Charity Commission releases guidance on changes to charity law

05 Aug 2022 News

The regulator has released guidance for charities on changes to expect as a result of the Charities Act 2022, which will amend the Charities Act 2011.

The changes will come into force this autumn and throughout 2023, and the Charity Commission will publish updated guidance when the changes take effect. 

Charities currently have a statutory power that they can use, in certain circumstances, to pay trustees for providing a service to the charity beyond usual trustee duties, or goods connected to that service. 

This power is being changed by the Charities Act 2022 and charities will only be able to pay trustees in certain circumstances just for providing goods to the charity, such as for supplying stationery. 

Changes to ex gratia payments

Furthermore, there will also be changes to moral or ex gratia payments, where a charity does not have a legal obligation to make a payment but its trustees feel morally obliged to do so.  

This most frequently occurs when a charity receives a legacy and there is evidence that the donor has changed their mind since making their will, according to the Commission. 

The Charities Act 2022 will introduce new powers that will enable charities to process ex gratia payments for small amounts without applying to the regulator. What dictates a ‘small’ amount depends on the charity’s gross income for the last financial year. 

For example, the maximum individual payment for a charity with an income of over £1m would be £20,000, compared to £2,500 for a charity with an income of between £25,000 - £250,000.

Fundraising appeals that cannot be used for intended purposes

Under the current Charities Act, if a fundraising appeal does not deliver its aim, raises too much money or cannot be used for its intended purpose, a charity may not be able to use all or any of the money raised. 

However, changes to the Charities Act aim to reduce these complexities. The current requirement which states in some circumstances charities must wait six months for donors to ask for a refund will no longer apply.

The regulator says there will also be a simpler process for obtaining the Commission’s authority to verify the use of funds. Moreover, if the donations were made in pursuit of one charitable purpose which can no longer be achieved, the donations can be spent on new purposes if they surmount to less than £1,000, and in these circumstances trustees can act without the Commission’s involvement. 

Other changes to the Charities Act

Under the Charities Act 2022, charities that are governed by a Royal Charter will be able to use a new statutory power to change sections in the Royal Charter if the Privy council approves it. 

The new act will also update provisions relating to giving public notice to written consents and orders of the Commission under various sections of the Charities Act 2011.

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