As a charity Trustee, you are required to “have regard” to the Charity Commission’s guidance on public benefit when making decisions, are you clear what this means?

public benefit - are we clear?

The public benefit requirement has always raised complex questions which in some contexts are controversial and in others are deeply political (for example the question of whether independent schools should have charitable status). when considering the charities act 2006, parliament shied away from setting any statutory definition of public benefit and left the position to be determined under the common law. it also removed the presumption of public benefit that had been thought to apply in certain areas. parliament therefore left the charity commission with the difficult task of providing guidance in an uncertain area and facing litigation as people seek to challenge that guidance. The Government’s recent response to parliament (September 2013) states that the outcome of the changes to public benefit introduced by the charities act 2006 have “been an administrative and financial disaster for the charity commission and for the charities involved, absorbing vast amounts of energy and commitment, as well as money”.in the interests of drawing a line under the issue, the charity commission has now published revised public benefit guidance for charities. The guidance has been split into three short high level guides that cover (a) the public benefit requirement, (b) how this arises when running a charity and (c) the obligation to report on public benefit. we have set out a summary of the guidance below.

guide 1: the public benefit requirementin order for an organisation to meet the criteria to be registered as a charity, it has to demonstrate that it has been established for a purely charitable purpose, ie a purpose which is one of the statutory descriptions of purposes, now set out in the charities act 2011, and which is for the public benefit. note, it is the purposes that must be for the public benefit, not the actual activities that are

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carried out to fulfil the purposes.

to meet the public benefit requirement:

• The organisation’s purposes must be beneficial. This cannot be decided by personal views and must be proved on an evidential basis, but is not always something that can be quantified or measured. in most cases the position will be clear.

• any detriment or harm resulting from the purpose must not outweigh any benefit. again, this is addressed on an evidential basis. where a benefit is obvious, it would be necessary to demonstrate significant potential detriment in order to outweigh the benefit.

• a sufficient section of the public must benefit. There are no set rules in deciding what constitutes a “sufficient section” of the public and this is dealt with on a case by case basis. for example, this could be confined to a geographical locality, a community, by reference to an occupation or profession. However, it cannot be defined by reference to any “protected characteristic” under the equality act 2010 unless it is justifiable under either one of the charity exceptions or any other exceptions under the equality act. it is not appropriate to restrict benefit to family, employees or members of a particular organisation (but different rules apply for poverty charities).

• There must be nothing more than “incidental private benefit” arising as a result of the relevant activity.

where an organisation has more than one purpose, it is necessary to consider whether each purpose meets the requirement on its own and the benefit provided by one purpose cannot be offset against the lack of benefit from another.

guide 2: public benefit in operationregistration is not the end of the story, when operating a charity the trustees must continue to show that the charity is being run for the public benefit. when trustees make decisions, those decisions will determine who benefits from the activities of the charity.it is perfectly appropriate to focus on certain beneficiaries or classes of beneficiaries. trustees must however give careful thought as to the extent to which it is appropriate to make choices, especially to the extent that such choices may exclude the poor from benefitting. it is possible to charge for using a charity’s services and to limit access to facilities, but in doing so trustees must not exclude the poor from benefitting and any provision for the poor must be more than a minimal or token provision.The new guidance confirms the tribunal’s decision and makes it very clear that it is trustees who must decide how to carry out the activities of the charity. There is no right decision and it is not for the courts or the charity commission to tell trustees what decision they must make. trustees need to identify who can potentially benefit from their charity’s purpose and then give proper thought to how to best achieve the charity’s purpose by considering the range of possible ways that this can be done.

guide 3: reporting on public benefitThe charities (accounts and reports) regulations 2008 provide that trustees must report on public benefit on an annual basis. This does not need to be a separate section of the trustees’ annual report and in most cases it will be sufficient to use the report to:

• explain what purposes the charity is there to achieve.

• explain what has been done during the year to fulfil those purposes.

• confirm that in deciding what to do during the year the trustees have had due regard to the charity commission’s public benefit guidance.

so are we clear?whilst the charity commission’s revised guidance is shorter and makes it clear that it is “guidance” as opposed to mandatory requirements, the position remains that there is no clear right or wrong answer when the question of public benefit is considered. in the case of each charity it will be a matter of looking at the particular circumstances and making a judgment call. whilst this allows flexibility for the future, it will be difficult for trustees to always ensure that they are acting in the public benefit. it also remains the case that there is still some ambiguity about the role of public benefit in relation to religious charities, and whether there is any presumption of public benefit. Observers continue to watch closely the outcome of the tribunal proceedings relating to the case of the preston down trust (part of the exclusive brethren), which is challenging the commission’s refusal to register the preston down trust as a charity on public benefit grounds.

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If you or your Trustees would like to discuss the issues raised by this note and the potential options for your charity, please contact:

Jo coleman, partner, ibb Solicitors charities team01895 207809 jo.coleman@ibblaw.co.uk

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© 2013

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