To be a charity in England and Wales, an organisation must be established for charitable purposes only. It is a legal requirement that a charitable purpose must be for the public benefit. All organisations applying to register as a charity must clearly demonstrate how their stated purposes are and will be carried out for the public benefit. This article will explain what the public benefit requirement is and how it can be demonstrated when applying to register as a charity.
A background to public benefit
Our previous article explained the principles behind charitable purposes. However, identifying a purpose and locating it within the descriptions of purpose is only half the story. The Commission must also be satisfied that a purpose is for the public benefit.
Charities have always been required to exist for the public benefit. ‘The public benefit requirement’ was confirmed by the Charities Act 2006 and is now found within section 4 of the Charities Act 2011, which states that it cannot be presumed that a purpose is for the public benefit.
In a registration application, we assess public benefit in individual cases based on the law as it applies to the facts of that particular case. The onus in demonstrating public benefit falls upon the applicant and, where relevant, this must be demonstrated by evidence.
Understanding public benefit can be tricky where a specific interpretation is not set out in legislation and the relevant caselaw can be complex. Our guidance on the public benefit requirement reflects the law, explains what the law says and how the Commission interprets and applies that law. It is a legal requirement for trustees to be aware of this guidance and to have taken it into account when making a relevant decision. The Commission has also published a more detailed analysis of the law relating to public benefit.
Demonstrating public benefit is not only essential at the point of registration but is an ongoing matter for all registered charities as part of their annual reporting process. It is helpful to see public benefit in a holistic way; not just as a legal requirement that charities have to meet and the Commission regulate, but rather a positive opportunity for trustees to think about and demonstrate the benefits that their charity delivers. Having a clear understanding of public benefit can help trustees to stay focused on what their charity is set up to achieve and help them to tell the story of their charity’s work, its impact and where that might be improved.
Public benefit and registration applications
As part of the registration process, trustees must be prepared to demonstrate (or answer questions about):
- How the organisation’s purpose is beneficial (the ‘benefit aspect’);
- How the organisation’s purpose benefits the public or a sufficient section of the public (the ‘public aspect’);
There are two aspects of public benefit and both aspects must be satisfied in order to demonstrate charitable status.
The ‘benefit’ aspect
A purpose must be beneficial in a way that is identifiable and capable of being proven by evidence where necessary. The extent and type of evidence we require will depend on the purpose in question and the means used to carry it out.
If the benefits that result from a purpose are well established and uncontroversial, then additional evidence may not be necessary. For example, an organisation providing GCSE textbooks to an afterschool club would not be required to specifically demonstrate why this is a beneficial means of furthering the education of children.
The need for evidence arises where it isn’t immediately clear that the purpose is beneficial. Examples of where we may ask for evidence of benefit are in the architectural or historic merit of a building to be preserved, the artistic merit of a collection to be displayed or the healing benefits of an alternative therapy to be provided. We take a broad view of what can be evidence, but in general it must be:
- relevant to the purpose;
- support the claims made for the benefits delivered;
- objective and, if appropriate, must demonstrate a degree of authority or expertise in the relevant subject matter.
Evidence does not always have to be quantifiable or universally accepted but it must be possible to identify and describe.
Where both benefit and harm arise from the same purpose, any detriment or harm cannot outweigh the benefit. An example of this is the case of the National Anti-Vivisection Society. The court decided that any assumed benefit in the advancement of morals arising from the Society’s purpose for the suppression of vivisection was outweighed by the detriment to medical science and research and, consequently, public health.
The ‘public’ aspect
A purpose must benefit the public in general, or a sufficient section of the public, and must not give rise to more than incidental personal benefit.
If the general public will benefit from an organisation’s purpose, then the ‘public’ aspect will be satisfied. However, if the people who can benefit are in any way defined or restricted, then it must be demonstrated how this group would be a sufficient section of the public. What is a sufficient section of the public varies according to the purpose and there is no numerical value to what constitutes. Part 5 of our public benefit guidance explains these requirements in more detail but, in general, a purpose benefits a sufficient section of the public if its beneficiaries are defined by a wide geographical area, a clear charitable need or where it is justified as a protected characteristic as set out in the Equality Act 2010.
Personal benefit means a benefit that an individual or organisation receives from a charity. A charity can provide a personal benefit where it is incidental to, or is a necessary result or by-product of, carrying out the purpose. For example, the personal benefit to pupils receiving education at a school is clearly incidental to their education being advanced. The benefit to an artist establishing a charity solely to present and promote their own artwork is not clearly incidental to a purpose in promoting the arts.
Tips to ensure a successful outcome
- It is for the trustees to provide evidence of benefit
- Personal views, however strongly held and expressed, cannot count as evidence of benefit
- If an organisation’s purpose is in the prevention or relief of poverty, then applicants are required to demonstrate the ‘benefit’ aspect only. In these cases, there is no separate consideration of the ‘public’ aspect and further details about this can be found in the annex of our guidance.
- For organisations that have more than one charitable purpose, applicants must be able to demonstrate that each of their purposes is for the public benefit. Both the ‘public’ and ‘benefit’ aspects must be satisfied in each case.
- Be able to explain how the organisation is carrying out or intends to carry out each of its stated purposes to help the Commission assess whether those purposes are for the public benefit
What’s next?
Next time, we’ll cover how to write charitable objects and ensure that they accurately describe what your organisation is established to do.
*The views expressed are the author's and not ICAEW's.