Charities Act 2022 changes from 1 June

The Charity Commission has clarified changes to the Charities Act 2022 including rules on selling or leasing charity land and use of endowment funds.

Sara White, Editor, Accountancy Daily

There are significant changes to the rules when selling, leasing or disposing of charity land.

Charities must comply with certain legal requirements before they dispose of charity land. Disposal can include selling, transferring or leasing charity land. The Act will simplify some of these legal requirements. The changes will include:

• widening the category of designated advisers who can provide charities with advice on certain disposals;

• confirming that a trustee, officer or employee can provide advice on a disposal if they meet the relevant requirements;

• giving trustees discretion to decide how to advertise a proposed disposal of charity land; and

• removing the requirement for charities to get Commission authority to grant a residential lease to a charity employee for a short periodic or fixed term tenancy.

A number of the measures will come into force at the end of 2023, including the provisions relating to disposals and the taking out of mortgages by liquidators, provisional liquidators, receivers, mortgagees or administrators; and changes to what must be included in statements and certificates for both disposals and mortgages.

There is also a shake-up of the rules on the use of permanent endowments.

The Act will introduce new statutory powers to enable:

• charities to spend, in certain circumstances, from a ‘smaller value’ permanent endowment fund of £25,000 or less without Commission authority; and

• certain charities will be able to borrow up to 25% of the value of their permanent endowment fund without Commission authority.

Charities that cannot use the statutory powers will require Charity Commission authority.

A new statutory power will enable charities that have opted into a total return approach to investment to use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains.

The Commission can currently direct a charity to change its name if it is too similar to another charity’s name or is offensive or misleading.

The rules will be extended to give the Commission the powers to stop a charity using a working name if it is too similar to another charity’s name or is offensive or misleading. A working name is any name used to identify a charity and under which the activities of the charity are carried out. For example, ‘Comic Relief’ is the working name of the charity ‘Charity Projects’.

In future, it will be able to use its powers in relation to exempt charities in consultation with the principal regulator.

A number of changes came into force on 31 October 2022, including the way charities can pay trustees for providing services or goods to the charity, controls on trustee expenses and payments, and simpler requirements for trustees to follow if an appeal does not raise the amount needed to deliver its aim, raises too much or circumstances change and the donations cannot be used as intended.

Further changes are due to come into effect by the end of 2023.