Stephen Claus explains what is a Charitable purpose?
There is often confusion in the minds of those who want to help a charity. Some people think for example, to raise funds for a person without money who has a terrible disease or disability, is charitable, but the law says no. Raising money for one person is not charitable, but raising money for people with a rare disease, any of whom could benefit, is charitable. This not a straightforward area of law, and it has been developing since the preamble to the Statute of Uses (known as the Statue of Elizabeth) in 1601!
There is a difference between “philanthropy” which could be charitable depending upon what is involved, and pure “charity”. However, philanthropy is wider than charity, it is basically good works. Not every good work is charitable.
A charity must be established for an exclusively charitable purpose or purposes. No inappropriate private benefits can be conferred (save in exceptional cases) and for every charitable purpose (the only exception being the relief of poverty), the benefits must be available to a sufficient section of the public.
A charity must have ‘charitable purposes’ that help the public (known as being ‘for public benefit’).
Charitable purposes include things that contribute to:
- relieving poverty
- saving lives
- citizenship or community development
- the arts
- amateur sport
- human rights
- religious or racial harmony
- the protection of the environment
- animal welfare
- the efficiency of the armed forces, police, fire or ambulance services
So if it is not in the list is that fatal? Well possibly, but not necessarily, and the Charity Commission (the Regulator for Charities) or the Courts may consider if a new purpose is within the current scope of the law, and permit a new purpose. However this is not a common event, is often legally complex and very drawn out.
Having then worked out if a purpose is within the descriptions of purposes set out above, you must consider if the public benefit test is met. This is a complex matter to explain, and a detailed analysis is beyond the scope of this article but briefly, this means in broad terms, the benefits of the charity must be available to sufficient section of the public. This is not a numbers test however, it means there must be no common nexus amongst the beneficial class (that is those who are intended to benefit).
For example you could not provide a benefit to all the residents of one street, as the common nexus of the residency in that street is contrary to the rule, but you can provide a benefit for an area which could be say residents of a village, such as a village hall. You could not provide a pension scheme for the employees of a named company, but you could provide pensions for poor people.
The benefit also provided must be for the public benefit. For example it is educational to provide courses of sufficient educational merit to people. That would be the advancement of education. Then you must ask is that education for the public benefit? Providing education is fine but not say teaching people how to be good pickpockets. Whilst it would be educational it would not be for the public benefit.
If you do not pass both elements of the test, being are you established for an exclusive charitable purpose and then also be for the public benefit, then you would not be charitable in the eyes of the law. Please note additionally the purposes must be exclusively charitable, you cannot be partly charitable the law does not allow that.
There is a large amount of material on the Charity Commission website which offers more detailed information, but many people feel it is too complex to understand the complexities, and often turn to a professional person for help, or sometimes to community organisations for help.
Charity is very well worthwhile and can be rewarding. The advantages of charitable status are discussed in a latter blog.
These are the views of Stephen Claus, and therefore does not constitute individual legal or financial advice, this article is for information only. If you require guidance or advice, please get in touch.