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The Charity Commission Explained: How UK Charities Are Regulated, Registered, and Held Accountable

News · October 28, 2024 · Daily Junction Editorial Team · 10 min

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The Charity Commission for England and Wales regulates over 200,000 charities, ensuring they operate for public benefit and comply with charity law. The regulator has faced criticism for being under-resourced and reactive, but recent reforms have strengthened its powers to investigate misconduct and protect charitable assets.

The Charity Commission for England and Wales is the independent regulator of over 200,000 registered charities, with combined income of £85 billion and assets exceeding £200 billion. Established in 1853 and operating under the Charities Act 2011, the Commission's role is to ensure charities operate for public benefit, comply with charity law, and maintain public trust. It registers new charities, provides guidance to trustees, investigates misconduct, and takes enforcement action against charities that breach the law. The Commission also maintains the public register of charities, a searchable database of all registered charities including their finances, trustees, and activities.

However, the Commission has faced persistent criticism for being under-resourced, reactive rather than proactive, and slow to investigate high-profile scandals. With a budget of just £30 million and 350 staff to regulate 200,000 charities, the Commission can only investigate a small fraction of complaints and relies heavily on voluntary compliance. Recent reforms have strengthened its powers and increased transparency requirements, but questions remain about whether the regulator has the resources and authority to protect the public and hold charities accountable.

This article explains how the Charity Commission works, what powers it has, how charities are registered and regulated, and the challenges facing charity regulation in the UK.

What is the Charity Commission?

The Charity Commission for England and Wales is a non-ministerial government department, meaning it operates independently of ministers but is accountable to Parliament. It was established by the Charitable Trusts Act 1853 and operates under the Charities Act 2011, which consolidated previous charity legislation.

The Commission's statutory objectives are:

1. Increase public trust and confidence in charities by promoting transparency, accountability, and good governance
2. Promote awareness and understanding of the public benefit requirement that all charities must meet
3. Promote compliance with charity law and effective use of charitable resources
4. Enhance the accountability of charities to donors, beneficiaries, and the public
5. Promote the effective use of charitable resources by encouraging good governance and management

The Commission regulates charities in England and Wales only. Scotland has a separate regulator, the Office of the Scottish Charity Regulator (OSCR), which oversees around 25,000 charities. Northern Ireland has the Charity Commission for Northern Ireland (CCNI), regulating around 5,500 charities. Charities operating across the UK must register with multiple regulators.

How charities are registered

To be registered as a charity in England and Wales, an organization must meet four criteria:

1. Charitable purposes

The organization must have exclusively charitable purposes as defined by the Charities Act 2011. There are 13 charitable purposes:

• Prevention or relief of poverty
• Advancement of education
• Advancement of religion
• Advancement of health or saving of lives
• Advancement of citizenship or community development
• Advancement of the arts, culture, heritage, or science
• Advancement of amateur sport
• Advancement of human rights, conflict resolution, or reconciliation
• Advancement of environmental protection or improvement
• Relief of those in need by reason of youth, age, ill-health, disability, financial hardship, or other disadvantage
• Advancement of animal welfare
• Promotion of the efficiency of the armed forces, police, fire and rescue services, or ambulance services
• Other purposes recognized as charitable under existing charity law

An organization cannot be a charity if it has non-charitable purposes (e.g., political campaigning, private benefit) or if its purposes are not for public benefit.

2. Public benefit

The organization must demonstrate that its purposes are for the public benefit. This means:

• The purpose must be beneficial (provide a benefit that is identifiable and capable of being proved)
• The benefit must be to the public or a sufficient section of the public (not just a private group)
• Any private benefit must be incidental and necessary to achieve the public benefit

The public benefit requirement has been controversial, particularly for independent schools (which charge fees) and religious charities (which may restrict membership). The Commission has issued guidance clarifying that charities can charge fees or restrict membership, but must demonstrate that the public benefit outweighs any private benefit.

3. Income threshold

Charities must have annual income of at least £5,000 to be required to register. Organizations with income below £5,000 can operate as unregistered charities, but many choose to register anyway to gain credibility and access to charity-specific benefits (e.g., Gift Aid, rate relief).

4. England and Wales jurisdiction

The charity must be based in England or Wales. Charities operating in Scotland or Northern Ireland must register with the relevant regulator.

Exempt and excepted charities

Some charities are exempt from registration, including universities, some museums, and some religious charities. Excepted charities (mainly small religious charities and Scout/Guide groups) are not required to register but must do so if their income exceeds £100,000.

The registration process

Registration is done online via the Charity Commission website. Applicants must provide:

• A governing document (constitution, trust deed, or articles of association) setting out the charity's purposes, powers, and governance
• Details of trustees (at least three for a charitable trust or association)
• A description of activities and how they achieve the charitable purposes
• Financial information (income, assets, and how funds will be used)

The Commission reviews applications and may request additional information or amendments to the governing document. Applications typically take 4-8 weeks to process, though complex cases can take longer. Once registered, the charity receives a charity number and is added to the public register.

Ongoing compliance and reporting

Registered charities must comply with ongoing requirements:

Annual return

All charities must file an annual return with the Commission, providing updated information on trustees, activities, income, and beneficiaries. The deadline is 10 months after the charity's financial year end.

Annual accounts

Charities must prepare annual accounts and file them with the Commission:

• Income under £25,000: Receipts and payments accounts (simple cash accounting)
• Income £25,000-£250,000: Accruals accounts and trustees' annual report
• Income over £250,000: Accruals accounts, trustees' annual report, and independent examination (by a qualified examiner)
• Income over £1 million (or assets over £3.26 million): Full audit by a registered auditor

Accounts must be filed within 10 months of the financial year end and are published on the Charity Commission website, making charity finances publicly accessible.

Trustee responsibilities

Charity trustees (the people who govern the charity) have legal duties under charity law:

• Act in the charity's best interests
• Manage the charity's resources responsibly
• Act with reasonable care and skill
• Ensure the charity is accountable and complies with the law
• Avoid conflicts of interest and unauthorized private benefit

Trustees are personally liable if they breach their duties, though they can be protected by insurance or indemnity provisions in the governing document.

The Commission's regulatory and enforcement powers

The Charity Commission has a range of powers to investigate and take action against charities:

Guidance and advice

The Commission provides guidance to help charities comply with the law. This includes detailed guidance on governance, fundraising, safeguarding, financial management, and public benefit. Charities can also request advice on specific issues, though the Commission cannot provide legal advice.

Monitoring and compliance

The Commission monitors charities through annual returns and accounts, complaints from the public, and media reports. It uses a risk-based approach, focusing resources on charities with the highest risk of harm (e.g., large charities, those working with vulnerable people, or those with governance concerns).

Regulatory cases

When the Commission identifies concerns, it may open a regulatory case. In 2023-24, the Commission opened 2,800 regulatory cases, covering issues such as:

• Governance failures (e.g., trustee conflicts of interest, lack of oversight)
• Financial mismanagement (e.g., excessive executive pay, unauthorized payments to trustees)
• Safeguarding failures (e.g., failure to protect vulnerable beneficiaries)
• Fundraising misconduct (e.g., aggressive tactics, misleading appeals)
• Links to extremism or terrorism (charities used to fund illegal activities)

Most cases are resolved through engagement and guidance, with the charity voluntarily addressing the issues. However, the Commission can escalate to formal enforcement if necessary.

Statutory inquiries

The Commission can open a statutory inquiry into a charity if it has serious concerns about misconduct or mismanagement. Inquiries are formal investigations with legal powers to:

• Require the charity to provide documents and information
• Interview trustees, staff, and beneficiaries
• Appoint independent experts to review finances or governance
• Publish findings and recommendations

In 2023-24, the Commission opened 450 statutory inquiries, a significant increase from previous years. High-profile inquiries have included the Captain Tom Foundation (family benefit concerns), Kids Company (financial mismanagement), and Oxfam (safeguarding failures).

Enforcement powers