48: What can we expect for charity law in 2023?

Happy new year and welcome to 2023. The new year offers its usual opportunity to look ahead to see what we may expect for charity law in 2023…

Cost of living crisis

There is no getting away from the fact that just about everything which can be expected in 2023 will take place against the challenges of the ongoing cost of living crisis. On 9 January 2023, the Chancellor announced the new Energy Bills Discount Scheme (EBDS) for non-domestic customers, including charities, which will replace the current Energy Bill Relief Scheme (EBRS) which runs out on 31 March 2023. The EBDS will run for a full year to 31 March 2024 but, as expected, the support offered will be reduced in comparison to the current scheme.

While the announcement of a further year’s support for energy bills offers some relief, charities will no doubt remain concerned, especially when many are already relying on reserves which have been depleted in the pandemic. Many charities are facing increased demand for services alongside a squeeze in donations as the crisis hits donors’ pockets. That squeeze can be felt acutely within charities too, as Pro Bono Economics reported last year that charity staff are paid on average 7% less per hour than workers in the rest of the economy. Added to this is a risk of burn-out within charity management with charity trustees and senior management, already tired from weathering the storm of the pandemic, being pitched straight into a new crisis with no obvious relief in sight.

The Charity Commission has recognised the ongoing pressures, publishing guidance last month on managing financial difficulties arising from the crisis. The guidance provides an overview of trustee responsibilities and options to consider, with links to further guidance and support.

Charities Act 2022 – ongoing implementation

Something which should hopefully alleviate some of the strain for charities during 2023 is the ongoing implementation of the Charities Act 2022. The Act is designed to reduce unnecessary bureaucracy for charities (while maintaining an appropriate level of oversight). The first round of implementation was brought in in October 2022 and we can expect further rounds of implementation in Spring and Autumn 2023.

The Spring 2023 implementation should include provisions to streamline the statutory regime applying to disposals of charity land, as well as some simplification of the statutory rules for permanent endowment. Charities planning land disposals over the next few months and / or considering making changes to their permanent endowment (such as to release capital restrictions to aid cash-flow) should be aware of these provisions so that they know which rules will apply and can act accordingly.

In Autumn 2023, implementation should include new powers for charity trustees of unincorporated charities to amend their constitutions as well as some changes to the current ‘regulated alterations’ regime for amending constitutions of charitable companies and CIOs.

At some point, as yet unspecified, we should also see implementation of new powers relating to ex gratia payments (where charity trustees feel a moral obligation to make a payment to a non-beneficiary but have no legal power to do), but these are currently subject to ‘further consideration’ while the government considers the impact on charities (such as the British Museum) currently governed by statutory provisions preventing them making such payments.

Charity law reform in Scotland

Charities registered in Scotland should be aware that charity reform is in progress there too, with the publication by the Scottish Government of the Charities (Regulation and Administration) (Scotland) Bill. The Bill proposes to give the Scottish Charity Regulator greater powers, including a new power to reject applicants for registration where there is insufficient connection to Scotland. There is currently a detailed consultation for views on the Bill, which is open until 3 February 2023.

Changes to companies and LLPs

The Economic Crime and Corporate Transparency Bill, currently making its way through Parliament, will bring in sweeping changes to the way we deal with Companies House – it will affect any charity which is established as a company or which has a company (or LLP) within its structure (eg a trading subsidiary company or a corporate director).

The Bill aims to bring in corporate reform directed at tackling economic crime, including the misuse of company registration for criminal purposes. As part of the reforms, Companies House will take on a regulatory role with greater powers to police the content of the companies register. It will also bring in new ID verification requirements for directors, people with significant control and those making filings at Companies House.

A ban on corporate directors will also be brought into force, subject to some exceptions to be permitted by secondary legislation. The White Paper preceding the Bill provided that the Government accepted that non-company corporate legal forms, such as CIOs, should be permitted within the exception – we will have to see when the secondary legislation is published, probably later in 2023.

Martyn’s Law – new Protect duty

Following a consultation in 2021, the Government last month announced its plans to proceed with legislation to introduce a new statutory Protect Duty. The legislation is to be known as ‘Martyn’s law’ after Martyn Hett, who was killed alongside 21 others in the Manchester Arena terrorist attack in 2017.

The proposal is to impose the duty on owners and operators of certain locations to take proportionate steps to keep people safe from terrorist attack. Charities are expected to be in scope, with those likely to be affected including museums and galleries, places of worship, theatres, hospitals and education establishments among others.

The legislation has not yet been introduced to Parliament. Charities which may be affected should look out for the legislation, so that they can feed into the process and prepare as necessary.

Charity Commission – new online services, guidance and Annual Return

The Charity Commission will be rolling out its new ‘My Charity Commission Account’ service in early 2023, with the plan for it go live from Spring 2023. The service is intended to be a new, improved interface between the Charity Commission and charity contacts and charity trustees.

In the current first phase of the roll-out, the Commission should be inviting charity contacts to enrol, therefore charities should check that those contact details are up to date.

Three forms of account will be available – an administrator account (for the charity contact), a trustee account and a third party account (where the charity wishes to authorise someone else, such as an adviser or an employee who is not the charity contact, to access online services on behalf of the charity). The Commission announced at its Annual Public Meeting in October 2022 that enrolment with the service will not be compulsory, but the Commission hopes that it will be regarded as so useful that contacts and trustees will want to enrol.

The Commission has also announced some new or updated guidance which we should expect in 2023. In addition to guidance to accompany each implementation stage of the Charities Act 2022, we can expect updated guidance on returning and refusing donations, as announced by the Charity Commission Chair Orlando Fraser in a speech in November. This will be welcome, as such updated guidance has been expected since the Commission’s blog on the subject in 2019.

The Commission has also confirmed that it will publish ‘redesigned’ guidance CC14 – Charities and investment matters: a guide for trustees by Summer 2023 after the decision in 2022 on responsible/ethical investment. The redesigned guidance will also incorporate an updated explanation of social investment. In the meantime, the Commission has confirmed that trustees can continue to rely upon the Commission’s current version of CC14.

Charity trustees should also be aware that, for financial years ending on or after 1st January 2023, a new Annual Return form is in place. The new form will contain more questions (some of which will only be asked once and then removed from 2024 onwards), but the Commission has promised that a new guide will be available to assist charities in completing the form.

Cases / decisions expected in 2023

Some interesting cases / decisions are expected this year.

Charity registration – We can expect the decision in the challenge brought by charity Mermaids against the Charity Commission’s decision to register LGB Alliance as a charity in 2021. Challenges of Commission decisions to register a charity are rare – rarer still for the challenge to come from another charity. The challenge in this case was heard in the Tribunal in November 2022 and in essence alleges that the purposes of LGB Alliance are not exclusively charitable because they are not the organisation’s true purposes and / or are not for the public benefit.

Judicial review of Charity Commission statutory inquiry report – The case of Kids Company looks to continue this year after the charity’s former CEO, Camila Batmanghelidjh, was given permission to proceed with a judicial review challenge against the Charity Commission over its statutory inquiry report into the charity published in February 2022. The case is likely to be of interest not only because judicial review claims against the Commission are rare, but also because of the light it may shine on the Commission’s processes when conducting and reporting on a statutory inquiry.

Charity rates relief – charity cases in the Supreme Court are also relatively rare. In March 2023, the Supreme Court will consider the proper test for mandatory charity relief from business rates (this firm is acting for the charity in the case).

Code changes?

We can also expect some updating to charity codes in 2023.

The Fundraising Regulator has begun a review of the Code of Fundraising Practice. It held an initial call for information held in 2022 and plans to conduct a 12-week consultation on potential changes to the Code in Autumn 2023. It aims to produce an updated Code in 2024. It is hoped that the changes will include some guidance on fundraising in the context of cryptoassets.

The Code of Charity Governance is also due for review in 2023. Last year, the new Chair of the Steering Group for the Code highlighted some key priorities for the next phase of the Code including some of the new governance challenges such as issues around digital and cyber, the environment and employee wellbeing and welfare.

All in all, 2023 is looking likely to be an interesting, and challenging, year on the charity law front.

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