When is a charity not a charity?

Tue 23 Jun 2015

Dispute throws light on requirement for exclusively charitable purposes

The three legal systems of the UK each have different definitions of charity and different regulatory frameworks.  However one common requirement for a body to be a charity whether in England & Wales, Scotland or Northern Ireland is that it must be established for charitable purposes only.  A recent case considered by the courts in Northern Ireland explored the implications of a general power in a body’s constitution and whether this denied charitable status.  Unusually it was not the authorities arguing the body was not a charity: it was the body itself (in an attempt to escape from the oversight of the charity regulator). 

The Charity Commissioners for Northern Ireland initiated an investigation.  The body being investigated, Bangor Provident Trust (BPT), asserted its constitution meant it was not established for exclusively charitable purposes and thus the Commissioners had no right to mount the investigation.  The Court of Appeal in Northern Ireland, decided that BPT is a charity (Charity Commission for Northern Ireland v Bangor Provident Trust [2015] NICA21).

Objectionable objects?

The point at issue concerned the implications of a clause of BPT’s main objects.  This gave BPT the power “to do all other things as are incidental or conducive to the attainment of the above objects” (all the objects referred to as set out in BPT’s constituting documents were exclusively charitable).

BPT’s argument was that a power given to the Committee of the Trust by the deed: “to do all such acts and things that are incidental to the attainment of the objects of the Society or any of them” denied charitable status.  BPT asserted that this rule combined with the “all other things” clause as set out above permitted it to “lawfully engage in purposes that were not wholly charitable.”  The Charity Commission argued that the “conducive” wording was qualified by the stated objects all of which were charitable objects.

The CA(NI) set out precedent authorities, quoting from the leading case of IRC v City of Glasgow Police Athletic Association.  The nub of the matter is whether a generic clause such as that in BPT’s rule book is either merely permitting the body to do things incidental or conducive to the attainment of the main charitable object (s) or is much wider permitting the body to do such things as the body may think are conducive to attaining its objects.  The latter would allow the body to carry on a non-charitable activity if the body subjectively decided this non-charitable activity helped advance its objects.  As the CA(NI) stated in para 30: “where the powers are expressed in entirely subjective terms it is effectively impossible to prevent non-charitable application of the body’s funds and to require the body to operate in an exclusively charitable manner.”

In the BPT case the CA(NI) decided the “all other things” clause in the rule book was incidental to the main purposes (all of which were charitable) and thus the body was established to exclusively carry on charitable purposes. 

Had the CA(NI) found that BPT was not a charity this would have caused havoc.  Many if not most charities have “all other things” powers in their constituting document.  An important point brought out by the case is that any such “all other things” clause must be subservient to the stated (exclusively charitable) objects of the body. 

If the Charity Commissioners (E&W), OSCR (Scotland) or the Charity Commission for NI (NI) have confirmed charitable status in accordance with the differing rules for each part of the UK we would never expect status to be questioned. 

HMRC could accept that a non-charity is charitable for tax purposes

As an aside, the NI Charity Commission had argued that the fact HMRC had afforded BPT charitable tax reliefs was conclusive.  Interestingly the Tribunal had decided that the NI Order also required that the body be charitable under NI law leading to the potentially odd outcome that HMRC could be granting charitable tax reliefs to a body that was not recognised as charitable under NI law.  However in the end the Courts did not have to consider the ramifications of this odd concept; it fell away as both the High Court and CA(NI) decided that BTP was established for charitable purposes only.