Starting a Charity – What you need to think about

Setting up a charity can be a complicated business and there are many things that need to be taken into consideration. Below are some of the things that need to be thought about.

LEGAL ISSUES

For of all you must establish the legalities of your charity. Not just anyone can claim to be a charity; there are certain requirements that must be filled. The most important thing is that a charity must be working for the public benefit. It must be fulfilling a specific purpose. There are three different types of charity, and a charity organisation must come under one of these three umbrellas. These are a Charitable Trust, a Charitable Company, and an Unincorporated Charitable Association. An Unincorporated Charitable Association is the easiest to set up, and the majority of charities fall under this category.

There are many other laws that dictate how organisations which claim to be charities must operate, and organisations are breaking the law if the fail to follow these rules.

TAX

The good news for those starting a charity is that charities get certain tax breaks. They will not be paying the corporate tax that businesses do. These tax breaks exist to encourage people to set up charities. New charities must therefore contact the HMRC to register as a charity for tax purposes. There are rules that need to be followed to receive these tax benefits.

BANK ACCOUNTS

Who to bank with can be an important decision for a charity. Similarly to businesses banking, different banks will offer different rates, so it is beneficial to shop around. Many banks offer favourable interest rates to charities.

REGISTRATION

As already mention you can’t just claim to be a charity, even if you are working in the public benefit. To be able to legally claim to be a charity you must first register as such. Organisations who successfully register as a charity will then be given a charity number, will get certain tax benefits, and be legally allowed to call themselves a charity.

WHY ARE YOU STARTING A CHARITY?

A charity is an organisation working for a particular cause or causes. You need to decide the reasons why you are starting a charity and the particular aims of your charity. You must decide which specific groups you are looking to help and you need long term goals. Fundraising for a particular purpose is not a charity; a charity is a long-term organisation working in the public interest with particular aims.

WHAT IS THE BEST WAY OF HELPING?

The particular operations of your organisation also need to be thought about. For example, how can you help those who you aim to assist? You may aim to raise money simply through donations, or you may want to run events that make money, which you then put towards the relevant causes. It may be that you decide supplying volunteers is better, and that time is better than money. This partly comes down to which causes you are trying to help.

Andrew Marshall (c)

Legal Criteria for Charities

It is important that there are a set of guidelines to say who can claim to be a charity and who cannot. The reason for this is that people need to be sure that organisations they are donating to are genuine charities. There are a set of criteria that an organisation must fall under to be considered a charity by UK law. A Charity must be working to fulfil one of the following goals.

Relief of Poverty

This includes organisation who work to prevent poverty, as well as those who help people suffering due to living in poverty. There are certain criteria that dictate what counts as poverty. This umbrella includes those working to prevent and relieve poverty both in the UK and internationally.

Human Rights

Those who act for positive human rights or promote human right can apply for charity status under this criteria. This includes treatment by governments, and anything connected to war, or the resolution of conflicts. A vast array of areas are included, from domestic abuse to major conflicts around the world.

Advancement of Education

Those who provide education fall under this category. Many areas are considered as education, not just education in institutions such as schools, colleges and universities. Adult education, as well as specialist education for those with learning difficulties and other disadvantages are included. Organisations who assist with person development can also apply for charity status under this heading. It doesn’t just cover those who provide education, but those who promote education as well.

Advancement of Health

This mainly consists of those providing medical help; whether it is actually treating those with medical issues or the distribution of medicines to those in need. Medical research, as well as education around health are covered, as are anyone who promote methods to prevent health problems.

Advancement of Religion

This is a controversial area as some don’t believe that religious groups should be able to apply for charity status. Groups who promote and educate within all religions can be included in this area. It isn’t just pro-religion groups though, atheist groups are also covered here.

Art, Heritage and Science

Like religion, not everyone agrees this is an area of charity, as it isn’t having the obvious effect of health and poverty on people’s lives. Those involved in these areas can be considered charities as they can be in the greater public interest, and it is considered important that art and heritage interests are maintained. Historic sites come under this section of charity law.

Animal Welfare

This includes those acting against the cruelty of animals, as well as those who promote animal welfare. Charities working on behalf of all animals come under this umbrella.

Advancement of amateur Sport

Coming under this area are organisations who work to improve amateur sport, and give opportunities to people to take part in sport. A large number of organisations within this area are those who work within disabled sport.

The Armed Forces

This is those who promote or assist in improving the efficiency of the armed forces. This includes those working on improving safety for service men and women, and those who help injured veterans and the families of those affected by the loss of those within the armed forces.

Relief of those in need, by reasons of youth, age, ill-health, disability, financial disadvantage or other disadvantage

These are organisations who help people disadvantaged due to the above issues. A large part of this are organisations assisting those with disabilities. The poor and those with mental health issues are amongst the many areas included.

Andrew Marshall ©

Stone King Sewell are a nationally reputed Charity Solicitors.

Why Charities must prove they are genuine

By law any charity has to fit certain specification to prove that they are a genuine charitable organisation. Although some would not agree with who should be considered a charity and who should not, there are important reasons why only genuine charities should be given charity status. It is crucial that bogus charities are not allowed to be given the status and kudos of genuine ones.

There are a number of criteria that those wishing to receive charity status need to meet. The most obvious is that they must show they have a charitable purpose. They must fit within one of several categories of charity that include the following: -

• Promoting the Relief of Poverty
• Promoting Human Rights
• Promoting Animal Welfare
• An Educational Organisation
• Promotion of / Education about Religion
• Health Services
• Involved in Art, Heritage or Science

These organisations must also be able to show they are working for the public benefit. If they are unable to do this they will not be deemed a charity, even if they have a charitable purpose. If they are not working in the public interest (in the UK or internationally) then they are not considered to be achieving something important enough to be given charity status.

One important reason why charities need to reach the criteria is that they are more likely to receive donations if they are a registered charity. Due to the rise in bogus charities more and more people are double checking charities are registered as such before they give donations. It is therefore crucial non-charities are unable to get away with claiming they are one. Charities with small incomes do not have to prove their charitable existence but many are choosing to do so for this very reason; that they are more likely to receive support from the public.

Other reasons why it is important for charities to prove they are genuine is because there are tax benefits and they can receive legal aid

Tax breaks mean that charities are able to put more of their income towards the causes they exists to help or promote. It is though, important non charitable organisations are not able to benefit from this same assistance. If organisations that should be paying the full amount of tax are not doing so the general public are affected. Less people and organisations paying the normal rate of tax, means that the average person will have to pay more to compensate, or there is less available for the government to spend on public services.

There is only a certain amount of legal aid that is put aside for charities to use. Therefore it is important only genuine charities are able to receive these funds. If non-charities are getting this aid then there is less to be split amongst the charities who need it.

Andrew Marshall ©

Charity Law Solicitors