The Charities Act 2022: What You Need to Know

The Charities Act 2022 is finally rolling out its changes, and the results are promising for charity trustees. This legislation promises to simplify and empower trustees in managing their charitable organisations. However, the road to implementation has been phased, with the first wave of changes taking effect in October 2022 and the second wave arrived on June 14, 2023.

In this blog post, we delve into the latest June changes, which include measures that ease restrictions on small endowment spending, streamline land disposal processes, and reinforce the Charity Commission’s role in regulating charity names.

Streamlining Land Disposal Processes

One of the standout features of the Charities Act 2022 is its streamlined approach to land and property disposal. The Act broadens the scope of experts who can advise charity trustees on these transactions. In addition to qualified surveyors from the Royal Institute of Chartered Surveyors (RICS), fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers can now provide guidance. Moreover, the Act allows charity trustees, officers, and employees with the relevant qualifications to contribute their insights. This expanded pool of expertise gives charities more options to consider.

Furthermore, the Act introduces a notable change that allows charities to grant fixed-term tenancies (of one year or less) to employees for use as their homes without needing approval from the Charity Commission. This newfound flexibility can be particularly beneficial to organizations like churches that provide staff members with rental accommodations.

Expanding Flexibility for Permanent Endowments

The Charities Act 2022 introduces a significant level of flexibility in terms of spending from permanent endowments. Charities now have the authority to utilise permanent endowments of £25,000 or less under specific conditions, without having to seek prior consent from the Charity Commission.

Additionally, the Act bestows charity trustees with the statutory power to borrow up to 25% of the permanent endowment’s value without requiring approval from the Charity Commission, provided that the borrowed amount is repaid within 20 years.

Furthermore, this legislation aligns with recent developments in charity investment case law, enabling charities that adhere to the “total return approach” to employ permanent endowment funds for social investments, even if these investments carry negative or uncertain financial returns. This adjustment broadens the scope for charities to pursue investments that align with their mission while maintaining overall financial stability.

These changes offer charities more leeway in resource allocation, enabling them to respond more promptly to urgent needs.

Strengthening Oversight of Charity Names

The Charities Act 2022 empowers the Charity Commission with enhanced authority regarding charity names. Beyond governing official names, the Commission now has the capacity to instruct charities to alter working names if they resemble those of other organisations or could potentially mislead the public.

Moreover, the Commission can delay the registration of a charity with a name deemed unsuitable. These measures enhance transparency, prevent confusion, and safeguard the distinct identities of charitable entities.

What’s Next?

While these changes might not drastically alter the daily operations of most charities, they undeniably simplify the regulation of charitable organisations and make it easier for them to manage property and allocate permanent endowment funds as they see fit.

Stay tuned for upcoming announcements later in 2023, addressing issues such as charity constitutions, trustee appointments, remuneration, and mergers. Staying informed and seeking guidance as these developments unfold will empower charity trustees to confidently navigate the ever-evolving regulatory landscape.

Have Questions or Need Guidance?

Navigating the Charities Act 2022 and its implications can be a complex task. If you have questions or need further guidance, don’t hesitate to reach out on 01903 234094. We’re here to support you in making the most of these legislative changes.