The Charity Act defines a Charity as an organisation that
- is established for charitable purposes only and
- is subject to the control of the High Court’s charity law jurisdiction.
Charitable Purpose: A charity’s purpose will usually be found documented in its governing documents. For its purpose to be charitable, both of the below must apply:
- It must fall within the descriptions of purposes in the Charities Act and,
- It must be for the public benefit
More details can be found about this in Charity Commission’s guidance publication CC4
There are several structures to choose from as a charity (see CC22a) for more information about this). They are:
Charitable incorporated organisations (CIO)
A CIO is registered with and only has to submit annual returns to the Charity Commission. A CIO is a separate legal entity and can therefore enter contracts in its business name and its trustees are not personally liable for any losses and contractual obligations.
Charitable company (limited by guarantee) – CLG
A CLG is registered with and submits annual returns to both the Charity Commission and Companies House. A CLG can only use its assets for charitable purposes and it is required to operate in the best interest of the charity. So, even though registered with companies house, it is not a commercial company and its profits aren’t distributable, rather it must be used for charitable purposes.
Unincorporated Association
This is a membership organisation set up via an agreement between a group of people who come together to operate for any reason other than making profit. If the aim is charitable and it operates for the benefit of the public, then it is a charity and must register with Charity Commission where income is over £5,000 per year. Unincorporated associations don’t have a separate identity from its members and can’t enter contracts in its own name. Unincorporated associations are required to submit annual returns to the Charity Commission
Charitable Trust: This is like an unincorporated association, except that it is run by its appointed trustees and not by members. As with an unincorporated association, a charitable trust must register with the Charity Commission if their income is over £5,000.
BAnC Services works with charities of all structures. We can prepare and submit your annual returns, prepare fundraising budgets and donor reports, review and develop internal controls and perform independent examinations.
Send an email to hello@bancservices.co.uk or book a discovery call through our website, to discuss how we can help.