The Charities Act 2022
On 24 February the Charities Act 2022 (the Act) received Royal Assent.
This new legislation updates the Charities Act 2011 and introduces significant changes in charity law. In the social housing sector, these changes will impact any organisation which has been established as a registered charity. Whatever its legal structure (for example, whether established as a limited company or an unincorporated body), if it operates exclusively for charitable purposes, such organisation will be subject to this new Act as part of legislation governing charities.
The need for change
The law relating to charities has developed over many years, but recently the consensus view has been that there is too much unnecessary bureaucracy around what a charity and its trustees can, and cannot, do. Many of the existing rules, in existence before internet and email communication, are over complicated and unhelpful to the operation of a charity’s business. Following recommendations set out in the Law Commission’s report – Technical Issues in Charity Law, published in 2017, the Act is intended to reduce this burden of regulation and increase trustees’ flexibility and autonomy to act. By removing some of the existing red tape, once in force, the new legislation will provide opportunities for charities to maximise the efficient use of their charitable funds.
Before the new changes take effect, secondary legislation will be required and, in April 2022, the government published its implementation plan which sets out the timetable for a staggered introduction. As a result, the provisions of the Act will be implemented in three groups starting in Autumn 2022, with a second tranche becoming law in Spring 2023 and the remaining provisions enacted in Autumn 2023.
Implications for Registered Providers/Registered Social Landlords (RPs/RSLs)?
On balance, it is good news; once implemented, the Act will simplify some of the existing regulations, reduce bureaucracy and so save trustee time and money. One of the key provisions for RPs/RSLs is the changes in relation to acquisitions and disposals of land. RPs and RSLs registered as charities will have access to a wider choice of professional advisors on land disposal and the rules on what advice they need to take before buying or selling land have been simplified. For example, under the new Act, obtaining external advice from a RICSA qualified surveyor will no longer be mandatory when an RP/RSL charity wishes to sell land. In addition, if the RP/RSL has a suitably qualified trustee or employee, he or she may provide the relevant advice without the need to instruct an external professional.
Further simplification measures in the Act include:
- Changes to the existing “connected persons rules” with the result that a smaller proportion of transactions will need consent from the Charity Commissioners.
- Increased flexibility in relation to money raised by charitable appeals, ex gratia payments and the ways in which charities may make use of any permanent endowment.
- Provision for trustees to be paid for goods they have provided to the charity in certain circumstances and a new power for the Charity Commission to ratify trustee appointments in circumstances where there is an issue with the validity of the original appointment.
- Removal of certain legal barriers to the merger of charities.
The changes to be introduced by the Charities Act 2022 have practical implications for RPs operating as registered charities and such organisations need to be aware of this new legislation. Although the significance for the day to day running of the business should be minimal, directors and trustees will have greater flexibility in relation to the regulatory requirements. The Charity Commission is currently updating existing guidance ahead of implementation of the first tranche of reform later in 2022.