From application to approval – checklist when setting up a charity in England and Wales

In 2023/24, the Charity Commission received 9,008 applications to register charities in England and Wales.

With only 54% of the 9,008 applications resulting in charity status being granted, it is important that the philanthropists, associations, companies and trusts applying for charity status get the fundamentals right. The factors to consider when setting up a charity include:

The public benefit requirement

The key starting point in applying for charity status is demonstrating that the proposed charity has charitable purposes which are for the public benefit. To prove this, the charity’s purposes must contribute to any of the following:

• Relieving poverty
• Education
• Religion
• Health
• Saving lives
• Citizenship or community development
• The arts
• Amateur sport
• Human rights
• Religious or racial harmony
• The protection of the environment
• Animal welfare
• The efficiency of the armed forces, police, fire or ambulance services.

The benefit must be identifiable and evidenced, not based on personal views. The public aspect must benefit the public in general, or a sufficient section of the public (depending on the purpose of the charity).

Trustees

There should be at least three trustees who will have independent control and legal responsibility for the charity’s management and administration.

Trustees must be over the age of 16 and will be collectively responsible for managing the charity. A variety of skills should be present among the board of trustees to enable a broad set of expertise when applying the collaborative approach to trustee decisions.

Charity structure

As ‘charity status’ is not an entity in itself, there will need to be an entity to attach the charity status to. There are various types of structures that a charity can take, the most common being:

• Unincorporated organisation or trust – run by individuals who are bound together by common rules or a constitution, who are registered with the Charity Commission once charity status is granted. This structure suits small charities as it typically involves less administration than incorporated structures. However, it is important to note that trustees of an unincorporated charity will be personally liable for the charity’s debts and liabilities and will need to enter into agreements in their personal names.
• Charitable Incorporated Organisation – commonly referred to as a “CIO”, this is an incorporated structure registered solely with the Charity Commission. The CIO structure is becoming the most common incorporated charity structure as it offers limited liability for its trustees and the ability to enter into agreements in the name of the charity (CIO). Registering a CIO requires a robust constitution and application to the Charity Commission.
• Charitable company – a Company Limited by Guarantee (CLG), registered with Companies House, which is granted charity status either at the time of incorporation or upon the CLG being able to meet the public benefit requirement. As with CIOs, a charitable company offers limited liability for its trustees (who will also be directors of the company) and the ability to enter into agreements in the name of the charity. A charitable company will be regulated by both Companies House and the Charity Commission.

When considering whether to set up a charity in England and Wales, there are a number of factors which should be considered when assessing the above. These include the risk profile of the charity, the responsibilities and duties to be taken by the trustees, existing or likely applicable regulatory requirements applied to the charity, and the financial position.

Professional tax and accounting advice should always be sought before applying to register as a charity.