Is charity registration worth it?
Originally published: January 2017 | Last reviewed: January 2017
The charitable and voluntary sector in the UK is diverse, with some 200,000 registered charities, plus many more not-for-profit organisations and charitable or community groups — up to 400,000 in total, according to some estimates.
But what does it mean to operate officially as a charity, assuming that's the right direction for your organisation?
Is a new charity the right move?
Don't jump too quickly into creating a new charity. Experienced founders advise being crystal clear on what you want to achieve and why it's needed, looking at what others are doing, and testing your idea before making it official.
Sometimes, an alternative may also serve your objective: volunteering or becoming a trustee with an existing charity that has the same goals. If you do want to start a new venture, a named fund is a simpler option for a one-off event or time-limited cause. In other cases, you may not want the restrictions of charitable status — so you'll want to create a different type of organisation.
Do I need to register?
If you're up and running, you may already consider yourself a charity. But do you also need to be formally registered as such?
In England or Wales, you must usually register with the Charity Commission if your charity has more than £5,000 income per year. It's also possible to register with the commission as a charitable incorporated organisation (CIO), whatever your income. On the other hand, some other types of organisations can't be classed as charities. Examples include a community interest company (though it can convert to a charity if it meets the test) or an organisation registered with HMRC as a community amateur sports club.
In Scotland, charities are regulated by the Scottish Charity Regulator, which registers organisations that have only charitable purposes and that provide public benefit in achieving those purposes. There's no obligation to register, but you're not allowed to describe yourself as a charity unless you're on the register. Note that charities established or registered in other legal jurisdictions (including England and Wales) must register with the Scottish Charity Regulator if they have substantial activity in Scotland.
In Northern Ireland, registration of charities began only in 2013, and the Charity Commission for Northern Ireland is still calling organisations up in tranches to apply for registration. An organisation must apply for registration as a charity if it has exclusively charitable purposes and is governed by Northern Irish law, regardless of income, size or whether or not it has already received charitable tax status from HMRC.
Note that an organisation's charitable status isn't the same as its legal structure. Be sure to understand the various legal structures for U.K. charities to determine which is best for you.
What changes if I register my organisation as a charity?
The advantages of charitable status include:
- Greater public recognition and trust
- Reduced (and sometimes zero) business rates and various other tax reliefs (for which you need to register separately with HMRC)
- Some tax breaks for donors
- A better chance of accessing certain types of grants and funding
- Help and guidance from the charity regulator
While every charity must prepare annual accounts and make them available to the public on request, registered charities must also provide information annually to the Charity Commission. Depending on the organisation's income, assets and structure, this may include a simplified or full trustees' annual report, update form or annual return. The commission may also require an independent examination or audit. There are additional reporting requirements for charitable companies.
Registration will also restrict your organisation in many ways, as explained by the Charity Commission. Among others, a registered charity:
- Can't pay or otherwise give benefits to a trustee or to anyone connected with a trustee (for example, a trustee's family member or company) except in certain limited circumstances or with prior approval of the Charity Commission
- Can't have a mix of charitable and non-charitable purposes
- Mustn't infringe certain restrictions on trading
- Faces some restrictions on political activities
- Mustn't simply benefit the narrow interests of too closed and too small a group
If your annual income is more than £10,000 and/or if your organisation is a charitable company or a CIO, you must state your registered charity status in the specified format on various documents, such as publicity materials.
Note that the Charity Commission's regulatory powers don't only cover registered charities. While unregistered charities are exempt from accounting requirements, the commission may intervene if, for example, a legitimate complaint is made regarding misconduct by or mismanagement of an unregistered charity.
In Northern Ireland, registration as a charity is compulsory for all organisations that meet the legal definition of a charity — whether or not they consider themselves to be one. Once registered, each charity (regardless of income) must report annually to the commission on their governance, resources and finances. All registered charities in Northern Ireland are required to include their charity registration number on key documents. In this case, there is no income threshold.
How do I register?
If you've decided to go ahead, you'll need to have various things in place first, including:
- A board of trustees
- A name and legal structure for your charity
- A governing document setting out your charitable purpose
You must also complete a lengthy online application form, with some of the questions requiring careful thought. You may also need to attach a business plan or other relevant documentation.
Full details of these requirements, and how to register once you're ready, are available at the following links:
- England and Wales: Charity Commission
- Northern Ireland: Charity Commission NI
- Scotland: Scottish Charity Regulator
Note that your application for charitable status may be turned down, although outright rejection is rare. It's more likely you'll be asked a series of follow-up questions to establish whether you meet the criteria. If your registration is successful, note that the charity regulators have an ongoing monitoring role and may investigate those charities not operating in accordance with their governing document.
A final word: seek professional advice locally
England/Wales, Scotland and Northern Ireland each have separate systems and are regulated by different bodies. Be sure to seek specialist expertise from a lawyer who knows your area rather than relying entirely on general guidance.
Expert input and advice for this article was provided by Interface Legal Advisory Service, which specialises in providing low-cost and user-friendly assistance to charities and other nonprofits.