Charity Act 2006 (UK)

Charities Act 2006 – the main changes
likely to affect FWBO/TRIRATNA Charities: (posted December 06)

Those of who you who are registered charities should have received from the charity commission their latest e-mail newsletter that has information about the new Charities Act 2006, parts of which are now coming into force. The newsletter is available at: www.charitycommission.gov.uk/tcc/newslist.asp. Most of the changes are good news €“ cutting back on the bureaucracy involved in running charities.

I’ve cut and pasted below those changes that, as far as I can tell, are most likely to affect FWBO/TRIRATNA charities. Numbers 4, 5, 7 & 8 seem particularly significant.

More information can be found in the charity commission newsletter, by e-mailing them via the newsletter, or by contacting them on 0845-3000 218.

The FWBO/TRIRATNA Trustees Handbook 2007 (elsewhere on this website) also tells you about your legal obligations as a trustee of a charity in England and Wales.

Vajragupta

1) New thresholds for registration:
“Put simply, if an organisation is charitable and has annual income of £5,000 or above it must be registered with us.”

2) Freedom for smaller charities to evolve and change:
“[The Act}… allows smaller, unincorporated (non-company) charities with income of less than £10k a year to take certain actions, outlined in this section, without having to come to the Commission for permission. We will still want copies of the resolutions passed by the trustees to make these changes.”
e.g. Transferring assets
“Trustees of these charities can transfer their charity’s assets to another charity whose objects are consistent with their own.”

3) Amending admin rules:
“The Act gives the trustees of all non-company charities power to pass a resolution to alter the parts of their charity’s governing document which set out how they administer their charity, for example the number of trustees needed to form a quorum at meetings. They will only need to use this power if it is not already included in the charity’s governing document.”

4) New Structure for Charitable Companies:
“Charities which want a corporate structure currently have to register both as charities and as companies, which means they have to meet the dual regulatory requirements of both the Charity Commission and Companies House. The Act creates a new vehicle for these charities €“ the Charitable Incorporated Organisation (CIO). A CIO will have the advantages of a corporate structure, such as reduced personal liability for trustees, without the burden of dual regulation.
Creating CIOs will require additional, secondary legislation and the recently formed Office of the Third Sector will start consultations in preparation for this legislation in the New Year. We will provide more information when we have it, via this newsletter and our website.”

5) Payment of Trustees:
“The Act does not allow trustees to be paid for being trustees. Voluntary trusteeship still remains a key principle of charity.
However, the Act allows trustees to pay an individual trustee for providing an additional service to the charity if they think it’s in the best interests of the charity – without having to come to the Commission for authorisation to do so.
An example of this could be a trustee who’s a plumber providing plumbing services to the charity as long as the trustees agree that it’s in the charity’s best interest, for example, because the trustee is charging a better price or in some way delivering a better service than the trustees could get elsewhere. Important points to remember:
• the number of trustees receiving payment in this way must be in a minority
• the amount paid must be reasonable and set out in a written agreement between the trustee and the charity; and
• the trusts or governing document must not contain any specific provision forbidding this type of payment.”

6) Trustee indemnity insurance:
Trustee indemnity insurance covers trustees from having to personally pay out when claims are made against them, such as health and safety breaches which cause an employee injury, as long as the mistake was honestly made and not the result of wilful misconduct. In practice, trustees are not held liable in this way for honest mistakes but anxiety about the possibility may have made people reluctant to become trustees. There was also the issue that the charity’s funds should not be used to pay for insurance which would benefit trustees.
The Act allows trustees to take out trustee indemnity insurance using the charity’s funds without our permission, as long as there’s no provision in the charity’s governing document which specifically forbids this. If there is a specific prohibition in the charity’s governing document then trustees will need to come to us so that we can amend this before they can buy trustee indemnity insurance.”

7) Changing the threshold for professional audit and independent examination:
“The Act simplifies the rules about when a professional audit is required and gives both charities which are companies, and those which aren’t, similar thresholds.
A non-company charity’s accounts will have to be professionally audited if it has:
• gross annual income over £500k; or
• an aggregate value of assets over £2.8 million and gross annual income over £100k.
Below this threshold, for non-company charities, an independent examiner can be used instead of an auditor. An independent examination is not required if the charity’s income is below £10,000. If the income is above £250,000 then the independent examiner must have an appropriate accountancy qualification.
For charities which are companies, accounts will have to be professionally audited if the charity has:
• gross annual income over £500k; or
• a balance sheet total (aggregate assets) over £2.8m.
Charitable companies with an income between £90k and £500k and assets of £2.8 million or less are not required to have their accounts audited if they provide an accountant’s report. For a charitable company with income of £90,000 or less then neither a professional audit nor an accountant’s report is required unless its assets are over £2.8m.”

8) Fundraising solicitation statements:
“Currently professional fundraisers and commercial participators fundraising for charities must have a written agreement with the charity, and must make a statement telling potential donors that they are getting paid when they ask for money. This is so that potential donors can make an informed choice about giving. The Act makes two main changes to these ‘solicitation statements’:
• They will have to include the amount the professional fundraiser or commercial participator will be paid for fundraising for the appeal, or if the specific amount isn’t known, to give a reasonably accurate estimate of what they’ll receive.
• Slightly different statements will also have to be made by employees, officers and trustees of charities who act as collectors. This doesn’t apply to volunteers.”

9) Public charitable collections e.g. in public places and door to door collections:
There are some slight changes to permits for public collections.

10) Criminal Records Bureau Checks:
Although not part of the 2006 Act, the newsletter also contains information about CRB checks on those working with children and vulnerable adults:

“In the last issue of this newsletter we explained that from June this year we were asking would-be charities working with children or vulnerable adults to provide us with evidence that they’d carried out CRB checks on trustees before the registration process. This was the first step in creating a more robust, proportionate system to safeguard vulnerable beneficiaries.

Trustees have responsibility for ensuring appropriate CRB checks are carried out on relevant employees and volunteers and they must take this responsibility very seriously. Our guidance Finding new trustees: what charities need to know (CC30) is a useful starting point. Find it on our website under ‘Publications’ or call Charity Commission Direct on 0845 3000 218 for a copy.”

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