Exploring the definition of a charity in the UK: What qualifies as charitable?

Here we explore the definition of what a charity actually is in the UK: from the governing laws and regulations to the registration process to the role of charity trustees.

The definition of a charity in the UK

• It’s the Charities Act — and the guidance provided by the Charity Commission — that outlines the rules and regulations for private charities and public charities in the UK.
• To meet the Charities Act definition of a charity, an organisation has to meet specific criteria, including its purpose meeting the description of one of the 13 descriptions outlined by the Charities Act. The Charity Commission determines whether the charity’s purpose meets these criteria.
• Charities also have to meet the public benefit requirement: that the purpose is actually beneficial and applies to the public as a whole without any criteria or restrictions.
• For a charity to register with the Charity Commission, eligibility criteria must be met. That includes meeting income thresholds, having an aligned purpose with one of the 13 descriptions, and providing the required documentation (including a governing document).

The two different types of charities

• There are two different types of charities in the UK: Charitable Incorporated Organisations (CIOs) and Charitable Companies Limited by Guarantee.
• CIOs have their own legal identity, allowing an organisation to enter into contracts in its own name and provide limited liability for its members. They suit smaller charities. Charitable Companies Limited by Guarantee, meanwhile, offer limited liability for the guarantors and suit charities that require a more complex governance structure.

Tax benefits and obligations

• Charities in the UK enjoy various tax benefits, including exemptions on income and gains used for charitable purposes. Donors who give to UK charities may also be eligible for tax relief through Gift Aid and payroll giving.

The role of charity trustees

• Charity’s trustees are responsible for ensuring that the charity operates in compliance with its governing document and charity law, as well as managing the charity’s resources responsibly. They may face potential liabilities arising from their role in the organisation. That means it’s essential to have appropriate insurance coverage to protect the trustees and safeguard the charity’s assets and resources.

To sum up

The definition of a charity and its regulation is a relatively intricate business. For an organisation to establish itself as a charity, it’s necessary to understand the legal frameworks, the registration process, tax benefits and obligations, and the role of trustees. Only then can an organisation set itself up in a sustainable way in the third sector and truly contribute to the greater good.

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