Charities Act 2022 Implementation Plan

As detailed in our previous Not For Profit e-News, the Charities Act 2022 gained Royal Assent on 24 February 2022. The Government have since set out an implementation plan, indicating a timeline for the activation of new provisions and fulfilment of the other commitments they have made in response to the Law Commission’s Charity Law Report.

The implementation will be led by the Department for Digital, Culture, Media and Sport, in conjunction with the Charity Commission for England and Wales and other departments. Provisions are expected to come into force at various points over the next year and a half, divided into three tranches: Autumn 2022, Spring 2023 and Autumn 2023. Whilst there are many provisions to be implemented this Autumn, we have detailed four which we believe to be of particular significance to charities, relating to Cy-près powers, ex-gratia payments, the remuneration of charity Trustees providing goods and services to the charity, and the status of Trust Corporations.

Cy-près Powers

In the context of charities, Cy-près (or “as close”) refers to the ability for the wishes of a donor to be carried out, even if the original purpose of the gift has failed. The updated provision will make it easier for charities to use money or property donated to a fundraising appeal which either did not meet or exceeded its target, for similar purposes of the original appeal, rather than returning the funds to donors.

These new rules will apply in several situations: firstly, if a charity considers the cost of returning funds or the expectation of donors to have them returned to be unreasonable, then it can seek permission from the Charity Commission not to do so; secondly, when an individual donor has given £120 or less in a year; finally, where donors cannot be traced or identified after reasonable action undertaken to locate them. The provision applies to both fundraising appeals that do not meet their intended purpose (initial failure) and those that exceed their initial goals and have excess capacity (subsequent failure).

Small Ex-Gratia Payments

This Autumn’s provisions will provide greater flexibility in making small ex-gratia payments without requiring Charity Commission consent. The definition of “small” will be linked to a charity’s gross income. The test for making ex-gratia payments will also be updated, enabling decision making to be delegated to employees, though the responsibility for the decisions will still ultimately rest with the Trustees.

Remuneration of Trustees for the Provision of Goods and Services

The statutory powers of charities currently extend to the payment to a Trustee for the provision of services and any goods supplied in connection with those services. From this Autumn, this power will include remuneration for goods that are not supplied in connection with particular services, for example, office supplies. Charities will still need to check their own constitutions and comply with safeguards, but this provision will build on the abilities of Trustees to provide assets to their charities.

Trustee of a Charitable Trust: Status as Trust Corporation

A charitable corporate body that acts as the sole trustee of a charitable trust currently only has corporation status in select circumstances. This means it is often required to appoint a second trustee. However, following the implementation of updates to section 32 of the Act, Trustee of Charitable Trust: Status as Trust Corporation, trust corporation status will be automatically granted to any trustee of a charitable trust if they are “a body corporate” and a charity, thus allowing them to be an effective sole trustee of property held on trust.

The Department for Digital, Culture, Media and Sport will review the Act within three to five years, and the Government has said that it will assess whether thresholds set out in the 2022 Act should increase with inflation during this period of review.

Further information on the Charities Act 2022 implementation plan can be found here.

This article originally appeared in the May 2022 edition of Not for Profit eNews.