Charities Act 2006

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CHARITIES ACT 2006

Charities Act 2006

Charities Act 2006

Introduction to Charities Act 2006

The Charities Bill received Royal Assent on 8 November 2006. This means that, after much debate in the House of Lords, the Bill has now become law and will be known as the Charities Act 2006 (“the Act”).

Although the Act has now received royal assent many of its provisions are yet to come into force. To date the main provisions that have been commenced are:

Increases to the financial thresholds above which charities must have a professional audit;

Measures to address concerns around the potential personal liability of charity trustees; and

Changes to the Charity Commission's governance arrangements.

These were among the first series of provisions that came into force on 27 February 2007, having been implemented by the First Commencement Order of the Charities Act 2006.

Charities will be affected because many are currently set up as companies limited by guarantee. The advantages of being set up like this are that the charity has its own legal entity and is able to enter into contracts in its own right. Also the liability to trustees is not as great because any claims would be made against the company and, finally, third parties often prefer dealing with companies.

Again much like the Charities Act the provisions of the Companies Act will not be implemented immediately. It is envisaged that that the government will consult on detailed implementation plans in February 2007 with all parts of the act commenced by October 2008.

Public Benefit

The thinking behind this new provision is that a demonstration of providing public benefit will safeguard public confidence and enable people to better understand why charities deserve tax and additional benefits.

The Act does not contain a definition of public benefit, or indeed suggest how charities should demonstrate it. Instead the Government will be working closely with the Charity Commission to implement a public benefit test. The Charity Commission has already published guidance on what its approach to public benefit will be. The latest guidance was produced in October 2006, and can be found on their website. The Commission say their decisions will be based upon underlying case law and that they will follow the court's approach and develop decisions on public benefit in the context of changing economic and social conditions, including public attitudes.

Further Charity Commission guidance on public benefit is expected soon. Until this further guidance is known it is difficult to know the precise impact that ...
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