Resources / What is a charity?
What is a charity?
A charity is not a type of organisation. It is a legal status, and you either meet the test or you do not. Two things decide it.
One: every one of your purposes falls within a list set out in law.
Two: those purposes are for the public benefit.
Miss either and you are not a charity, whatever your intentions. Meet both and you are a charity even if nobody has registered you yet.
Test one: your purposes are on the list
Section 3 of the Charities Act 2011 lists 13 descriptions of charitable purpose. Yours have to sit inside them.
- Preventing or relieving poverty
- Advancing education
- Advancing religion
- Advancing health or saving lives
- Advancing citizenship or community development
- Advancing the arts, culture, heritage or science
- Advancing amateur sport
- Advancing human rights, conflict resolution, reconciliation, or religious and racial harmony and equality
- Advancing environmental protection or improvement
- Relieving those in need because of youth, age, ill health, disability, financial hardship or other disadvantage
- Advancing animal welfare
- Promoting the efficiency of the armed forces, or of the police, fire and rescue or ambulance services
- Anything already recognised as charitable, or close enough in kind or spirit to the purposes above
The last one is what lets charity law keep up. It is how new purposes get recognised without an Act of Parliament.
Your own purposes are written down in your governing document. They are called your objects, and they matter more than anything else on this page. Everything your charity does has to further them. Doing something outside them is acting outside the trustees' powers, even when it is obviously a good thing to do.
Test two: it is for the public benefit
Public benefit has two parts, and you have to pass both.
- The benefit part. The purpose has to do good in a way you can identify and evidence. Any harm it causes must not outweigh that good.
- The public part. The good has to reach the public, or a wide enough section of it. You cannot limit who benefits by a personal link or a contract. If you charge, the price must not shut out people of modest means.
There is no free pass. Until 2006 the law assumed that relieving poverty, advancing education and advancing religion were for the public benefit. That assumption is gone. Every charity has to be able to show it, and trustees have to report on it every year (Charities Act 2011, section 4; PB1).
If you are thinking of setting one up
Three questions are worth answering honestly before you go further.
- Does something like this already exist? Joining or partnering with an existing charity is often better for the cause than starting a fourth one doing the same thing in the same town.
- Can you find enough trustees? Most governing documents ask for at least three, and you need people who will actually turn up. A board that exists on paper is a common reason charities end up in trouble.
- Is charity the right status? If you want to pay the founders, keep control, or move into whatever work looks promising next year, a charity will frustrate you. A community interest company or an ordinary company may fit better.
Which legal form?
| Form | Suits | Watch out for |
|---|---|---|
| Charitable incorporated organisation (CIO) | Most new charities. It is its own legal person, so it can hold property and sign contracts, and trustees get limited liability. Registered with the Charity Commission only. | You must register whatever your income. Some lenders are still less familiar with CIOs than with companies. |
| Charitable company | Charities with staff, premises or contracts that want a form banks and funders know well. | Two regulators, so two sets of filings: Companies House and the Charity Commission. |
| Unincorporated association | Small membership groups with no property and no staff. | No separate legal person, so trustees can be personally liable. Contracts have to be signed by individuals. |
| Trust | Grant-making funds set up to hold and give away money or property. | Same personal liability point as an association. Usually no wider membership. |
When you have to register
In England and Wales you must register with the Charity Commission if your income is at least £5,000 a year, or if you are a CIO, whatever your income. Some charities are excepted or exempt and follow different rules. Scotland has its own regulator, the Office of the Scottish Charity Regulator, and Northern Ireland has the Charity Commission for Northern Ireland.
If you already run one
The two tests are not a one-off hurdle you cleared at registration. They are a live standard, and the Commission expects trustees to check against them at least once a year.
- Read your objects again. Not the summary on your website. The wording in your governing document.
- List what you actually do. Every service, event, course and trade.
- Match one to the other. For each activity, name the object it furthers. Anything you cannot place is either something to stop, or a sign your objects need changing.
- Minute it. An unminuted conversation is not evidence. A short, dated board minute is.
Drift is normal and rarely deliberate. A funder offers money for something adjacent, a trustee has a good idea, and five years later a third of what you do sits outside what you were set up for. Catching that early is the whole point of the annual check.