The revised public benefit guidance

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On 16 September 2013, the Charity Commission published its revised public benefit guidance for all charities. It is crucial that charities understand and have regard to the public benefit guidance throughout their existence; from formation to decision making to annual trustee accounting. The revised guidance aims to clarify the Charity Commission’s position on monitoring public benefit in charities and seeks to make public benefit requirements clearer.

On 16 September 2013, the Charity Commission published its revised public benefit guidance for all charities. It is crucial that charities understand and have regard to the public benefit guidance throughout their existence; from formation to decision making to annual trustee accounting. The revised guidance aims to clarify the Charity Commission’s position on monitoring public benefit in charities and seeks to make public benefit requirements clearer.

The revised guidance was necessary following a decision in 2011 of the Upper Tribunal in a matter brought by the Independent Schools Council. That case raised questions regarding the decisions to be taken in considering what is for the public benefit and how a fee charging charity may operate for the general public, particularly when some sections of the public are unable to afford its services. Sections of the 2008 guidance were then extracted or redacted and the Charity Commission commenced a review of its public benefit guidance in 2012. That review revealed further concerns from the third sector relating to the lengthy and complex nature of the existing 2008 guidance and the fact that it was hard to interpret, given that it was guidance, not statute, and that it erred in its interpretations in part.

The guidance is now presented in three sections, as follows:

PB 1 “The public benefit requirement”
This guidance focuses on what it means to be a charity. In order to be a charity the charity’s purposes must be for the public benefit. This requirement is set out in the Charities Act 2011 but the Act does not define the “public benefit requirement”. Thus, the guidance explains how a charity’s purpose must be for the public benefit, what the public benefit requirement is and what it means. The guidance is essential reading for charities that are forming or thinking about amending their objects.

With the advent of the new guidance it is now clearer on the registration application form what the Charity Commission is looking for to demonstrate the public benefit of your charity. Reference should also be made to PB2 when applying to the Charity Commission for registration, as PB2 assists in explaining the way in which a charity will operate for the public benefit.

PB2 “Running a charity”
Charities must carry out their charitable purposes for the public benefit. Thus, this guidance is for existing charities on how they may operate their charity so as to fulfil their purposes for the public benefit. PB2 offers guidance on maintaining public benefit and what to consider when taking decisions which could affect this.

The guidance also elaborates upon the necessity to consider the access of the poor to any charitable activity that charges a fee. Although "poor" is not defined, the guidance suggests that this concern will relate to “charges that someone of modest means will not find readily affordable”. Further examples show that a small admission fee to a venue will not be caught by this concern. However, the guidance does make clear the principles established in the Independent Schools Council matter, in that the level of provision in relation to the poor “must be more than minimal or token”. Importantly, the trustees should try to look beyond this level and consider what further provision may be made, given the circumstances of their charity and its potential for public benefit.

Primarily PB2 is aiming to equip trustees with more user friendly guidance to assist them with operating their charities and making informed decisions for themselves. This is in contrast to a trustee perhaps trying to work out what the Charity Commission’s default decision might have been, from the elaborate 2008 guidance.

PB3 “Reporting”
All registered charities have a duty to report on how they have carried out their charity’s purpose for the public benefit. The requirements for how this is completed depends on whether they are a “smaller” or “larger” charity. The guidance sets out the reporting requirements including the requirements for the Trustees Annual Report and the manner in which the charity may explain how it has operated for the public benefit, in pursuing its charitable aims.

The Charity Commission makes it clear that the guidance is not the law on public benefit and is instead high level general guidance. Nevertheless, charities have a legal duty under the Charities Act to have “regard” to the Charity Commission’s public benefit guidance “when exercising any power or duties to which the guidance relates”.

The guidance does not deal with specific charities, for example educational charities, and is a generic overview. The educational charity guidance is currently under review.

The overall ethos is that charities should feel more equipped to take the best public benefit decision they can for their charity, from the range of options that may be open to them. There is, however, a concern that some trustees may no longer feel they can prove they are acting in accordance with best practice, as was previously laid out in the guidance. On the whole though, the new public benefit guidance is easier to digest, manoeuvre around and use and should be of assistance to all charities in making their decisions.

How can we help you?
If you would like to discuss any issues raised by this article, please contact Helena Jones on 0113 388 8443 or helena.jones@mills-reeve.com

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