Implementation plan for the Charities Act 2022

As we noted in our blog on 1 March (which you can read here), the Charities Act 2022 contains a number of changes to charity law aimed at smoothing and simplifying the processes trustees often use in the management of their charity.

Although the Charities Act 2022 received Royal Assent on 24 February 2022, most of its provisions will not come into force straight away, but rather will be implemented by the Department for Digital, Culture, Media and Sport (DCMS) over the next 18 months in a staggered fashion.

The DCMS has now published an indicative timetable for when each of the provisions in the Charities Act 2022 will come into force. As you will see below, it is currently anticipated that the provisions will come into force in three groups, in autumn 2022, spring 2023 and autumn 2023.

Charities Act 2022 implementation timetable

Group 1: Autumn 2022

• Power to amend Royal Charters: s4 gives trustees of Royal Charter charities a statutory power to amend their constitution. This will assist Royal Charity charities which do not have an express power in their constitution to make a proposed amendment.
• Cy près powers: s6 replaces the scenarios in which charity trustees are permitted to apply funds from failed appeals “cy-près”, i.e. for the nearest possible purpose, rather than returning them to the original donors. Trustees may now apply funds cy-près where:
  • (a) It is unreasonable to incur expense to return the donation;
  • (b) The amount of the donation is £120 or less;
  • (c) The donor is unidentifiable; or
  • (d) The donor cannot be identified or found.

s7 allows charity trustees to apply the proceeds of a failed fundraising appeal to other purposes, without the need to obtain a cy-près scheme. If the proceeds total £1,000 or less, trustees can do this by way of resolution; if the proceeds exceed £1,000, they must obtain Commission consent to do so.

• Ex gratia payments: s15-16 enable charity trustees to make ex gratia payments up to a certain level without requiring authorisation from the Commission. The level is set by reference to the charity’s annual gross income, and applies per payment, rather than per financial year. The new test for making ex gratia payments is more objective, and enables trustees to delegate the decision, should they wish to.
• Remuneration of trustees for providing goods: s30 permits charities to pay trustees for the provision of goods, without Commission consent.
• Trust corporation status: s32 confers trust corporation status on any trustee of a charitable trust that is a body corporate (e.g. a company, CIO or Royal Charter charity) and itself a charity, in its capacity as trustee of a charitable trust.
• Tribunal costs: s36 enables the Charity Tribunal to authorise charities to pay legal costs that they incur in Tribunal proceedings from the charity’s funds.

Group 2: Spring 2023

Permanent Endowment

Sections 9 to 14 and 35a of the Charities Act 2022, which are concerned with permanent endowment:

• Raise the threshold up to which trustees can resolve to release permanent endowment restrictions on a fund from £10,000 to £25,000, and the gross income of the charity in question will no longer be relevant;
• Allow trustees to borrow from their charity’s permanent endowment without having to seek an order from the Commission, provided the borrowing is limited to the 25% of the total capital value of the available endowment fund, and must be repaid within 20 years;
• Allow trustees to release restrictions in respect of outstanding borrowing from a permanent endowment fund; and
• Create a new power for charities which invest permanent endowment on a “total return” basis to use permanent endowment to make social investments that they could not otherwise make, because they are expected to produce a loss.

Charity land

Sections 17 to 23 of the Charities Act 2022, which are concerned with charity land:

• Remove the requirement to advertise a proposed disposition as advised in the surveyor’s report. The charity must consider any advice that is given by the surveyor, but there is no longer a requirement to follow that advice;
• Allow trustees to take advice from a wider pool of surveyors on their disposal of charity land – the adviser no longer needs to be a member of the Royal Institution of Chartered Surveyors; and
• Allow charity trustees to provide such a report or advice to the charity.

Group 3: Autumn 2023

• Charity constitutions: s1-3 harmonise the rules for all charities (whatever legal form they take) when amending their constitution. This should make it quicker and easier for trustees to amend their charity’s constitutions.
• Remuneration of charity trustees: s31 grants the Commission a power to order a charity to remunerate a trustee where: (1) the trustee has done work for the charity; and (2) it would be inequitable for the trustee not to be remunerated for that work. This prevents the need for trustees to apply to court to authorise the payment of an equitable allowance.
• Charity mergers: s33-35 enable gifts to a charity which has since merged to take effect as a gift to the new charity, and amend the definition of a “relevant charity merger” to include mergers where one of the charities has permanent endowment held in a separate charity, and that separate charity continues to exist without being transferred to the new charity.

Reviews

The DCMS has stated that it will review:

• The financial thresholds set out in the Charities Act 2011, to consider whether they should be increased in line with inflation, this year; and
• The Charities Act 2022 as a whole, in the next 3-5 years.

It has also stated that it intends to update existing Charity Commission Guidance to provide more clarity to the sector.

Next steps

We will provide links to the new and updated guidance provided by the DCMS as part of the implementation of the Charities Act 2022 in the coming months. In the meantime, the DCMS’s implementation plan can be read in full here and the Charities Act 2022 and its explanatory notes can be read in full here.

If you have any queries about the topics discussed above, or there are any other issues we can help you with, please do get in touch with Ben Brice or Laura Sherratt.