Fundraising can be a science, a set of specialist skills and knowledge, and/or a profession. Many charities have fundraising staff on their payroll and many also employ external consultants, ie ‘professional fundraisers’ to raise funds for them. Sometimes charities enter into arrangements with ‘commercial participators’—usually companies or firms which agree to provide some financial benefit to the charity or charities in the course of selling their own goods and services, and use the charitable contribution as part of their promotion. The Charities Act 1992 (CA 1992) as amended by the Charities Act 2006 (CA 2006) and regulations made under it contain some fairly detailed obligations applying to professional fundraisers and commercial participators and fairly specific restrictions on their agreements with charities. These are designed to protect the charity rather than the other party. For the sake of completeness, CA 2006 is now replaced for most purposes by the Charities Act 2011 (CA 2011) (a consolidating Act) as amended by the Charities (Protection and Social Investment) Act 2016 and the Charities Act

Law360: Thirteen UK charities are no longer plugging a black hole in their pension schemes, a consultancy said on 19 March 2024, amid a wider improvement in funding for retirement savings plans.

In practical terms a charity has no capital gains tax liability on any gains that it makes but there may be a tax liability if those gains are not applied only for charitable purposes. Relief from capital gains tax is also available to a donor who disposes of an asset to a charity otherwise than under a bargain at arms’ length (for example a gift or a sale at undervalue. the relief from capital gains tax will disapply the usual rules which substitute deemed market value consideration and instead the donor will be treated as disposing of the asset for a consideration which gives rise to neither a gain nor a loss. Definition of charity Logically relief is not available unless a body of persons is a charity. For the purposes of most taxes in order for those persons to qualify as a charity they must satisfy the following conditions: • the organisation must be for charitable purposes • it must meet the jurisdiction criteria • it must be registered • it must meet the management criteria To

Example 1—disclosed agent A charity promotes a challenge where participants will cycle from London to Paris in order to raise funds for the charity. The charity engages the services of a specialist company that will organise the event. The charity is acting as a disclosed agent on behalf of the specialist tour operator and will receive commission for each participant who takes part in the event. The specialist tour operator will provide the flights, bikes, accommodation, food, etc for the challenge and the charity will promote the event. The charity insists that the participants raise a minimum sponsorship of £2,000 and they have to pay a registration fee of £200 when they book their place on the challenge. 50% of the sponsorship must be raised and paid directly to the charity eight weeks before the departure date. This represents the cost of the event and is paid to the tour operator by the charity less their commission of 10% of the cost of the challenge (£1,000 – £200 = £800). The charity invoices the tour

There are currently a number of structures that are appropriate for a charitable institution to adopt, the most common being: • a trust • an unincorporated association • a company limited by guarantee • a charitable incorporated organisation Additional forms consist of: • a company incorporated by Royal Charter • a statutory corporation • a company limited by shares • an industrial and provident association • a friendly society • community interest company It is likely that in time the new charitable incorporated organisation (CIO) introduced by the Part 11 of the Charities Act 2006 (CA 2006) will replace the company limited by guarantee as a choice as it has the advantages of this format but is only regulated by the Charity Commission (CC). When deciding on the format of the charity, the CC have a helpful guide: Charity types: how to choose a structure. Incorporated v unincorporated It is important to recognise that there are significant differences between incorporated and unincorporated organisations. The main points in respect of incorporated institutions is that: • they

Maintained by Adrian Shipwright and Julian Hickey at Burnell Chambers Qualifying organisations The following bodies are entitled to VAT exempt eligible fundraising events: • charities that meet the eligibility criteria • bodies corporate-if the entity is wholly owned by a charity and its profits are payable to the charityi • other qualifying bodies: ◦ non-profit making bodies included at Schedule 9, Group 9, item 1 of the Value Added Tax Act 1994 (VATA 1994) (Subscriptions to trade unions, professional and other public interest bodies) ◦ Eligible under VATA 1994, Sch 9, Group 10, item 2A Eligible bodies are bodies whose principal purpose is the provision of facilities for persons to take part in sport or physical education and which: (a) is precluded from distributing any profit and may only distribute any such profit to a non-profit making body (b) applies in accordance with note (2B) any profits it makes from supplies of a description within item 2 or 3; and (c) is not subject to commercial influence Typical examples of qualifying bodies include: • trade

Charities can adopt a variety of different legal forms or structures. A charity’s governing documents will depend on the form or structure adopted. A charity’s governance may be affected by both common law principles and statutory provisions. This Practice Note discusses the different legal forms or structures a charity may adopt, and the governing documents required for each legal form of charity. For a comparison of the different legal forms a charity can take, see Practice Note:Setting up a charity. Charitable trust A trust (including a charitable trust) may be created in a number of ways (see Practice Note: Creation of trusts—express trusts). It is possible to create some types of trust orally (though some trusts, such as trusts of land, must be made in writing and by deed–see the Law of Property Act 1925, s 52). However, charitable trusts are usually created by: • a trust deed • a Will • a scheme which has been made by the Charity Commission, the court or the Attorney General (under the Royal Sign Manual) The Charity Commission

Charity trustees are subject to a number of duties. When investing, trustees must further the purposes of their charity over time, comply with the legal duties to which they are subject and make decisions which are in the best interests of their charity. The investments must be reviewed regularly. There is, however, a degree of leeway as to the types of investments which are made. There are, of course, many sorts of investments that are available to trustees when they deal with charity assets. These vary from simple interest bearing bank accounts to common investment funds. The tax position of the investment will be a critical factor and a charity will wish to examine HMRC guidance and, often, obtain specialist advice on this topic as part of its investment strategy. See Charity investment—definitions What is an investment? Investing involves using charity assets with the ultimate aim of generating a financial return which may consist of (a) obtaining an income from the investments and/or (b) achieving capital growth. The term is not defined in statute. In

Put simply, ‘permanent endowment’ means any asset of a charity which is retained for the express purposes of the charity. This will often refer to land but can also be investment assets that are held with a view to generating income for the charity to use to perform its functions. For those charities with a permanent endowment, special investment criteria apply. The reasoning that is applied is one of current against future needs. The income generated by the capital today is used for the charity purposes now, but, subject to the relaxation in the Charities Act 2022, the capital must be retained so that the continuing needs of the charity are met from future generated income (‘the standard rules’). As more income is needed, so charities may have to look at also generating capital growth. This balancing approach has created issues for charities. The alternative, ‘total return’ approach to investments may allow a charity to deal with these issues by allowing them to invest their permanent endowment in a manner that

A charity is an institution which is established for charitable purposes only and falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities (Charities Act 2011, s 1)

The Charity Commission for England and Wales is a body corporate which is responsible for regulating the charities in England and Wales, subject to certain exceptions.

The Charity Commission, on 4 February 2025, has issued a regulatory alert about a new 'failure to prevent fraud' offence, which will come into effect on 1 September 2025. This legislation targets large, incorporated charities that meet at least two of the following criteria: more than 250 employees, £36m in income, or £18m in total assets. These charities could face criminal liability if an associated person commits fraud for the organisation's benefit without adequate fraud prevention measures in place. It is not necessary to prove that directors or senior managers were aware of the fraud. The Commission advises affected charities to review the Home Office guidance, enhance their fraud prevention strategies, and seek professional legal advice where necessary. Additionally, updated guidance on internal financial controls and fraud protection, published in April 2023 and November 2024, respectively, should be consulted.