Charitable status

The Charity Commission has launched a two-month consultation on the issue of 'public benefit'.

The consultation includes proposals that could see independent schools losing their charitable status if they cannot demonstrate public benefit to all aspects of society.

Stakeholder Response: Charity Commission

To comment to the Charity Commission click here

Commission chairman Dame Suzi Leather said: "Charities are precious, and play a vital and unique role. 

"The issue of public benefit is at the heart of the implied covenant between charities and society: in return for having purposes which are charitable and provide public benefit, charities may enjoy the benefits of charitable status.

"Charities can take many different forms and there is no one size fits all approach to public benefit. 

"We believe that every charity should be able to show a real benefit to the public - not just private interests - and that people on low incomes should be able to benefit. 

"The best charities show continuous improvement and assess their performance against public expectations - we want to encourage the rest of the sector to follow their example.

"All charities should report what they do for public benefit. 

"We think that those which charge high fees where the public benefit may not be obvious should assess and report the value of the benefit they provide alongside the value of the benefits they receive - including of course the tax breaks."

Stakeholder Response: Independent Schools Commission

To comment to the Independent Schools Commission click here

The ISC said: "Charitable status is worth about £100m annually to independent schools .

"Compared to the £2.2bn they save the exchequer (by educating 440,000  UK-domiciled children free of cost to the state), plus £170m they pay in irrecoverable VAT and £300m they give back in scholarships and bursaries, this is not a huge amount.

"However, to some smaller schools running with no endowments and very small margins it could make the difference. Moreover, the charitable ethos is very important to independent schools - they have a historical role within their communities that colours the entire school environment.

"Essentially they see themselves as a force for educational good, and not just for their fee-paying students .

"They do not see themselves as businesses motivated by profit  - and, unlike commercial companies, any surpluses stay inside the charity and can only be used for charitable purposes: there are no dividends and no shareholders .
 
"We don't yet know how the public benefit requirement will affect independent schools because the consultation has only just begun.

"Currently all that has happened is that the presumption that  educational religious and other charities are for the public benefit has been removed.

"All of these charities have always needed to be for the public benefit: the removal of the presumption does not change the underlying law.

"What it does mean is that the Charity Commission, as regulator, will enter uncharted territory in examining the public benefit delivered by charities for the relief of poverty and by religious and educational charities.
 
"ISC is currently surveying all its charitable members to uncover the full range of activities and financial benefits its schools are currently offering.

"The results of this survey will help inform our  discussions with the Charity Commission. We are looking to work with the Commission in agreeing what can reasonably be expected from schools of different types and sizes .

"We will look to emphasise two points. First, that public benefit is a matter of law and not public opinion (the Commission's draft guidance accepts that this is the case). 

"Secondly, that  proportionality is good law: the expectations from smaller and larger charities will be different.

"Again, this is agreed. It is important to realise that many smaller, rural, independent schools do not have much money, do not have wonderful facilities and are not particularly close to a maintained school. It is clearly unfair to expect these schools to do as much as wealthier schools in urban areas.
 
"There is a widespread assumption that independent schools are, on the whole, wealthy.

"While there are (literally) a few schools with significant endowments, the vast majority do not have millions in the bank. 

"Already charitable independent schools, in total, give back more than they receive in fiscal benefits, and so are at a disadvantage to commercial schools. 

"We have to ask whether we want an profit-led independent sector that has no reason at all to engage with society and which has to pay a proportion of parents' money to shareholders; or if we want a charitable sector committed to education and using spare resources to offer bursaries to those who could not otherwise benefit from an independent education or engaging in projects with the wider community."