New Legislation – Charities Act (2006)

The trustees of Precious Seed have asked Brian Knowles, chairman of Western Counties and South Wales Evangelisation Trust, for some preliminary observations on the Charities Act (2006) and its implications for ‘church’ fellowships. As with many pieces of new legislation, provisions take effect progressively and much has still to be learned about the requirements of this Act. We are most grateful for our brother’s careful and thoughtful help in these difficult matters and set out below is his reply. This will no doubt raise questions in our readers’ minds. If these are sent to us c/o of our Articles Editor, Brian has kindly agreed to explore the issues and do his best to provide answers in due course.

The new ‘Charities Act’ passed its final parliamentary stages and became law in England and Wales on November 8th 2006. In many respects the Act sets out to simplify statutory requirements that apply to small charities and most assemblies fall into this category.

Under previous legislation, ‘the advancement of religion’ was one of the principal definitions used to classify a charity as such. This remains the case and is re-stated in a list which this new Act has extended. However, ‘charities’ are now to be defined as bodies which exist ‘for the public benefit’. During debate in the House of Commons strong assertions were made to the effect that religious institutions significantly contribute to the good of society, benefiting not only those who take part in acts of worship but the public in general. English case law supports this concept and it is not expected that The Charity Commission, which will oversee the provisions of the Act, will challenge recognized Christian churches. Its decisions, however, can be appealed to a Charity Tribunal which will be established.

The Charities Act (2006) requires charities in England and Wales which have a gross income above £5,000 per annum to register with the Charity Commission unless they are ‘excepted charities’ which are grouped under certain specific historic denominations. Needless to say ‘the assemblies’ as such are not included in these. The Act is to be reviewed after the elapse of one year and there are strong indications that the threshold for registration will then be increased to £10,000 per annum. However, even the smallest charity with a gross income below the threshold may register if it so wishes.

The processes of registration and the implications thereafter for small charities have been simplified. The fundamental purpose of the registration requirement is necessarily to promote openness, honesty and clarity for those bodies which collect monies from individuals and use or distribute it for charitable purposes. A significant benefit arising from recognition of charitable status is the ability for such a charity to reclaim income tax which donors have paid in respect of sums donated, thereby increasing their income raised by such gifts to them by 28%.

It is the writer’s opinion that charity legislation exists to ensure protection against fraud or misuse of monies donated for the benefit of others or, to use our terminology, ‘the advancement of the Lord’s work’. Registration is not new and many assemblies have registered years ago. Its purpose is to protect rather than investigate.