These pages aim to provide a general summary of the Attorney General's reference to the Charity Tribunal regarding relief of poverty charities, seeks to answer some of the most commonly asked questions and provides a summary of the Tribunal's judgment. For advice specific to your circumstances please contact us at the details set out below.
1. What was the reference about?
The Attorney General can refer questions of charity law to the Tribunal to clarify the law.
In essence, in this case, the Attorney General asked the Tribunal to consider whether certain relief of poverty charities are still charitable following the introduction of the Charities Act 2006 (which removed the presumption of public benefit in relation to relief of poverty charities) and, in particular, whether they still meet the public benefit test.
2. Who was likely to be affected?
All charities which relieve poverty of members of a class or group of beneficiaries who are defined or linked by reference to:
a) employment with a particular employer, i.e. employee benevolent funds (e.g. an employee benevolent fund which relieves poverty of current and former employees of Xplc and their dependants); or
b) another contractual connection (e.g. a charity which relieves poverty of persons who receive services under a service contract from the same supplier and their dependants); or
c) membership of an association or Society or similar (e.g. a charity which relieves poverty of the present and former members of a tennis club and their dependants); or
d) a family connection (e.g. a charity which relieves poverty of the relatives of John Smith); or
e) a similar connection
The reference may also have affected restricted funds held by charities which can only be used to benefit a restricted beneficiary class defined as described above (e.g. a care home provider charity may hold a restricted fund the purposes of which are to provide financial assistance grants to the occupants of a particular care home).
3. What were the possible outcomes and what did the Tribunal decide?
There were a number of possible outcomes but in the worst case scenario the Tribunal could have decided that the charities affected by the Reference were no longer charitable – that they do not provide a public benefit. The implications of this would depend on the structure of the charity (whether incorporated or not) and whether it was registered pre or post-1st April 2008 when the relevant provision of the Charities Act 2006 came into force. In the case of charities registered pre-1st April 2008, it is likely that the purposes of those charities would have to have been broadened, by scheme, to include a much wider class of beneficiaries or they could evenhave been removed from the Register of Charities and their assets transferred to another charity with similar aims.
Charities that were likely to be affected could apply to be joined as a party and make submissions to the Tribunal. 10 parties applied. BWB represented 2 parties to the Reference – the British Airways Welfare and Benevolent Fund (supported by the Prudential Staff Charitable Trust) and the Chartered Accountants Benevolent Association. BWB played a key role in bringing together 8 parties to the Reference to make a persuasive joint written submission on behalf of those parties, which saved costs and the Tribunal’s time.
The final hearing took place on 15th and 16th November. As to the need for a hearing, the Tribunal commented that;
"By the time of the hearing of the Reference, it was common ground between the parties, with the exception of the Charity Commission as well as the interveners that the 2006 Act did not in fact cast doubt on the continued charitable status of the type of charity with which the Reference is concerned. One might wonder, therefore, why the Reference was felt to have been necessary. Mr Henderson for the Attorney General told us that, in the light of the doubts which had been expressed by the Commission and within the sector, there had been sufficient uncertainty for the Attorney General to have considered it appropriate to make the Reference."
Fortunately, the Tribunal concluded that the Charities Act 2006 has not affected the charitable status of the charities affected by the Reference and has concluded that they do still meet the public benefit requirements. This will be of considerable relief to those charities affected.
In particular, and referring back to its previous decision in relation to the Attorney General’s 1st Reference in relation to independent schools (the “ISC case”), the Tribunal decided that;
- What satisfies the public benefit requirement may differ markedly between different types of allegedly charitable purposes.
-Relief of poverty charities must meet the first requirement of public benefit – public benefit in the first sense – which requires that the purpose of a trust (e.g. relief of poverty) must be of its nature beneficial to the community - the Tribunal made clear that this test does not look at the section of the public to be benefitted.
- In the ISC case the Tribunal had determined that, in order to be charitable, public benefit must also be provided to a “sufficient section of the public” – public benefit in the second sense.
However, in its decision in relation to the 2nd Reference, the Tribunal concluded that relief of poverty charities for a narrow beneficiary class are an exception to this requirement and do not have to provide a public benefit in the second sense. To this end, a relief of poverty trust could be charitable even though its beneficiary class is essentially a private class, provided that it provides a public benefit in the first sense. The Tribunal said
"The 2006 Act has not, in our judgment, changed that. The “public benefit” as that term was understood for the purposes of the law of charity required, in the context of a trust for the relief of poverty, only that public benefit in the first sense should be shown."
The Tribunal held that the abolition of the presumption of public benefit in section 3(2) of the 2006 Act had no impact on whether a trust for the relief of poverty is charitable or not. The Tribunal made clear that even before the 2006 Act there was no presumption of public benefit for relief of poverty charities in practice and that whether or not a relief of poverty charity is for the public benefit will turn on the evidence. So, the Tribunal has confirmed that the 2006 Act has not changed the law in relation to poverty charities.
In addition, although the Tribunal made clear that relief of poverty charities for a narrow beneficiary class are an exception to the requirement to provide a public benefit in the second sense and that this exception is not to be extended, the Tribunal decided that it is logical to treat “prevention of poverty” charities as subject to the same exception, depending on the way that the prevention of poverty is to be carried out.
This is obviously a great relief for those charities that might have been found to be no longer charitable. Organisations that have applied for charitable status but were told they may not be charitable pending the outcome of the Reference may have applications revisited and the Charity Commission is likely to review its Guidance.
For further information or advice please contact Laura Soley or Robert Oakley.
Charity & Social Enterprise Department
Bates Wells & Braithwaite London LLP
2-6 Cannon Street
London EC4M 6YH
T: 020 7551 7777
F: 020 7551 7800
Laura Soley
l.soley@bwbllp.com
Robert Oakley
r.oakley@bwbllp.com
