Review Of The Charities Act 2006 - Giving Charity Back To Charities?

Background- What's happened?

The Charities Act 2006 was the first to have an automatic review procedure built into it. Nearly six years after the Act's passage into law, Lord Hodgson of Astley Abbotts has undertaken a wide-ranging review - not only on the operation of the Act itself but also on the wider legal and regulatory framework for English and Welsh charities.

The result of this comparatively swift eight month process was published yesterday in a 159 page report entitled; 'Trusted and Independent: Giving charity back to charities.'

The review attracted significant feed-back from sector bodies and charities alike and sets out over one hundred recommendations: some of them are technical corrections to unplanned effects of the Act but many more are fresh (although in some cases controversial) and responsive to the wishes of many in the sector. They could create real opportunities for those working in and with charities throughout England and Wales.

We set out below some of Lord Hodgson's key recommendations and highlight those likely to be of particular interest to charities and their donors.

Paying charity trustees

The report recommends that charities falling into a new category of 'large charities' (with income over £1 million per year) should be allowed to pay their trustees (for being trustees) without the need to get express permission to do so from the Charity Commission.

Payments would be subject to certain disclosure requirements. The recommendation would not affect the power of charities of all sizes to reimburse trustees' proper expenses. It is argued by the report that this move would encourage a more diverse range of trustees.

Smaller charities would not be affected by this recommendation and would have to continue to seek Charity Commission authority where a payment is proposed that is not permitted by a power in the charity's governing document.

The principle of voluntarism has been the subject of much debate in the consultation period. It has been suggested that the whole character of English charities may be affected by a more permissive stance on the payment of charity trustees and the issue has polarised many in the sector.

Where trustee payment becomes the norm rather than the exception in larger charities, it may be increasingly difficult for larger charities who do not wish to pay trustees (or only some of them) to avoid a new trustee expectation. The risk is that this could lead to a 'two-tier' sector where trustees at smaller charities are generally volunteers and those at...