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23rd July 2012

The Hodgson Review: a Much Needed Spotlight

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On 16th July, Lord Hodgson published his much-anticipated and comprehensive Review of the Charities Act 2006, Trusted and Independent: Giving Charity back to Charities. Ranging over both the effectiveness of the Charities Act 2006 and a wide number of other features of the charity sector’s law and regulation, there are well over 100 recommendations.

Implementation will be a mixed experience. The recommendations require, variously, discussion amongst a number of agencies, legislation, preparation of guidance, and the engagement of the whole charity sector and everyone who works with it. However, there is no doubt that if these recommendations are put into practice they would represent a huge improvement for charities and for the public’s experience with them.

The main recommendations include:

  • Trustees’ terms of office should be limited to 3 terms of 3 years. Trustees of large charities should be allowed to be paid as such.
  • The Charity Commission should re-focus on proactive regulation and compliance rather than advice work. Its core functions should be prioritised as registering charities, dealing with misconduct, and providing advice.
  • The compulsory registration threshold should be raised to £25,000 annual income, with voluntary registration available below this.
  • There should be joint registration for new charities with the Charity Commission and HMRC.
  • The Charity Commission should instigate a set of key indicators as to charities’ compliance and those at risk of default should be supported or investigated.
  • All annual reporting to Charity Commission should be on a single form. Late filing of annual reports or accounts should lead ultimately to withdrawal of gift aid and possibly fines.
  • Annual returns for the Charity Commission and Companies House for charitable companies should be combined and joint accounting requirements explored.
  • The income threshold for an audit should be raised to £1million and the asset threshold removed. The summary information return for large charities should be discontinued.
  • There should be proportionate charging for Charity Commission registration and annual returns, and possibly cost recovery for bespoke legal advice. Charity Commission decisions which may be appealed or reviewed by the Charity Tribunal should be simplified so that all legal decisions may be appealed (i.e. as to both merit and process) and all other decisions may be reviewed (i.e. as to process).
  • Public charitable collections legislation should be overhauled.
  • Membership of the Fundraising Standards Board should be proactively encouraged by Charity Commission, e.g. by making this an annual reporting key indicator.
  • Social investment should be facilitated by the clarification of trustees’ legal powers and the development of a standard legal form for a social investment vehicle.
  • Failed legacies in the context of merged charities should be addressed by changes to the Charities Act 2011. The Charity Commission, HMRC and banks should accommodate charities which incorporate by permitting them to retain existing registrations and accounts.
  • The statutory regime for land disposals and mortgages should be abolished, trustees remaining under their duty to act in the charity’s best interests and seek advice if necessary. The charitable incorporated organisation should be available as a legal form for charities under secondary legislation to be introduced in Autumn 2012.
  • Charitable industrial and provident societies should be required to register in order to retain their charitable status.

If you have any questions on this please contact Chris Knight, our Head of Charities on 01604 233233 or by email