The government has unveiled plans to overhaul the UK's outdated charity laws in a move which could see organisations such as Amnesty International securing charitable status.

The draft legislation, set out by ministers on Thursday, will now be subject to a short, sharp period of pre-legislative scrutiny.

Central to the legislation is a plan to create a "modern definition" of charity "to reflect what is and what ought to be charitable in today's society".

In future charities will be more accountable to the Charity Commission, including a new tribunal to deal with unresolved complaints.

The legislation will also make it easier for charities to merge.

It will also establish a new legal entity, the Charitable Incorporated Organisation, for charities that wish to take a corporate form.

"This will avoid dual regulation between charity and company law and provide an alternative to the company limited by guarantee model currently used by many charities," says the Home Office.

The charitable and voluntary sector is geared up for an intense lobbying push as a committee of MPs and peers examines the legislation before the final law is unveiled in the November Queen's Speech.

Clear definition

The legislation will produce a clear definition of what "charitable" means - and could put pressure on public schools to prove that they perform a public good.

Public benefit will remain as the most fundamental test of charitable purpose.

Ministers insist the move is necessary to update legislation which in some areas has remained unchanged since the reign of Elizabeth I.

Under the legislation the government says charities will be "more accountable, their workings more transparent and their achievements more evident".

Over-regulation

But some charities feel the outcome of the legislation could be over-regulation.

A new approach to fundraising could also raise concerns in some quarters.

While the government wants to ensure that self regulation remains in place, the draft legislation is likely to give the Home Office powers to regulate fundraising if self-regulation fails.

Moves to better define charities could also prompt divisions amongst MPs.

Some Labour MPs are set to press for independent schools to lose their charitable status altogether - or instead believe they should be forced to offer more scholarships to those from poorer backgrounds.

Status

Plans outlined by the Home Office in July 2003 detailed proposals for a new application process, which would require organisations to pass a two-stage test to qualify as a charity.

Firstly, their objectives would have to match one or more of those on a new list, which includes goals such as the advancement of amateur sport, and the prevention of poverty.

Next, the organisation would have to show the Charity Commission that it was run on the "principle of public benefit".

On-going checks would then be carried out by the Charity Commission on an organisation's "public character".

Mactaggart said the government wanted to "protect the charity brand so that people are confident in giving money to charities and make sure that people know what is a charity".

"Many people think that Amnesty International at the moment is a charity and they think that the advancement of human rights is a proper charitable purpose which should benefit from tax breaks," she added.

Giving

The Home Office also unveiled plans for a simplified licensing system for charitable collections, to be administered by councils.

Concern has been expressed that street collectors, who ask the public to sign up to direct debit giving, currently fall outside the scope of legislation.

A group bringing together charities, police, local authorities, charity "umbrella" groups and the Charity Commission will examine plans for the scheme.

While ministers say they initially want to explore the development of a self-regulated code of conduct they are also warning that they will take action to curb sharp practice unless the industry acts.

Welcome step

Ahead of an intense round of lobbying as the draft bill is examined in committee, the "third sector" gave a broad thumbs up to the planned changes.

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, said the central elements of the legislation were welcome.

“We very much welcome the government’s draft legislation but the important element is when we actually see this enacted. When will this be on the statute book,” he said.