The Charities Act and the Practical Effects on your Charity, Spring 2023

MVA offers some insight into the changes being introduced by The Charities Act 2022 and how this can affect your organisation.

In February 2022, the Charities Bill received Royal Assent and was passed into law as The Charities Act 2022, ideally offering trustees more flexibility to manage charities effectively.

Created from recommendations from the Law Commission which formed its basis, it is suggested The Act will not have a big impact on charities’ daily operations but aims to simplify certain areas of regulation.

Below are some of the changes and what they can mean for your charity:

Fundraising and Cy-près Powers
If a fundraising appeal raises too much or too little for the intended purpose, charities could have more flexibility under the new provisions.

In given situations, this would mean a charity could use funds from failed appeals for a similar charitable purpose rather than returning the donations.

More Flexibility around ‘ex gratia’ Payments
The rules around ‘Ex gratia’ payments, or expense as gestures of goodwill outside of contract, are being relaxed so that certain small ‘ex gratia’ payments (where a moral duty can be shown) will no longer need approval from The Charity Commission.

Trustee payments for Goods in Given Circumstances
Where Trustees before could only be paid for supply of services, they can now be paid for goods provided to a charity in certain circumstances, even if not expressly stated in a Charity’s governing document.

More Flexibility in the Use of a Permanent Endowment
There are to be new statutory powers for trustees to borrow from monies or property which were intended to be held by a charity forever.

Most of the legal restrictions on how charities can use permanent endowments would still apply, but there will be more flexibility in some areas.

Borrowing, however, can only be up to ¼ of the endowment fund value; and any expenses must be recovered within a 20-year period.

More Freedoms for the Sale of Land
As of Spring 2023, Charities will have access to a much wider pool of professional advisors on land disposal, with more straightforward rules on what advice they should receive.

Rules on Changing the Charity’s Governing Document, and changes to Amending a Charity’s Purpose
It will now be easier for most charities to amend their governing documents or Royal Charters.

This will allow most charities greater flexibility to respond to changes in their environment, as well as the needs of their organisation, and should make it clearer for the steps that charities should take to modify their governing documents.

However, when a charity wants to change its purposes or reason to operate and exist, The Act brings in more consistent factors which would be considered by the Charity Commission to allow such change.

Some of these changes had already been introduced since October 2022, with further amendments and provisions to be put in place by Autumn 2023.

To see the Implementation Plan, or for more information, visit the Government website.

MVA continues its efforts to provide reliable and trustworthy guidance and advice during these challenging times for us all.
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