Charities Act 2022 – what it means for your charity

Several key changes to charity law are set to be introduced over the next twelve months with the aim of making life simpler for trustees and to help maximise what charities deliver.

The technical amendments to the Charities Act 2011 were proposed in May last year and given Royal Assent in February 2022. Now known as the Charities Act 2022, it is only applicable to England and Wales.

The changes are designed to save charities money and also ease the burden on trustees, which will mean they can focus on running the charity while keeping a strong oversight for when things do go wrong.

It is also hoped that the changes will reduce some of the bureaucracy and relieve some of the regulatory pressures on trustees.

The five key changes include:

Rules on how charities can amend their charitable objectives (to be introduced in Autumn 2023) – The aim is to bring into line the ability to update or change a charity’s purpose, regardless of the charity’s structure. Charities will still need to discuss the changes with The Charity Commission, as they could potentially affect their charitable status.

How Charitable Incorporated Organisations (CIOs) and unincorporated charities can amend their constitutions (being implemented in Autumn 2023) – It will now be much easier for charities and trustees to amend their governing documents. However, in certain circumstances, a charity may still be subject to the Commission and the Privy Council’s approval.

New powers on making Ex gratia payments (this is under further consideration prior to commencement) – Ex gratia payments will be allowed in certain circumstances now without the Commission’s prior approval. This amount will depend on the size of the charity but starts at £20,000 with a sliding scale for smaller charities. This threshold is per payment. There is now also the ability to delegate the decision-making to staff or committee members. However, it is important for trustees to understand their moral obligation for the ex gratia payment.

Significant changes on disposing of land (being implemented in Spring 2023) – Charities will have more straightforward rules on what advice they must receive on land disposals and be able to access a wider pool of professional advisors, which will hopefully save time and money when selling land. Historically, reports have been disproportionate to the value of the land, and this is a reduced reporting requirement.

The ability to use permanent endowment funds (implementation Spring 2023) – When charities hold ‘permanent endowments’ (money or property originally meant to be held by the charity forever), there will be more flexibility to make use of these. Trustees will have greater freedoms to release some or all of an endowment, depending on the value. This includes allowing trustees to borrow a sum of up to 25 per cent of the value of these permanent endowment funds, without having to get the Commission’s approval first. The threshold is £25,000 with anything above this amount still needing the Commission’s prior approval.

More powers re-directing charities on naming issues, mergers, and incorporations (introduced from Spring 2023) – The Charity Commission have new powers to direct charities to change working names, as well as charity names, and powers to delay registration when trustees don’t update the name when advised. There will also be a new right for a corporate trustee or charitable trust to have trust corporation status, which saves an application to the Lord Chancellor.

In addition, there are some other changes:

Previously, trustees could only be paid for a supply of services to their charity, but the new Act enables trustees to be paid for goods provided to the charity in certain circumstances, even if not expressly stated in the charity’s governing document. This will allow the charity the flexibility to access goods from trustees if it’s in the best interest of the charity, for example cheaper, without needing Commission permission. This came into force on the 31st October 2022.

When charities have fundraising campaigns for specific purposes (restricted funding), if these appeals fail (due to not reaching a fundraising target etc.), any donations received below £120 can be used on similar charitable purposes, without the express need to contact individual donors to obtain permission. This came into force on the 31st October 2022.

Full details and guidance on how the government intends to implement all these changes can be found here. For more information about the Charities Act 2022 or any other issue affecting your charitable or not-for-profit organisation, please contact our specialist charities team or via our Contact Us form.

By Manager, Kerry Tyas