34: Charity law in 2021 – a look ahead
Last week, we looked at some of the charity law developments we have seen so far in 2021. This week, we consider some developments we can expect in the months ahead. As might be expected, much of our gaze will be on the progress of the Charities Bill through parliament, but there are other developments ahead, including in the government’s reform agenda, which may impact on charities.
What we can expect in the rest of 2021?
As noted above, the Charities Bill will be continuing its progress through parliament, reaching its Committee stage in the House of Lords shortly, where it will undergo more detailed scrutiny.
Responsible investment cases
As noted last week, earlier this year two charities were given permission to bring cases before the court seeking clarification of their powers on ‘responsible investment’. Those cases will be due in the next few months. The cases relate specifically to the individual circumstances of the two charities, and it is not clear that the wider experience and breadth of the charity sector will be represented before the court, but it is possible that the court may seek to make observations aimed at the wider sector.
The Charity Commission has stated that it will put on hold the publication of its final guidance on responsible investment pending the outcome of the cases.
Earlier this year, BEIS held three consultations in the next stage of formulating and implementing a new package of reforms of corporate transparency and the role and powers of Companies House and the companies registrar. The reforms will impact on any charity which deals with Companies House, in particular those which are companies and / or which have a company within their structure.
One of the potential reforms relates to the aim for greater collaboration between Companies House, HMRC and the Charity Commission to work towards a ‘file once with government’ approach. As a recent Companies House blog noted, it is a ‘long-term ambition’. It is helpful, however, that it is being considered now, when new IT infrastructure is being created for public sector agencies, so they can be put in place in a way which should accommodate a ‘file once’ approach.
We should expect to hear more later this year on the government’s responses to those consultations and the next steps in implementing the reforms.
Business rates review proposals
HM Treasury is currently consulting on a proposal to make business rates revaluations more frequent (every three years rather than every five years) stated to take better account of changing economic conditions. The consultation is open until 24 August 2021 and a useful commentary for charities has been published on the Charity Tax Group website. The consultation is part of the government’s Fundamental Review of business rates which was the subject of consultations in 2020.
The Review is important to the charity sector because charity business rates relief is the largest single charity relief, worth around £2 billion per annum to the sector. There has been no indication as yet that the charity relief is under threat in the Review, but any change would have a very significant impact on charities’ cash-flow and sustainability, especially now when the sector is struggling in the wake of the pandemic. The government intends to publish its final report on the Fundamental Review in Autumn 2021.
Also expected in the Autumn is a White Paper on the government’s ‘levelling up’ agenda. We await the detail of the policies to be included in that White Paper although, among other things, it is expected to target ‘regeneration of the great British high street’ with a new ‘High Streets Strategy to revolutionise local communities and support them to thrive’. Presumably that strategy will need to align with the Fundamental Review of business rates, due to be published around the same time.
Consultation on another White Paper – this one dealing with audit reforms – has just closed. The reforms are designed to address recent high profile corporate collapses, such as Carillion, which have raised concern over standards of corporate governance and the role of auditors. The reforms proposed would, however, affect the largest charities, potentially imposing additional regulatory and reporting requirements and personal liability. Some of the concerns raised as a result, for example by the Charity Finance Group, are familiar ones in the sector – of charities being caught in new regulatory requirements which are aimed at the commercial sector and take insufficient account of the existing charity regulatory framework.
Such concerns are echoed in the Charity Commission’s response to the proposals, in which it states that it ‘supports the government’s objective to improve the UK’s audit and corporate governance framework’, but ‘does not support extending a framework designed with the interests of shareholders and for-profit commerce in mind to the charity sector where these imperatives simply do not apply’. The Commission instead invites BEIS to work with the Commission, the charity sector and stakeholders to consider how existing mechanisms in place for the charitable sector could be enhanced to meet the desired outcome of improved corporate governance and oversight.
Challenge to charity registration of LGB Alliance
Challenges to Charity Commission decisions to register a charity are very rare, but we are likely to see one later this year after a charity, Mermaids, issued a crowdfunded challenge to the Commission’s decision to register LGB Alliance as a charity.
LGB Alliance has objects relating to countering discrimination on the basis of sexual orientation and promotion of education, equality and diversity in respect of lesbian, gay and bisexual people. It adopts a position that ‘there are only two sexes and gender is a social construct, and that this perspective should form part of the discussion about these issues’. The Charity Commission received objections to the registration application and considered those before making its decision to register LGB Alliance. The challenge in essence submits that LGB Alliance is not a charity on the basis that its objects are not those set out in its constitution and are discriminatory, political and not for the public benefit, and hence not charitable.
The case should be heard in the Tribunal in coming months and will likely raise interesting questions of interpretation of the test of charity status in the context of equality law.
We will no doubt be picking up a number of these developments, and more, in the months to come.