THE CHARITY LAW ASSOCIATION
WORKING PARTY ON CHARITY LAW REFORM IN NORTHERN IRELAND
RESPONSE TO DEPARTMENT FOR SOCIAL DEVELOPMENT IN NORTHERN IRELAND CONSULTATION PAPER
CHARITY LAW REFORM IN NORTHERN IRELAND
Introduction
The Charity Law Association has over 700 members, mainly lawyers, but also accountants and charity professionals. It is concerned with all aspects of the law relating to charities, and has established a working party to consider a response to proposals for Charity Law Reform in Northern Ireland.
The Members of the Working Party are:
Anne-Marie Piper – Farrer & Co (Chair)
Paul Bater – Paul Bater & Co
Andrew Brown – BTCV
Marion Baxter – Robinsons
Ian Davies – Farrer & Co
Jean Dollimore - Hempsons
Alison Dunn – Newcastle Law School
Richard Fries – London School of Economics
Mark Harvey – Help the Aged
Grace Henry – Help the Aged
Linda Kabi – E-Business Legal
Alexandra Lawton – Withers LLP
Malcolm Lynch – Wrigleys
Jane Macfarlane
Simon Mackintosh – Turcan Connell
Alison Maclennan – 11 Old Square
Stephen Marshall – Robinsons
Dr Gareth Morgan – Association of Independent Examiners
Kerry O’Halloran – University of Ulster
Hubert Picarda QC – 9 Old Square
Chris Priestley – Withers
Philip Smith – Arthur Cox
Danielle Traynor – BDO Stoy Hayward
General observations
The present consultation is not a draft bill type consultation but one based on general principles and proposals. It has not been possible to assess how the proposals would operate in detail, and opportunity for further input would be useful when the detailed proposals are published.
The Association warmly welcomes the proposals to reform charity law in Northern Ireland broadly in line with the current reforms in England Wales and Scotland. This should put in place an effective system for the regulation and administration of charities. This should result in improved efficiency and accountability for the charity sector in Northern Ireland.
Definition of Charity in Northern Ireland
We welcome the proposals for defining charitable purposes along the lines of the bills in Scotland and England and Wales. We think that there could be difficulties with the new purposes 12 and 13.
12 The promotion of peace.
Without further clarification this could be taken to include political purposes, and would be unlikely to be acceptable for tax purposes. It would be better in our view to put the promotion of peace into an expanded item 8, and to include a form of words which excluded political purposes.
13. The promotion of good community relations
Simply promoting good relations is not as such charitable (Anglo Swedish Society –v- IRC). There are many charitable purposes (some recently recognised) which could cover this ground. The promotion of equality and diversity, conflict resolution and reconciliation should cover these issues. In our view a further expansion of item 8 would be appropriate so as to include equality and diversity.
Public benefit charity test
We note that the charity test will only be passed if the organisation’s purposes are one of the specified purposes (ie it must be for exclusively charitable purposes and it provides public benefit in Northern Ireland or elsewhere. There will be no presumptions of public benefit, which mirrors reforms in Scotland and England and Wales.
We note with approval that there is no stated definition of public benefit, and hope that public benefit will continue to be defined by case law, rather than a rigid statutory definition.
Registration
The Association welcomes the proposal to have compulsory registration of all charities in Northern Ireland (including those which currently have separate legislation) avoiding the complexities of having exempt or excepted charities.
We accept the practical necessity to phase in registration, and note that it will probably be on the basis of the largest first. This will need to be clarified a little. Will charities be considered large in terms of income, capital, number of branches or other factors?
We wonder about the necessity for all charities based outside Northern Ireland but which actually operate there to be registered. This could operate as a deterrent to some organisations, which would be to Northern Ireland’s detriment. We are, of course, aware that Scotland is pressing ahead with a similar requirement.
The requirement for charities operating in Northern Ireland to have at least one trustee who is resident in Northern Ireland is more problematic. If the charity is a company this requirement goes beyond the present requirements of European company law. In addition, if the charitable company carries out any economic activity, there could be problems with European law generally (see Commission –v- UK 1989 3 CMLR 601). In addition, membership restrictions based on nationality have been held to breach Article 12 of the EC Treaty (Commission –v- Belgium Case C-172/98).
Accountability
The Association welcomes the proposal to create a Charity Commission for Northern Ireland.
The Commission will need wide powers to share information (subject to appropriate safeguards) in view of the multiple definitions of charity and registration requirements across the UK and in the Irish Republic.
As to Appeals, the experience in England and Wales leads us to strongly recommend that there should be both an internal complaints procedure with an Independent Complaints Reviewer, and access to a speedy informal Appeals Tribunal along the lines of the reforms proposed in England and Wales. There have been numerous occasions when charity clients have had a good case for registration or for complaint about Charity Commission action, but the existence of appeal to the High Court or Judicial Review has proved an illusory remedy because of the prohibitive costs. It needs to be remembered that the bulk of charities are small organisations without the resources to bring expensive legal actions.
Compliance
Regulation
We welcome the proposals for regulatory powers. We would stress the necessity when drafting the legislation for there to be clear, tightly defined grounds for the Commission to exercise its powers and for such actions to be subject to scrutiny by the Appeals Tribunal. There should be a requirement for proportionate regulation, with measures taken by the Commission reflecting the true gravity of the case. Some cases should be disposable by advice and support and not draconian measures. Regulation should avoid being “target driven” with case numbers increasing simply to justify Treasury funding.
Charity names
The powers are welcomed, but again the actions should be subject to the scrutiny of an Appeal Tribunal.
(c) Accounts and audit
The powers are generally welcomed, and especially the proportionality of the various thresholds for accounting requirements.
Whilst accounts should be supplied to the public on request as a matter of transparency, there is a particular problem which needs to be addressed. The experience in England and Wales has revealed that commercial organisations compiling information about charities are making requests for accounts, not to inform themselves, or because they have concerns, but to compile money making publications. In some cases this imposes an unfair burden on small charities. Consideration needs to be given to this issue. For example removing the compulsion to provide in cases of commercial publications.
Governance
The Association welcomes the proposals to make Charitable Incorporated Organisations and Community Interest Companies available in Northern Ireland.
Administration
Small charity proposals
These are welcomed
Disposal of charity property
This proposal is welcomed. Up to now, there has been no equivalent provision to the English law provisions making the disposal void without official consent. Consent could be given retrospectively in Northern Ireland. Will this remain the case or will disposals in future be void in the absence of consent?
Public notice reform
This is welcomed
Scrutiny of wills
This is welcomed.
Revision of Monetary limits
This is welcomed. It is essential if the full effect of the other reforms is to be achieved.
Fund Raising and Public Charitable Collections
The proposal to reform this area is broadly in line with Scotland and England and Wales and for that reason is welcomed. Further comment can only be made when the detailed proposals are known.
The Role of the Attorney General and the Court
There are areas which clearly have an element of public interest and which need the involvement of the Court or the Attorney General (e.g. Charity proceedings, Misdescribed legacies). With regard to the exercise of the new Charity Commission’s basic powers of regulation, which will sometimes need to be used urgently, it must be questioned whether the direct involvement of the Attorney General at such a basic administrative level would be necessary. The need for consultation before e.g. requesting documents from a charity would only cause delay. The Attorney General can in any case take proceedings in relation to any charity if there are concerns.
Educational endowment schemes
The powers given to the new Charity Commission to make schemes are welcomed.
Minor Amendments
These are welcomed. In view of the multiple definitions of charity and registration requirements across the UK and Irish Republic, the Charity Commission power to share information will need to be quite wide. There will need to be suitable safeguards.
Cross Border and Non-Devolved Issues
The effect of the various reviews of Charity Law in the United Kingdom and the Irish Republic is likely to be that an organisation which actually operates in all those areas will have to register with four regulators. An organisation which operates in Northern Ireland and the Irish Republic will need to register with two. The importance of having a system of charity regulation which is tailored to the needs of the individual jurisdiction is obvious, but the situation will need to be managed to avoid unnecessary burdens on charities. The following issues arise and there may well be others.
Registration
There is a need to consider the extent to which mutual recognition of charitable status can be achieved across jurisdictions to ease the burden of multi registration. Thus a body registered in jurisdiction A should be able to register in jurisdiction B with minimum formality.
Regulation
Whilst recognising the differences of approach in the various jurisdictions, there will be a need for consistency of approach wherever possible. A protocol is currently being agreed between the Charity Commission and OSCR in Scotland, and it is hoped that this approach can be adopted across the other jurisdictions. It would be useful to have a clear statement of the jurisdiction of the Northern Ireland Charity Commission in relation to charities established outside Northern Ireland.
Taxation and Rating
The question arises as to what extent (if any) there will be recognition of the various definitions of charity for taxation and rating purposes.
Unlike charity regulation, taxation is not a devolved issue in the United Kingdom, and will be a matter for central government decision. It will be an issue for inter government discussion with the Irish Republic where cross border issues arise.
There is a need to ensure that all the definitions of charity in the UK are recognised by Her Majesty’s Revenue and Customs, and that cross border issues are discussed with the Revenue Commissioners of the Irish Republic.
With regard to Rating in Northern Ireland, this is a devolved issued and a separate consultation is proceeding in relation to that. In principle, any Northern Ireland specific definition of charitable purposes would apply for rating purposes even if not for other UK tax purposes.
