Kew Law LLP Solicitors - Residential Conveyancing and Commercial Conveyancing.

Charitable Trusts and Charitable Companies limited by guarantee.

Many individuals or business owners wish to leave a lasting legacy and establish charities. Charitable trusts are not subject to the rules against perpetuity and can therefore be used to create an enduring vehicle to support the causes that your prefer, either during your lifetime or on your death. By setting up your own charity you can ensure that you can financially promote a cause in the most tax efficient way possible. Income tax may be reclaimed on donations to the trust, Tax is not payable on a trust’s investment income and a trust is not subject to inheritance tax.

At Kew Law we have the knowledge and the exeprience to best advise you on the most appropriate vehicle to promote that cause.

Charitable Trusts

A Charitable Trust is run by the Trustees with their duties and powers deriving from the Trust Deed. Such a Trust is suitable where the dealings of the Trust are simple (eg. making grants to individuals or other charities) and there are a small number of people involved in the decision making process. Individual trustees are jointly and severally liable to the charity’s creditors.

You can make a provision in your Will for the establishment of a charitable foundation in your name following your death. You can either dictate the terms of such a charity in your Will or, preferably, you can give your Executors guidance as to the charitable objects which you wish your charity to pursue and leave it to them to establish the charity in accordance with the prevailing legislation at the time of your death.

Where the charitable trust has an income of £5,000 or more you are required by law to register with the Charity Commission. A charity with an income of less that £5,000 can still enjoy the benefits of charitable status without having to meet the regulatory requirements of registered charities.

Charity as a Company limited by guarantee.

Where it is envisaged that the charity will be involved in more complex operations eg. owning property, staff employment contracts, construction contracts etc. the trustees may feel the need to be protected from unlimited personal liability. In such circumstances, the advisable route would be to establish the charity as a Company limited by guarantee.

Kew Law can assist you. Call 0800 987 8156  or contact us here for further information.

Charitable Status

In order to gain charitable status with the Charity Commission and with HMRC, the purposes or aims of the charity must be exclusively charitable – a charity cannot have some purposes which are charitable and others which are not.

The Charities Act 2006 (‘the Act’) has now introduced a range of charitable purposes onto the statute.

There are thirteen charitable purposes defined in the Act:

1. The prevention or relief of poverty
2. The advancement of education
3. The advancement of religion
4. The advancement of health or the saving of lives
5. The advancement of citizenship or community development
6. The advancement of the arts, culture, heritage or science
7. The advancement of amateur sport
8. The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
9. The advancement of environmental protection or improvement
10. The relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
11. The advancement of animal welfare
12. The promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
13. Any other purposes

The last category is the ‘cover-all’ category to enable the law to expand to reflect changing social needs and attitudes. Hence, Section 2(4) of the Act reads as follows:

“The purposes within this subsection (see subsection (2)(m)) are:

• any purposes not within paragraphs (a) to (l) of subsection (2) but recognised as charitable purposes under existing charity law or by virtue of section 1 of the Recreational Charities Act 1958 (c. 17);
• any purposes that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of those paragraphs or paragraph (a) above; and
• any purposes that may reasonably be regarded as analogous to, or within the spirit of, any purposes which have been recognised under charity law as falling within paragraph (b) above or this paragraph.

The Act introduced a new requirement for charities in England and Wales, namely, that a charitable purpose must be for the public benefit. This requirement became law in April 2008. The Act does not define public benefit. Essentially, those seeking to argue that a particular purpose is charitable must be able to demonstrate what benefits to the public arise from the charity carrying out its chosen purpose; those benefits must relate to the proposed purpose; the benefits must be balanced against any detriment or harm; the opportunity to benefit must not be restricted by the ability to pay and any private benefit obtained from the proposed purpose must be incidental.

Call 0800 987 8156  or contact us here to arrange a consultation with a  Solicitor at Kew Law LLP.

Solicitors in Braintree, Witham, Maldon, Colchester, Wickford, Burnham-on-Crouch and Chelmsford