Charities Flashcards
Trusts Law Privileges? (5)
Exempt from the following rules:
- Rule that the trust must specify with sufficient certainty the objects of the trust.
- The rules against perpetual duration.
- If charitable trustees have a power to accumulate income and not use it, then this ends after 21 years. Otherwise no limit.
- Not subject to the doctrine of lapse (if the fulfilment of a trust disposition fails then the property returns to the settlor.
- If the equitable beneficial interest of a private trust is not exhausted, there is a resulting trust back to the settlor/his estate. In the case of charitable trusts, provided they are valid in their terms, if they become impossible/impracticable to carry out the doctrine of cy-pres arises. This means that as long as property has been devoted to charity and the settlor has demonstrated a general charitable intent, then the charitable commission or courts can divert the unspent funds to a charity whose purposes are as close as possible as the original charity. You can’t use this doctrine to create a valid charity out of an invalid one, but it has been used as a modernisation mechanism where purposes which might be somewhat out-dated in their particular specification can be pursued in a modern fashion.
Tax Law Privileges? (3)
o The list of exemptions have grown over the years. For example, they do not pay income tax on their investment income. If a charity takes the form of a company, they will be exempt from corporation tax. If a charity sells assets and gains no capital gains tax is payable. Stamp duty is not payable on assets transferred to a charity.
o The only area with no exemptions for charities is VAT.
o There are also privileges for donors – gifts are paid out of untaxed income. You can deduct these payments.
Legal Definition of Charity?
Commissioners of Income Tax v Pemsel
This has been applied, extended over the years and summarised by the four heads of charity summarised in Pemsel. A purpose must be within the spirit of the preamble.
Pemsel gave the categories as:
- relief of poverty
- advancement of education
- advancement of religion
- other purposes beneficial to the community which the law recognises as charitable.
Legal Definition of Charity?
The Charities Act 2011 s.3(1)
- the prevention or relief of poverty
- the advancement of education
- the advancement of religion
- the advancement of health or the saving of lives
- the advancement of citizenship or community development
- the advancement of the arts, culture, heritage or science
- the advancement of amateur sport
- the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
- the advancement of environmental protection or improvement
- the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
- the advancement of animal welfare
- the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
- any other purposes…
3 Legal Requirements?
The trust must have a recognised charitable purpose.
The trust must be for the ‘public benefit’.
The trust must have exclusively charitable purposes.
Public Benefit?
Independent Schools Council v Charity Commission
Concerned with the status of certain schools – the advancement of education. The tribunal made some general comments which summarise neatly some of the problems with the public benefit requirement. There has never been a systematic attempt to define a public benefit, but the cases suggest 2 aspects:
- The nature of the purpose must be such as to be for the community. This is the substantive nature of the benefit – public benefit in the first sense.
- Those who will actually benefit from the carrying out of the purpose must constitute the public as a whole, or a substantial amount of the public. In the judgment they say the number must be sufficiently numerous, but this seems dangerous.
Wholly and Exclusively Charitable?
Ancillary Non-Charitable Purposes -
Morice v Bishop of Durham
Held to be non-charitable because the concepts the money was left for went way beyond the scope of charity and could not be said to be incidental to any charitable purposes.
Wholly and Exclusively Charitable?
Ancillary Non-Charitable Purposes -
IRC v Glasgow Police Athletic Association
Charitable purposes helping to recruit police and making policemen fitter. This association also provided recreation for the members and this could not be regarded as merely ancillary to the charitable purposes.
Wholly and Exclusively Charitable?
Ancillary Non-Charitable Purposes -
London Hospital Medical College v IRC
Court concerned with the activities of the students union of the college. The court said that the recreation could be seen as merely ancillary to the main purpose of the college in training and educating doctors.
Wholly and Exclusively Charitable?
Ancillary Non-Charitable Purposes -
AG v Ross
Whether a non-charitable purpose is ancillary to the main purpose of the trust is a question of fact and a matter of degree, depending on the circumstances of each case.
Wholly and Exclusively Charitable?
Construction of gift -
Re Atkinson’s Will Trust
“Worthy Causes” could not be said to be limited to exclusively charitable purposes.
Wholly and Exclusively Charitable?
Construction of gift -
Re Best
If a gift is for “charitable AND benevolent” purposes, the use of the word ‘and’ allows the court to interpret the second word as being included within the meaning of charitable.
Wholly and Exclusively Charitable?
Construction of gift -
Re Macduff
However, where a gift is left for “charitable OR other purposes”, this will not be exclusively charitable.
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty
Re Coulthurst
The court said you don’t have to use the word ‘poverty’. It is quite clear that it does not mean destitution but is a word of somewhat wide import. If by reason of their financial circumstances they are most needing of assistance the total picture is one of giving to not just the most deserving, but those most in need.
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty
Re Sanders’ Will Trusts
Trust to provide dwellings for the working classes and their families. Held not charitable for the relief of poverty – the would-be beneficiaries were described as the working classes – made reference to Coulthurst that it was not helping widows/orphans but people who were working - a low wage does not mean they could not afford accommodation.
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty
Re Niyazi’s Will Trusts
Construction of a working men’s hostel in Cyprus. The fact the benefit is overseas doesn’t stop it being charitable under UK law. Refers to Sanders but decides it is charitable here. “No doubt there are a number of hostels of superior quality, but without any such laudatory adjective hostel has a flavour of a building which provides modest accommodation for those who have some temporary need for it.” The words working men and hostel both have some sort of impoverished flavour about it and thus it just passes.
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty
Re Gwyon
Those who are going to benefit from the trust must be ‘poor’.
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty - Public Benefit
Re Scarisbrick
Distinction between a gift to individuals who happen to be poor (not-charitable) or a gift for the relief of poverty among a class of people (charitable).
The Heads of Charity under the Charities Act 2011 - Prevention of Poverty - Public Benefit
Re Segelman
A trust for “poor and needy” relations was upheld as valid even though the class to benefit comprised only 26 people. The trust was only upheld because it also included the relatives’ future children.
