, or has been, or will be done.

If what could be done under a purpose (as it is expressed) includes something that isn’t charitable then it can’t be a charitable purpose, the organisation isn’t a charity and the commission can’t register it.

If the applicant chooses to submit a fresh application it would need to be clear from the application that the organisation no longer has the non-charitable purpose and has stopped any associated activity.

3.4 Step 4: decide if each purpose falls within the descriptions of purposes

Once the commission can be certain what the purpose is, it must consider whether it falls within one or more of the 13 descriptions of purposes set out in the Charities Act.

What needs to be demonstrated varies according to the particular purpose.

For example, some of the descriptions (such as ‘the advancement of amateur sport’) are defined, or partially defined, in the Charities Act.

For more information on what they look for in relation to each of the descriptions of purposes, read the commission’s guidance on charitable purposes.

New or unusual purposes

If the purpose is new or unusual the commission will consider whether it can recognise it by analogy as a new charitable purpose within the law.

3.5 Step 5: decide if each purpose is for the public benefit

To be charitable, a purpose must be for the public benefit.

When making a registration application, the commission asks applicants to answer specific questions to demonstrate how each of their charity’s purposes is for the public benefit, having regard to its public benefit guidance.

For more information on what the commission looks for in relation to the public benefit of purposes falling within each of the descriptions of purposes, read the commission’s guidance on charitable purposes.

The commission will decide if a purpose is for the public benefit based on the law as it applies to that purpose and the facts of the particular case. The law on public benefit is contained in charities’ legislation and decisions of the courts.

3.6 Step 6: assess if each purpose will be carried out for the public benefit

Once a charity is set up, its trustees must operate it as a charity in accordance with charity law and the charity’s purposes.

All of a charity’s purposes must be for the public benefit. This means that, when running their charity, the trustees must carry out its purposes for the public benefit. They also have a duty to report on how they have done this in their trustees’ annual report.

It’s for a charity’s trustees to decide how to carry out their charity’s purposes for the public benefit. This usually doesn’t concern whether or not an organisation is a charity. However, the commission asks about this at the registration stage because if it isn’t possible to carry out a purpose for the public benefit, this would suggest that the purpose itself isn’t for the public benefit.

If possible, the trustees could redefine their charity’s purpose to clarify how it will be carried out for the public benefit. In extreme cases, where it isn’t possible for the trustees to put right the difficulties with the organisation’s purpose, this would mean that the purpose isn’t charitable and so the commission couldn’t register the organisation as a charity.

When making a registration application, the commission asks applicants to answer specific questions to demonstrate how the trustees will carry out each of their charity’s purposes for the public benefit, having regard to its public benefit guidance.

For more information on what it looks for in relation to purposes falling within each of the descriptions of purposes, read the commission’s guidance on charitable purposes.

3.7 Step 7: decide whether to register

In order to decide whether or not to register an organisation as a charity, the commission needs to have sufficient information to enable it to make that decision.

If an application for registration is incomplete it will return it and ask the applicant to resubmit it with the information needed.

Once the commission has all the information, it will make a decision based on the information provided in the application and the governing document and on the relevant law.

Its decision will be one of the following:

• a decision to register
• a decision to register with conditions
• a decision to not register (‘formally reject’ the application)

3.8 Making a decision to register

Where the commission is satisfied that the organisation is a charity and should be registered, it’ll make a decision to register it.

It will advise the applicant of their decision, inform them of the charity’s registered number and provide the trustees with a list of online guidance relevant to their role as trustee.

3.9 Making a decision to register ‘with conditions’

In some cases, the commission may be satisfied that an organisation is a charity and should be registered but have concerns about how the trustees intend to carry out the charity’s purposes. Or it may wish to offer general advice about running the charity so that it has the best opportunity to flourish within the legal framework for charity.

Where the commission considers it appropriate, it will inform the applicant of their decision to register but offer advice or guidance on governance and good practice issues. This may involve suggesting changes to the administrative provisions of the charity’s governing document which don’t affect its charitable status.

Experience has shown that charity trustees appreciate being given this sort of guidance at this time.

In some cases the commission may decide to register the charity on condition that the trustees take certain actions to remedy concerns it has about how the charity will operate.

Depending upon the nature of its concerns and the potential risks to the charity, those conditions may take the form of:

• confirmation by the trustees that they understand the legal framework for charity and will act to operate the charity in accordance with commission advice or guidance
• evidence of firm plans that the trustees have to address those concerns
• evidence that the trustees have taken a particular action to address the commission’s concerns

In some cases, the commission may monitor the charity after registration to follow up on its advice to the trustees to see whether its concerns have been addressed. It may advise the applicant where they intend to do this. It may, for example, simply need to look at how the trustees report in their trustees’ annual report on how they have carried out their charity’s purposes for the public benefit.

The commission may take regulatory action if the trustees have not taken the required actions.

3.10 Making a decision to not register

Where the commission isn’t satisfied that an organisation is a charity, it’ll make a decision to not register (or ‘formally reject’ the application). It will explain in writing the reasons why it has made its decision.

The commission will explain that if the applicant disagrees with its decision, they can set out the reasons why they think the organisation is charitable and provide additional information or evidence. This will allow the commission to review its decision.

If the commission declines to register the organisation, the applicant can either:

• reapply, providing they have addressed the commission’s reasons for rejection
• ask the commission to review its decision if they think it’s wrong
• appeal to the Charity Tribunal

4. What the commission expects of applicants

Setting up and running a charity takes commitment. A charity’s trustees are accountable from the moment they start the process of setting it up and then applying to register it.

The commission’s experience is that better informed applicants are more likely to successfully register their charity and in a shorter time.

The commission expects applicants to have read its guidance so that they understand how to set up a charity and what is required to register one.

Applicants need to:

• have decided that their organisation is eligible for charitable status
• be able to demonstrate that their organisation is charitable
• be able to demonstrate that the trustees understand their role and responsibilities

The commission expects applicants to be clear about their charity’s purposes and understand the requirements of being a charity.

The commission can only assess an application and make a registration decision when it receives a full application.

The commission expects applicants to:

• provide all the information requested in the online application
• provide full and honest answers to the questions
• confirm this by completing and signing the trustee declaration form

5. Registration research, facts and figures

The commission’s published registration decisions are examples of decisions it has taken which are novel, significant or otherwise of wider interest.

Its registration bulletins present key facts and figures about newly registered charities.

The commission’s research into registration applications explores trusteeship and governance issues and gives a snapshot of the challenges and opportunities facing charity register applicants.