Phase 2 of the Charities Act 2022 implementation

On 14 June 2023 a further 18 sections of the Charities Act 2022 were brought into force. These cover disposing of land; charity names; dealing with permanent endowment; total return and redefining connected persons. In addition The Charities (Disposal of land Designated Advisors and Reports) Regulations 2023 came into force on 14 June 2023.

The intention of the Charities Act 2022 was to simplify and streamline lower risk activities by charities and clarify some of the complex rules.

From 14 June trustees of charities are able to:

• spend, in certain circumstances, a proportion or all of their permanent endowment fund where the market value of the fund is not more than £25,000 without obtaining Commission authorisation.
• borrow, in certain circumstances, up to 25% of the value of their permanent endowment fund without Commission authorisation.
• use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains where they have opted into a total return approach to investments.
• dispose of land by taking advice from a suitably qualified person – this has expanded to include trustees and employees under the term ‘designated advisor’

The Commission has gained some new powers:

• the Commission to direct a charity to stop using a working name if it is too similar to another charity’s name or is offensive or misleading.
• the Commission to delay registration of a charity with an unsuitable name or delay entry of a new unsuitable name onto the Register of Charities. Working with the principal regulator, the Commission can also use these naming powers on exempt charities.

Other changes

• The definition of connected person has been updated
• The rules on disposing of land only apply where all of the land is held on trust.
• Permanent endowment is now defined as being property held on terms that distinguish between capital and income – if there is no statement to that effect it is likely not be deemed permanent endowment.

Still to come;

Some provisions will not be introduced until the end of 2023. These include the new powers in relation to ex-gratia payments (which need further consultation and may not come in in 2023), s18 which enables charity to charity land transactions for less than best value; amending charity governing documents; trustee remuneration.

LBMW are running a series of webinars throughout the year on the new provisions. Our one on land is scheduled for 21 June. You can sign up via our Events page.