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Charities Act 2022: Key changes

This article by Steve Collings FCCA looks at the laws and regulations applicable to
charities and highlights the key changes to the Charities Act 2022 impacting 2023
year ends and beyond.
Further guidance on charity accounting is available in the Charity (Charities SORP)
area of Navigate UK GAAP Accounting and the Charities Sector Guide. See also the
Navigate Learning Insight course Charity accounting: overview and update.

Charity accounts have become even more specialised over recent years and it is
important that independent examiners, auditors and those involved in the
preparation of charity accounts are familiar with the requirements of both charity
law, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and the Charities SORP (FRS 102) (second edition – October 2019)
Accounting and Reporting by Charities: Statement of Recommended Practice
applicable to charities preparing their accounts in accordance with the Financial
Reporting Standard applicable in the UK and Republic of Ireland (FRS 102)
(effective 1 January 2019).
In addition, independent examiners for charities registered with the Charity
Commission for England and Wales (CCEW) will need a sound understanding of the
provisions in CC32 Independent examination of charity accounts: Directions and
guidance for examiners. It should be emphasised that examiners of charities
registered with the Office of the Scottish Charity Regulator and the Charity
Commission for Northern Ireland have issued their own guidance for independent
examiners which should be understood.

Which charity laws and regulations apply?
The applicable charity law will depend on where the charity is registered. The table
below outlines the applicable law:

England and Wales:
•Charities Act 2011
•Charities Act 2022 which amends the Charities Act 2011
•Co-operative and Community Benefit Societies Act 2014

•Charities and Trustee Investment (Scotland) Act 2005
•The Charities Accounts (Scotland) Regulations 2006 (as
Supporting regulations
•The Charities References in Documents (Scotland) Regulations
•The Charities Reorganisation (Scotland) Regulations 2007
•The Charities and Benevolent Fundraising (Scotland)
Regulations 2009
•The Scotland Charitable Incorporated Organisations
Regulations 2011
•The Scottish Charitable Incorporated Organisations (Removal
from Regulations and Dissolution) Regulations 2011
•The Charities Restricted Funds Reorganisation (Scotland)
Regulations 2012

Northern Island
•Charities Act (Northern Ireland) 2008
•Charities Act (Northern Ireland) 2013
•Charities Act (Northern Ireland) 2022
•The Charities (Accounts and Reports) Regulations (Northern
Ireland) 2015

Charities Act 2022 (England and Wales) – Key changes
In February 2022, the Charities Bill received Royal Assent and became the Charities
Act 2022. Some of the key changes in the Charities Act 2022 are as follows:

Amending government documents
Charities and trustees will be able to amend their governing documents or Royal
Charters more easily. This will apply to unincorporated charities and will enable
efficiencies in keeping governing documents up to date.

Access to more professional advisors
Charities will have access to a much wider pool of professional advisors on land
disposal. In addition, there will be more straightforward rules on what advice
charities must receive which should save time and money when it comes to
disposing of land.

Use of a ‘permanent endowment’
Charities are given more flexibility to make use of a ‘permanent endowment’. This
is money, or property, which was originally intended to be held by the charity
indefinitely. The changes include allowing trustees to borrow a sum of money up to
25% of the value of their permanent endowment funds without obtaining approval
from the charity regulator provided it is paid back within 20 years.

Ex-gratia payments
The Charities Act 2022 relaxes the rules on ex-gratia payments so that smaller exgratia
payments (possibly up to £20,000, depending on the level of the charity’s
income) can be made without needing authority from the Charity Commission for
England and Wales.
A key point to note is that this does not mean that charities are free to make any
payment below this value. The ex-gratia payment must fall within the scope of
being ex-gratia which, in itself, has specific requirements.

Payment for goods or services to a trustee
Trustees will be able to be paid for goods provided to a charity in certain
circumstances (even if this is not expressly stated in the charity’s governing
documents). Prior to the Charities Bill becoming the Charities Act 2022, trustees
could only be paid for supply of services.

Simpler rules on failed appeals
Charities can now take advantage of simpler and more proportionate rules on failed
appeals. Prior to the changes, a failed appeal would mean that the charity would
not be able to use all (or any) of the money for the purpose it was raised.

Legacies less likely to be lost
In situations where a charity merges with another organisation, or becomes an
incorporated charity, there is a risk that legacies to the old charity may be lost as it
effectively no longer exists. It is for this reason that some old charities remain open
as a ‘shell’ to receive legacies and this, of course, creates administrative burdens
which lead to increased costs for the charity.

Incorrect trustee appointments
If a mistake comes to light surrounding the appointment of a trustee, the Charity
Commission is now given a new power which ratifies the appointment or election of
a charity trustee where there is either:
•uncertainty as to whether the trustee was properly appointed or elected; or
•any defect in their appointment or election.
Charities need to keep in mind this should always be a last resort because trustees
still have a duty to comply with the rules in their governing document.

When are the changes effective?
The Charities Act 2022 will come into effect as follows:

Provisions that came into force on 31 October 2022
•Section 4: Power to amend Royal Charters
•Section 5: Orders under section 73 of the Charities Act 2011
•Sections 6 and 7: Cy-près powers
•Section 8: Power of the court and the Commission to make schemes
•Section 30: Remuneration of charity trustees etc providing goods or services to
•Section 32: Trustee of charitable trust: status as trust corporation
•Section 36: Costs incurred in relation to Tribunal proceedings etc
•Part of Section 37: Public notice as regards Commission orders etc
•Part of Section 40 and Schedule 2: Minor and consequential amendments

Provisions that came into force in Spring 2023
•Sections 9-14 and 35(a): Permanent endowment
•Sections 17-23: Charity land
•Section 24 and Sch 1: Amendments of the Universities and College Estates Act
•Sections 25-28: Charity names
•Sections 38 and 39: Connected persons
•Part of Section 40 and Schedule 2: Minor and consequential amendments

Provisions expected to come into force in Autumn 2023
•Section 1-3: Charity constitutions
•Section 29: Power relating to appointment of trustees
•Section 31: Remuneration etc of charity trustees etc
•Sections 33, 34 and 35(b): Charity mergers
•Section 37: For remaining purposes
•Sections 40 and Schedule 2: For remaining purposes

Document downloaded on 29-08-2023 from Croner-i Navigate, the UK’s leading
online research service for tax, audit and accounting professionals. Find out more
at www.croneri.co.uk or call 0800 231 5199.