Sunday, November 26, 2006

Charity Facts: What is a charity?

A charity is a particular type of voluntary organisation – one that takes a distinctive legal form and has a special tax status. In the UK today there are probably over 500,000 voluntary organisations – fewer than 200,000 of these are registered charities.

Charities can be organised in a number of different ways – they can be an unincorporated association, a trust or a company limited by guarantee. Each of these has a different governance structure – for example, a charity that is formed as a registered company will be governed by a board of directors, a charity that is set up as a trust will be governed by a board of trustees.

Every charity has to have a governing document that sets out the charity's objects and how it is to be administered.

To register as a charity, an organisation must have purposes that are defined under law as charitable. These include the relief of financial hardship, the advancement of education, the advancement of religion and other purposes that benefit the community.Once registered, charities have to obey a number of rules, which include regulations covering trustees, accounts, finances and management. Those that are registered as companies have to comply with company law too.

A registered charity is not allowed to have political objectives or take part in political lobbying other than in a generally educational sense.

Are set up for a charitable purpose
Are not profit-making – so any surplus they may make must be used only to further the organisation's purposes
Are independent – that is, they are not a part of any governing department, local authority or any other statutory bodies

Advantages of becoming a charity:

Tax relief on:
Income tax (on gifts given)
Corporation tax
Stamp duty
Capital gains tax
Inheritance tax

Plus increased public support as the organisation is more likely to be viewed as legitimate and worthy.

Disadvantages of becoming a charity:

Charity law imposes high standards of regulation and bureaucracy.
Trading, political and campaigning activities are restricted.

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