Charitable Status
This page seeks to set out some of the background about charitable status and some of the pros and cons for Freegle in considering whether this would be appropriate for our organisation.
Q. What is Charitable Status?
A. Charitable Status refers to an organisation that is registered with the appropriate authority as charitable.
Q. Where does an Organisation have to register if it wants to be a Charity?
A. Organisations based in England and Wales need to register with the Charity Commission. [1] Organisations based in Scotland need to register with the Office of the Scottish Charity Regulator (OSCR). [2] Charities based in Northern Ireland do not, and cannot, register. The only formality needed for NI organisations is to apply to HMRC for charitable status for tax purposes.
Q. What is the HMRC and how does that affect charitable status?
A. Her Majesty's Revenue and Customs (HMRC) can register organisations as charitable. This is independent of whether the organisation has registered as a Charity. It is possible to be registered with the HMRC but not with Charity Commission or OSCR.
Q. What benefits are there to being registered with HMRC?
A. There are some tax benefits to being registered, mainly the ability to claim tax relief on income and gains, and on profits from some activities, as well as claiming tax back on income received on which tax has already been paid, for example on bank interest and Gift Aid donations.
Q. Can an Organisation be charitable without being registered anywhere?
A. Yes, if the constitution an organisation adopts clearly shows that it is operating charitably it can claim to be charitable., However, the endorsement given by registration with the appropriate authority and/or the HMRC obviously lends weight to that claim. An organisation cannot refer to itself as a Charity, however, unless it is registered with the Charity Commission or OSCR.
Q. What does an organisation need to do to register with the HMRC?
A. The application is simple, but the governing document that needs to be submitted must demonstrate that it is governed in such a way as to be considered charitable and that the people in charge of governing the organisation are 'fit and proper'.
Q. What does an organisation need to do to register with the Charity Commission or OSCR?
A. An organisation needs to be set up with a governing document (eg. constitution, articles of association) that comply with the guidelines set out by the appropriate authority. In England and Wales the organisation needs to have an income of more than £5k; the OSCR doesn't have this requirement.
Q. What benefits might there be for Freegle of being registered as charitable or a Charity?
A. There are tax benefits, external recognition of the organisation as, maybe, a more credible entity, and access to funding sources only available to charities.
Q. What disincentives are there for registering Freegle?
A. There would be paperwork, monitoring and some annual expenses which will mean commitment by volunteers to do the work and raise that funding. There are requirements on what needs to be included in the governing document which might not suit the way Freegle operates at present (eg. maintaining a list of all voting members, holding an AGM).
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