Charities Act 2022 implementation – part II

The Charities Act 2022 is being implemented in three stages. The first tranche of changes was introduced on 31 October 2022. The next set entered into force on 14 June 2023.

The most recent changes concern charities’ permanent endowment, charity land and charity names.

Permanent endowment

A charity’s permanent endowment consists of those assets which are intended will never be disposed of and either used to deliver the charity’s purposes (e.g. almshouses) or used to generate an income.

The practical changes regarding permanent endowment are:

• For endowments of £25,000 or less, trustees can borrow up to 25% of the value of their charity’s permanent endowment, subject to this being repaid within 20 years, without the need to obtain the Charity Commission’s consent
• Where money has already been borrowed from permanent endowment, any outstanding amount is to be taken into account when assessing whether the value of permanent endowment falls above or below the threshold of £25,000
• Charities that have opted into a total return approach to investment are able to use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains
• The Charity Commission is empowered to make regulations regarding the use of the power to use permanent endowment for social investments.

Charity land

The Charities Act 2011 imposes restrictions on the disposal of charity land. Charity trustees are required to obtain and consider a written report on a proposed disposal. Previously, the person providing the report had to be a surveyor, but the recent changes have expanded the category of designated advisers to:

• A Fellow or Professional Associate of the Royal Institution of Chartered Surveyors;
• A Fellow of the Central Association of Agricultural Valuers; or
• A Fellow of the National Association of Estate Agents.

Charity trustees were previously required to advertise the proposed disposition of land in accordance with the advice set out in the surveyor’s report. Trustees now have a discretion as to how to market the land.

Charity trustees, officers and employees of a charity can now produce the report provided that this does not give rise to a conflict of interest.

Charity names

The 2022 Act gives enhanced powers to the Charity Commission to require charities to change or stop using a name if it is too similar to another charity’s or is offensive or misleading.

The Commission can now, among other changes:

• Issue a direction to unregistered charities if its formal name is the same as, or too like, the formal name of another charity (previously it was limited to registered charities);
• Issue such a direction at any time to registered charities (there was a time restriction previously);
• Issue a direction to any charity regarding its working name (before it applied only to formal names).

The Commission may also now refuse to register a charitable incorporated organisation where its working name – previously just its formal name – is the same as, or too like, that of another charity.

The remaining changes set out in the 2022 Act which the Government intends to introduce –  not including those relating to ex gratia payments which are under further consideration – are due to be implemented in the autumn of this year.