Charities - Making A Difference

A number of the rules introduced in the Charities Act 2006 have come into effect over the past year.

The Charities Act 2006 introduced a number of new laws, some of which enhance the role of the Charity Commission and others which protect trustees as individuals.

Payment Of Trustees

Since March 2008, with permission from the Charity Commission, charities have been allowed to pay trustees for providing goods and services as long as certain rules are followed.

• Payment must be for services other than as a trustee.
  
  
• Terms must be set out in a written agreement.
  
  
• The arrangement must be in the best interests of the charity.
  
  
• If more than one, the benefiting trustees must be a minority of the trustee board.
  
  
• The benefiting trustee(s) must not be involved in decisions regarding the provision of these goods/services.
  
  

Trustee Liabilities

Since February 2007, trustees have not been required to ask the courts for liability assurance. The Charity Commission now has the power to relieve trustees from personal liability for breach of trust or duty, as long as they have acted honestly and reasonably. However, the commission will take any deliberate breaches of trust very seriously.

Trustee Indemnity Insurance

Charity Commission approval was previously required if a charity wished to purchase indemnity insurance for its trustees. Since February 2007, permission is no longer required but:

• trustees must be satisfied that it is in the charity's best interests to purchase the insurance
  
  
• the charity's governing documents must not prohibit the purchase of indemnity insurance.
  
  

Cy-près

Cy-près is the long-established legal principle applying to circumstances where donations cannot be used for the purpose that they were originally intended. Any change in use must be as close to the original purpose as possible. The Charities Act 2006 introduced a more flexible regime, which came into force in March this year.

The Charity Commission and the courts can now also consider current social and economic circumstances when deciding how to deal with donations that cannot be used as originally intended.

Changes To Thresholds

Audit and examination thresholds for unincorporated charities and charitable companies have been harmonised. For accounting periods beginning on or after 1 April 2008, unless otherwise specified in the charity's governing document, the following limits apply.

Fig 1: Audit And Examination Thresholds

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.