Casework Guidance

B1 Regulation of exempt charities - key facts

• Exempt charities are exempt from registration and direct regulation by the Commission.
• Before the Charities Act 2006, exempt charities had no charity regulator. We could not use our investigation and enforcement powers. We could give advice or permission if the charity requested it.
• The 2006 Act increased the regulation of exempt charities by:
  • providing for the appointment of principal regulators, responsible for promoting compliance with charity law
  • making more of our investigation and enforcement powers apply to exempt charities with a principal regulator (but we must consult the principal regulator)
  • providing for exempt charities to lose their exemption when there is no suitable body to act as principal regulator
• The 2006 Act changes are ongoing. Most exempt charities have principal regulators already; some do not yet. A few have lost exempt status (and had to register if their income is above £100k, otherwise they are excepted from registration).
• When dealing with exempt charities, we must take account of whether they have a principal regulator or not, because it affects our regulatory approach.
• If an exempt charity has a principal regulator:
  • we must consult the principal regulator before using any of our powers
  • we must consult the principal regulator before giving specific advice or guidance
  • we can only open a statutory inquiry if the principal regulator asks us to

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B2 Exempt charities - where to start

The key questions to start with are:

• Is this an exempt charity?
• If so, does it have a principal regulator?

We need to know because it affects which parts of the Charities Act apply, which powers we can use, and whether we must consult the principal regulator first. Otherwise we could act in breach of our powers.

 

B2.1 Identifying exempt charities and their principal regulators

Exempt charities and their principal regulators are listed in Annex 1 of Exempt Charities (CC23).

Common investment and deposit schemes that admit only exempt charities are also currently exempt.

Not all English universities and Higher Education Institutions (HEIs) are exempt. You can check whether a HEI is exempt on HEFCE’s website. 

 

B2.2 The Charities Act and exempt charities

• Some Charities Act provisions do not apply to any exempt charity
• Some provisions only apply if there is a principal regulator
• We can give advice or permission to any exempt charity that requests it
• Our investigation and enforcement powers only apply if there is a principal regulator
• If there is a principal regulator, we must consult them before using any of our powers (including advice and permission)
• Principal regulators do not share our Charities Act powers; they may be given additional powers if required, but only to promote compliance with charity law
• Principal regulators can ask us to intervene, or open an inquiry, if they have concerns about one of their charities

This is explained in more detail in part E of this guidance and also in Exempt Charities (CC23). 

 

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B3 Exempt charities with principal regulators

B3.1 Consulting the principal regulator

The Charities Act provides that if an exempt charity has a principal regulator:

• We must consult the principal regulator before using any of our powers. This includes
  • enabling powers (advice and permissions),
  • protective (investigation and enforcement) powers,
  • powers conferred on us by the governing document or other legislation.
• We can only open a statutory inquiry if the principal regulator asks us to (see section B3.6).
   

The Charities Act does not say how we should consult principal regulators. We can agree what is appropriate in different circumstances. An email or phone call will usually be sufficient. This will be covered in our Memorandum of Understanding (MoU), which will also explain who to contact for different issues – see section B3.8. What matters is that we keep a written record of our consultation and the principal regulator’s response. It should be treated like any other legal authority.

 

If we may need to use several powers during a case, we should consult the principal regulator on the whole case plan at the outset, so we don’t have to go back to them every time we need to use a different power. We should keep the principal regulator updated on progress. Any investigation should involve joint working with the principal regulator.

 

We are looking into the possibility of arranging with principal regulators that they will always agree to certain specified powers or permissions for any of their charities and do not need to be consulted further in individual cases (within certain parameters). Any such agreement must be recorded and communicated to all key Operations, Investigation and Enforcement, and Policy colleagues. An addition to the relevant MoU may be appropriate.

 

B3.2 When do exempt charities need our permission?

Just like any other charity, an exempt charity needs appropriate powers to act. These can be:

• express powers in law
• express powers in the governing document
• implied powers (one that is not stated in the governing document or law but can be inferred from what else the document or the law says)

We can give an exempt charity a power or permission it needs, if it asks us to and it makes the case. We should apply the same legal and policy considerations as we use for registered charities, taking account of any special considerations for the type of charity concerned (see section B6).

If there is a principal regulator, we must consult them first (see section B3.1).

 

It follows that exempt charities may be unable to use online forms if permissions are generated automatically.

 

B3.3 When can we give advice or guidance?

We can give an exempt charity advice or guidance on request and where this fits with our risk framework. But if they have a principal regulator, we must consult the principal regulator first.

 

We do not have to consult the principal regulator if we are only referring an exempt charity to our published guidance.

 

B3.4 When should exempt charities consult their principal regulator and when should they consult the Commission?

In general, exempt charities should go to their principal regulator with any query first. If we are approached first on any of the following issues, we should refer them to their principal regulator and not deal with it ourselves:

• any question within the (non-charity) regulatory remit of the principal regulator
• basic questions about charity regulation
• reporting any serious incident that has occurred

We shouldn’t, however, expect principal regulators to give advice on technical charity issues or to deal with request for permissions that require Charities Act powers.

 

B3.5 Are there any pitfalls to avoid?

We should be careful to avoid referring an exempt charity back to its principal regulator:

• when the principal regulator has told the charity to ask us
• when the charity needs advice, authority or permission that only we can give – not forgetting that we (not the charity) must consult the principal regulator

We cannot accept an assurance from a charity (or their professional advisor) that a principal regulator is happy for us to exercise our powers (e.g. to authorise an amendment) in any particular case. We must consult the principal regulator ourselves.

 

We should also be careful not to allow an exempt charity to ‘pick and choose’ between advice from the principal regulator and advice from us. If we discover inconsistencies between our approaches on a particular matter, we must take it up with them.

 

B3.6 When can we take regulatory action including formal inquiry?

If we have concerns about an exempt charity, we should discuss them with the principal regulator. This will be a formal information exchange under the Charities Act (see section B3.7).

 

We can only open a statutory inquiry if the principal regulator asks us to. We should inform them of any reasons why we feel a statutory inquiry would be appropriate. If we do open an inquiry, we should continue to liaise with the principal regulator, and make sure we have consulted them about using any of our powers. This is covered by the MoU (see section B3.8).

 

B3.7 Sharing information with the principal regulator and other regulators

The Charities Act allows the Commission and principal regulators to share information, including confidential information. OG 405 Sharing information with other public authorities under the Charities Act 2011 explains the rules about information sharing.

 

B3.8 MoUs and principal regulator contacts

We agree a Memorandum of Understanding (MoU) with each principal regulator, explaining how we work together.

 

MoUs are not legally binding, but they follow the legal framework and set out the rules and principles that we have agreed in order to work together effectively. It is important to know what they say and ensure that we adhere to it.

• MoU with DEFRA    
• MoU with DCMS       
• MoU with HEFCE     
• MoU with DfE
• MoU with Welsh Government           

 

MoUs include key contacts for different purposes such as Operations, Policy, and Investigation and Enforcement. The Head of Function usually delegates day-to-day liaison to a Single Point of Contact (SPOC) in their team. If in doubt, check with the relevant Head of Function. The SPOC should be the usual channel for communication, to ensure consistency in our approach.

 

Please communicate any comments or concerns about the content of a MoU to the Head of Policy Development, Guidance and Review.

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B4 Exempt charities with no principal regulator

B4.1 When do exempt charities need our permission?

Just like any other charity, an exempt charity with no principal regulator needs appropriate powers to act. These can be:

• express power in law
• express power in the governing document
• implied power (one that is not stated in the governing document or law but can be inferred from what else the document or the law says)

We can give an exempt charity with no principal regulator a power or permission it needs, if it asks us to and if it makes the case. We should apply the usual legal and policy considerations, taking account of any special considerations for the type of charity concerned (see section B6).

 

B4.2 When can we give advice or guidance?

We can give an exempt charity with no principal regulator advice or guidance on request, where this fits with our risk framework.

 

B4.3 When can we take regulatory action including formal inquiry?

If an exempt charity does not have a principal regulator, we cannot open a statutory inquiry or use our investigation and enforcement powers; the Charities Act disapplies these powers (see section E).

 

If we have concerns about an exempt charity with no principal regulator, we should look for an appropriate regulator that can take action in response to our concerns. We may be able to offer advice to the regulator with a view to encouraging the charity to comply with the requirements of charity law (see section B4.4).

 

B4.4 Working with other regulators

Whilst there may be no regulator with responsibility for overseeing compliance with charity law, exempt charities with no principal regulator are still likely to be subject to other forms of regulation. We often work with other regulators and may have MoUs with them. There is no requirement under charity law to consult these regulators. 

 

We can exchange information with other regulators as provided by the Charities Act. We may be unable to take any direct action, but we could give advice on the requirements of charity law and any action that the charity needs to take in order to comply with them.

See OG 405 Sharing information with other public authorities under the Charities Act 2011.

 

B4.5 What is the timetable for completing the implementation of the new regulatory framework?

The intention of the Charities Act is that all exempt charities will have a principal regulator or lose their exempt status, but there is no timetable for further phases of changes at present. Further changes require decisions by the Office for Civil Society (OCS), working with the Commission and other regulators. Any decision must be ratified by Parliament.

As soon as Government announces any firm proposals, we will assist with communication to charities that are affected. There will be plenty of time (several months) for charities to prepare for any changes. We always work with any groups of exempt charities that will lose their exemption and be required to register, to help them prepare.

 

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B5 Recording exempt charities casework

Casework for exempt charities should be recorded on our corporate systems in the same way as for registered charities:

• you can create an entry for an exempt charity in Register Plus
• if there is a principal regulator, add them under ‘external references’

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B6 Guidance on specific types of exempt charities

B6.1 Universities and HEIs in England

HEFCE is the principal regulator for these charities - see their website. 

Not all English universities and HEIs are exempt. You can check whether a HEI is exempt on HEFCE's website.

 

Our role in approving amendments

Universities and HE Institutions are constituted in several different ways, most commonly:

• Royal Charter bodies
• statutory corporations (Higher Education Corporations)
• companies limited by guarantee

In most cases, amendments to their governing documents must be approved by the Privy Council Office (PCO). PCO will normally consult us before giving consent.

Cases involving exempt educational charities regulated by HEFCE, including PCO approval work, are likely to require input from a technician or mentor experienced in these issues. 

 

 

Associated Student Unions

Before 2010, student unions were treated as exempt charities because of their relationship with their ‘parent’ HE (or FE) Institution. Student unions are now recognised as independent charities and are no longer exempt. Most are now registered or liable to register; a few smaller ones (income below £100k) are currently excepted.

 

We are now the charity regulator for student unions. If a student union is linked to an exempt HEI, consider informing HEFCE if we are taking action that may affect the HEI. For example, an inquiry into a student union could draw public or media attention to the HEI itself.

 

It is possible for a student union to be constituted as part of a HEI. Such a student union could not register as a charity in its own right. Based on advice from HEFCE and the National Union of Students, we are aware of just one or two instances where this may be the case.

 

For further information see OG48 Students' unions.

 

B6.2 Academies

Cases involving exempt educational charities regulated by DfE or the Welsh Government are likely to require input from a technician or mentor experienced in these issues.  

Academies are state-funded independent schools. DfE is the principal regulator for these charities.

 

Not all charities called ‘academy’ are exempt academy trusts

‘Academy’ is not a description of a particular type of charity. Many charities have ‘academy’ in their name, but this guidance (and the exemption) only applies to academy trusts created as companies using the DfE model articles in accordance with the Academies Act 2010, and their closely linked charities (e.g. endowment funds).

 

One way to identify academy trusts and their endowments is to look for the phrase “broad and balanced curriculum” in their objects. This uncommon wording is from DfE’s model articles of association. This wording can currently be found in the model objects for all academy trusts apart from 16-19 academy trusts, where the wording is '16-19 Academy offering a curriculum appropriate to the needs of its students'.

 

Setup

The legal body that runs the school (the academy) is a charitable company called an academy proprietor or academy trust. An academy trust may run a single academy, or may be a multi-academy trust. Some academy trusts belong to groups or federations.

 

Free schools, Studio Schools, 16-19 Academies and University Technical Colleges are all types of academy.

 

When do academy trusts become exempt?

The academy trust becomes exempt when the academy school opens. It may exist as a charity and have funding for several months before becoming exempt.

 

Even though academy trusts may be technically liable to register if they complete a financial year between receiving their funding and opening the school, we would not insist on registration unless there were specific reasons in a particular case. We could not refuse registration if an academy trust in this position requested it.

 

Regardless of whether they register, we have jurisdiction over academy trusts before they become exempt and we can exercise any of our powers if necessary. We should contact DfE before doing so.

 

Model documents and standard variations

The governing document for an academy trust is its articles of association. It also has a funding agreement which contains some regulatory provisions. DfE and the Commission have agreed model wording for these documents. Variations from the models must be agreed by the Commission and DfE. We have agreed certain standard variations such as objects for recreational facilities or a nursery, but we would not generally agree to individual departures from the model unless the charity made a compelling case (and the principal regulator agreed).

 

Model documents for academy trusts can be found on the DfE website.

 

Academy Land

Academy trusts usually lease their premises from another organisation. Depending on the academy’s history (i.e. what kind of school became an academy), the land may be:

• owned by the local authority
• held by the local authority on charitable trusts
• owned by a charitable trust (often called the Foundation)

 

B6.3 Foundation and voluntary schools  

Cases involving exempt educational charities regulated by DfE or the Welsh Government are likely to requrie input from a technician or mentor experienced in these issues. 

Voluntary and foundation schools are ‘maintained schools’ (local authority funded) and independent charities. DfE is their principal regulator in England; the Welsh Government is principal regulator in Wales.

 

Setup

Because of their history and the interaction between charity and state provision, there are many complications and permutations in the setup of foundation and voluntary schools.

 

Voluntary (aided or controlled) schools usually comprise two charities that work interdependently:

1. the governing body, a corporate body created under s.21(2) of the School Standards and Framework Act (SSFA) 1998, which runs the school;

2. the charity usually called the foundation, which holds the land and buildings on trust for the provision of a school and/or for specified religious and educational purposes.

 

Each of these charities has its own charity trustees. The foundation appoints a number of the school's governors: a majority of them for voluntary aided schools; a minority for voluntary controlled schools.

 

Foundation schools can be established in one of two ways, as explained below. In either case the governing body (a corporate body created under the SSFA 1998) is a charity and the governors are its charity trustees. The school is the charitable activity of the governing body charity.

• Some foundation schools have a foundation (sometimes called a trust), a separate charity which holds the title to the land and buildings on trust for the provision of the school, The members of the trust are its charity trustees. The two charities work interdependently. The trust also appoints some of the governors - the number will be specified in the school's Instrument of Government.
• Some foundation schools do not have a foundation (or trust). The governors run the school and hold the land and buildings; they are the only charity trustees.

 

The ‘school’ itself is the charitable activity of the governing body, not a legal entity in its own right.

 

The governing body (and any Foundation Body created by DfE under s.21 of the SSFA 1998) is an exempt charity. DfE (or the Welsh Government in Wales) is its principal regulator. Any other linked foundation is an excepted charity (it doesn’t have to register), and we are its regulator.

 

School land and buildings

Cases involving school sites or disposal of land are often complex. You should always take advice from a specialist technician or legal adviser.

• Some school site trusts are for wider religious purposes including, but not limited to, education
• Some school site trusts contain ‘reverter’ provisions and any disposal or change of use could result in the land being lost to charity
• Sometimes a local authority holds a school site as trustee, because it should have transferred the land to a charitable trust
• Some school sites include both charity land and land that has been funded or part-funded by DfE or the local authority
• DfE also has certain powers over land that has been used for a school

 

Conversion to academies

Under the government’s academy programme, the governing bodies of foundation and voluntary schools can ‘convert’ to academy trusts. The corporate governing body is replaced by an academy trust. This can raise issues in relation to the terms on which the school site is held. We have agreed procedures with DfE to try to ensure that charity land is not adversely affected.

 

B6.4 Industrial and provident societies

Industrial and provident societies (IPSs) are registered, but not regulated, by the Financial Services Authority (FSA). An IPS must be either a Co-operative or a Community Benefit Society. Only Community Benefit Societies can be charities; Co-operatives exist for the benefit of their members.

 

Charitable IPSs are exempt charities that do not yet have a principal regulator.

 

Community Benefit Societies must produce an annual report including details of their benefit to the community. The FSA can deregister organisations that cease to demonstrate the characteristics of a Community Benefit Society. For more information see the Business Link website. 

 

You can search the FSA Mutuals Public Register. 

 

B6.5 Housing charities (registered providers)

We estimate that the majority of charitable Industrial and Provident Societies (Community Benefit Societies) are registered with the Homes and Communities Agency (HCA) as providers of social housing (‘registered providers’). Other types of charity (e.g. charitable companies, almshouse trusts) can also be registered providers, but they are not exempt.

 

Charitable IPSs that are registered providers do not yet have a principal regulator.

 

Board remuneration

The Housing and Regeneration Act 2008 allows payment of board members (charity trustees). There is no restriction on the level of payment, but registered providers must follow good practice (including an appropriate code of governance). Board members must comply with their duties as charity trustees to act in the interests of the charity and manage conflicts of interest.

OG515-5 Payment for serving as trustee, section E10 The payment regime for Registered Providers of Social Housing.

 

Social housing/affordable home ownership

The provision of housing is not a charitable purpose in itself, but can be a way of furthering charitable purposes including relief of financial need, or advancing education or health by providing housing for key workers. We have issued joint guidance with HM Revenue and Customs and the HCA - Affordable Home Ownership - charitable status and tax.

 

For further information see Guidance for Charitable Registered Social Landlords.

 

B6.6 Linked charities (connected institutions)

Some charities with close administrative links to an exempt charity can also be exempt by virtue of those links. For this to apply, the linked charity must be:

• administered by or on behalf of an exempt charity

and

• established for the general purposes of, or any special purpose of or in connection with, that charity

Connected institutions have the same principal regulator as their main charity - see section E2.1 of OG717-2 Exempt charities: connected institutions and how to identify them. 

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Legal/Policy/Accountancy Framework

Part 3 and Schedule 3 of the Charities Act set out the legal framework for exempt charities, including the new provisions for principal regulators, responsible for promoting compliance with charity law. Statutory Instruments bring the changes into effect for different groups of exempt charities. Additional Statutory Instruments are made to appoint principal regulators or make changes to the statutory framework (for example, creating or removing classes of exempt charities).

 

Schedule 9 of the Charities Act contains transitory modifications that apply to exempt charities where the new regulatory framework has not yet been implemented.

 

The Charities Act, and in particular the transitory modifications, specify which powers and provisions apply or don’t apply to exempt charities. These are detailed in the following sections.

 

E1 Exempt charities and our powers

Our Charities Act powers include those listed below. The table explains when we can and cannot use them in relation to exempt charities.

 

Many of our inquiry, enforcement and protective powers are disapplied by the Charities Act (as modified by Schedule 9) in relation to exempt charities without a principal regulator. Some others could only be used pursuant to an inquiry, and our power to institute inquiries is disapplied.

 

Where there is a principal regulator, we must consult them before using any power, including powers in a governing document (s.28 of the Charities Act). We cannot open an inquiry except at the principal regulator’s request (s.46 (2)).

 

All usual restrictions still apply, e.g. powers that can only be used once we have opened a statutory inquiry(*), or at the request or formal application of the charity.

 

Inquiry, enforcement and protective powers	Charities Act 2011 provision	Exempt charities with no principal regulator	Exempt charities with a principal regulator
Require a charity to change its name in specified circumstances	s42-45	Not applicable	Must consult principal regulator
Institute inquiries into the administration of a charity	s46-47	Not applicable	Only on request of principal regulator
Enter premises and seize documents (search warrant)	s48-49*	Not applicable	Must consult principal regulator
Call for documents and search records	s52-53	s52 not applicable	s52 – Must consult principal regulator
Suspend any trustee, officer, agent or employee of a charity	s76*	Not applicable	Must consult principal regulator
Appoint new trustees	s76(3)(b)*	Not applicable	Must consult principal regulator
Vest charity property in the Official Custodian for Charities	s76(3)(c)*	Not applicable	Must consult principal regulator
Order individuals not to part with charity property or pay debts owed to the charity without approval (“freezing orders”)	s76(3)(d)* and s76(3)(e)	Not applicable	Must consult principal regulator
Restrict transactions that can be entered into on behalf of a charity	s76(3)(f)*	Not applicable	Must consult principal regulator
Appoint an interim manager for a charity	s76(3)(g)*	Not applicable	Must consult principal regulator
Remove a trustee, officer, agent or employee of a charity who contributed to misconduct or mismanagement	s79(2)(a)*	Not applicable	Must consult principal regulator
Make a scheme of our own motion for the administration of a charity	s79(2)(b)*	Not applicable	Must consult principal regulator
Other powers to remove or appoint trustees	s80 (including 80(2)(a)*)	Not applicable	Only pursuant to s.46 Inquiry (80(2)(a)); must consult principal regulator
Suspend or remove trustees etc from membership of a charity	s83*	Not applicable	Must consult principal regulator
Give specific directions for protection of a charity	s84 *	Not applicable	Must consult principal regulator
Direct the application of charity property	s85	Not applicable	Must consult principal regulator
Give directions about dormant bank accounts	s107-109	Not applicable	Must consult principal regulator
Determine the membership of a charity	s111	Only at the request of the charity	Must consult principal regulator
Exercise the same powers as the Attorney General with respect to taking legal proceedings	s113-114	Not applicable	Must consult principal regulator
Order a disqualified person to repay sums received from a charity while acting as charity trustee or trustee for the charity	s184(2)-(4)	Not applicable	Must consult principal regulator
Order that  trustees who are receiving remuneration by virtue of section 185 CA2011should not do so or should account to the charity for that remuneration	s186	Applicable	Must consult principal regulator
Ensure the safekeeping of charity documents	s340	Applicable	Must consult principal regulator

 

 

Support powers (advice and permissions)	Charities Act 2011 provision	Exempt charities with no principal regulator	Exempt charities with a principal regulator
Authorise cy-près application of gifts belonging to unknown or disclaiming donors	s63-66	Applicable	Must consult principal regulator
Make a scheme for a charity governed by charter or by or under statute, subject to Order in Council	s68	Applicable	Must consult principal regulator
Establish a scheme for the administration of a charity (including the alteration of purposes cy-près)	s69 (1)(a) (see also s62 and 67)	Applicable	Must consult principal regulator
Appoint or remove trustees; remove officers or employees	s69 (1)(b)	Applicable	Must consult principal regulator
Vest or transfer property, or require or permit any person to call for or make any transfer of property or any payment	s69 (1)(c)	Applicable	Must consult principal regulator
Make schemes: i) on application from Attorney General ii) on application from one or more trustees or interested persons iii) of own motion	s70 (2)-(5)	Not applicable	i), ii) Must consult principal regulator iii) Not applicable
Alter provisions in Acts of Parliament establishing or regulating a charity, subject to Parliamentary approval	s73	Applicable	Must consult principal regulator
Authorise expenditure on promoting a Bill in Parliament	s74	Not applicable (authorisation not required)	Must consult principal regulator
Establish common investment funds and common deposit funds	s96-103	Applicable	Must consult principal regulator
Authorise dealings with charity property or other actions in the interests of the charity	s105	Applicable	Must consult principal regulator
Authorise ex-gratia payments	s106	Applicable	Must consult principal regulator
Give advice and guidance to a charity trustee or trustee for a charity	s110 (see also s15(2)-(3))	Applicable	Must consult principal regulator (if specific to charity)
Authorise charity proceedings	s115	Not applicable (authorisation not required)	Must consult principal regulator
Authorise regulated amendments to memoranda and articles of charitable companies	s198 (as amended)	Applicable	Must consult principal regulator
Grant a waiver to a person disqualified from acting as a charity trustee	s181	Applicable	Must consult principal regulator
Relieve trustees, auditors etc from liability for breach of trust or duty	s191	Applicable	Must consult principal regulator
Incorporation of charity trustees	s251-266	Applicable	Must consult principal regulator

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E2 Charity Law requirements that don’t apply to any exempt charities

E2.1 Registration

See sections 29-41 of the Charities Act.

 

An exempt charity cannot register with us, must not describe itself as registered and may not use a registered charity number (even if it had one previously).

 

E2.2 Dispositions and mortgaging of land

See sections 117-126 of the Charities Act.

 

Trustees of exempt charities must fulfill their general duties as charity trustees when disposing of or mortgaging charity land. The usual Charities Act restrictions on disposals and mortgages do not apply.

 

All charities must include appropriate statements of compliance in the documentation relating to a disposal or mortgage. For further information see Sales, leases, transfers or mortgages: What trustees need to know about disposing of charity land (CC28).

 

E2.3 Accounts, auditing and Annual Reports

See sections 130-173 of the Charities Act.

 

All exempt charities must produce proper accounts, although the way in which they do this differs from charities that the Commission regulates.

 

Exempt charities do not have to comply with the Charities Act requirements to:

• file accounts or annual reports with us
• have their accounts audited or independently examined
• produce a Trustees’ Annual Report

Many exempt charities must produce accounts and comply with audit requirements under their own legal frameworks or regulators’ requirements. When accounts must be prepared to  give a ‘true and fair view’ of an exempt charity’s financial performance and position, then those accounts are prepared in accordance with relevant financial reporting standards and should state whether they are prepared in line with a relevant Statement of Recommended Practice (SORP). 

• DfE requires academy trusts to follow the accounting requirements for registered charities (including producing accounts and an annual report in accordance with the Charities SORP)
• Higher and Further Education Institutions prepare accounts following the HE/FE SORP
• Registered providers of social housing prepare accounts following the Housing (RSL) SORP
• Charitable companies must produce accounts under the Companies Act 2006 to give a ‘true and fair’ view, and should also follow any relevant SORP (usually the Charities SORP)
• Industrial and Provident Society and Friendly Society legislation sets audit requirements for these organisations and require accounts to give a ‘true and fair’ view and should also follow any relevant SORP (usually the Charities SORP).

Otherwise, exempt charities must:

• keep proper accounting records
• prepare income and expenditure accounts for a period of not more than 15 months and a balance sheet for the end of that period
• keep these records and financial statements for at least 6 years (unless the charity ceases to exist and we agree to their disposal)

An exempt charity must also provide a copy of its most recent accounts to anyone who makes a written request, within 2 months. It may charge a reasonable fee to cover the costs of doing this.

 

The whistleblowing provisions in the Charities Act apply to exempt charities, either by virtue of s.160 (for exempt charities that are not companies) or s159 as modified by s160 (for exempt charities that are companies).

 

E2.4 Changing to a Charitable Incorporated Organisation (not yet available)

An exempt charity will be unable to change to a CIO:

• A CIO cannot be an exempt charity; it must register with the Commission.
• Many exempt charities can only exist in specified legal forms - academy trusts must be companies; many types of school, college and university are corporations created by statute; they cannot opt to change legal form.
• We anticipate that the CIO regulations will not allow exempt charities to change to CIOs.
• It is intended that when charitable Industrial and Provident Societies (IPSs) cease to be exempt they will be able to convert to a CIO.

In all cases, seek legal advice.

 

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E3 Charity Law requirements that apply to all exempt charities

E3.1 Meaning of ‘charity’ and ‘charitable purposes’

See sections 1-6 of the Charities Act.

 

E3.2 Offence of Supplying false or misleading information to the Commission

See section 60 of the Charities Act.

 

E3.3 Duty of trustees in relation to application of property cy-près

See section 61 of the Charities Act.

 

Trustees of a charitable trust have a duty to take steps to enable property of the charity to be applied when a cy-près occasion arises (see OG 2 Application of property cy-près).

 

E3.4 Disqualification of trustees

See sections 177-184 of the Charities Act.

The Charities Act provisions relating to the disqualification of trustees apply to all charities, including an exempt charity.  We have power to grant a waiver from disqualification. Where a principal regulator has been appointed, we must consult them first.

 

E3.5 Requirement on charitable companies to disclose charitable status

See section 194 of the Charities Act.

 

Charitable companies that do not have ‘charity’ in their name must state that they are a charity wherever they must state their registered name under company law, and in any conveyance.

 

E3.6 Restrictions on companies and incorporated charities’ powers of amendment

See sections 197-198 of the Charities Act.

 

Any amendment that would cause the body to cease to be a charity has no effect on the trusts on which the charity’s property is held and the purposes it can be applied for.

 

Charitable companies cannot make ‘regulated amendments’ (affecting how their property can be applied) without our prior written consent.

 

E3.7 Other provisions of the Charities Act generally

These apply unless specified.

 

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E4 Charity Law requirements that only apply to exempt charities with a principal regulator

E4.1 Restriction on expenditure on promoting Bills in Parliament

See section 74 of the Charities Act.

 

E4.2 Restriction on taking charity proceedings

See section 115 of the Charities Act.

 

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E5 Appointment of principal regulators and implementation of changes to the exempt charity framework

The Minister for the Cabinet Office can make regulations (Statutory Instruments) under the Charities Act to:

• bring the exempt charities provisions in the Charities Act into effect for particular exempt charities
• appoint principal regulators for particular exempt charities (s25)
• give a principal regulator any additional powers it needs (s26)
• add or remove categories of exempt charities (s23)
• make other connected modifications to the law (s23)

Statutory Instruments must be approved by Parliament.

 

E5.1 Statutory Instruments appointing principal regulators

The Charities Act 2006 (Principal Regulators of Exempt Charities) Regulations 2010 (SI 2010 no. 501) – appoints Environment Secretary, Culture Secretary and HEFCE as principal regulators.

 

The Charities Act 2006 (Principal Regulators of Exempt Charities) Regulations 2011 (SI 2011 no. 1726) – appoints Secretary of State for Education and Welsh Ministers as principal regulators for foundation and voluntary schools.

 

The Charities Act 2006 (Principal Regulators of Exempt Charities) (No. 2) Regulations 2011 (SI 2011 no. 1727) – Appoints the Secretary of State for Education as principal regulator for academy trusts and sixth form college corporations.

 

E5.2 Statutory Instruments making changes to exempt charities

The Charities Act 2006 (Changes in Exempt Charities) Order 2010 (SI 2010 No. 500) – amends schedule 2 to the 1993 Act, removing Welsh HE institutions, the independent colleges of Oxford, Cambridge and Durham universities, student unions, Eton and Winchester Colleges, the Museum of London, the representative body of the Welsh Church and the Church Commissioners

 

The Charities Act 2006 (Commencement No.7, Transitional and Transitory Provisions and Savings) Order 2010 (SI 2010 no. 503) – implements Charities Act provisions for exempt universities and HE institutions, exempt museums and galleries , Kew Gardens and their connected charities.

 

The Charities Act 2006 (Changes in Exempt Charities) Order 2011 (SI 2011 No. 1725) – amends schedule 2 to the 1993 Act and makes consequential amendments to education legislation in relation to academies, foundation and voluntary schools and sixth form colleges.

 

The Charities Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2011 (SI 2011 no. 1728) – implements Charities Act provisions for academies, sixth form colleges and foundation and voluntary schools and their connected charities.

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