SUMMARY

The changes introduced by the Charities Act (Northern Ireland) 2008 are taking effect. As of last month, December 2013, the Charity Commission for Northern Ireland has commenced the compulsory registration of all organisations that operate for charitable purposes there.

The requirement to register is not governed by the size or annual income of a charity, but on the basis of whether or not the charity satisfies certain conditions which are detailed below. If a charity is required to register, it should take steps to ensure that it is on one of three lists of the Charity Commission for Northern Ireland. The consequences for failing to register, if called upon to do so, is a breach of the Charities Act (Northern Ireland) 2008 and the Charity Commission for Northern Ireland may pursue the issue through the courts.

Although registration is a one off process, it will bring with it the need to comply with certain annual reporting requirements. Charities should be alive to these changes and begin to prepare their organisations for the new regime under which they shall shortly be operating.

BACKGROUND

In 2008 the NI Charities Act (Northern Ireland) (“the NI Charities Act”) was enacted to create a new regulatory framework for charities in the country. Prior to this Act there was no form of charity registration in Northern Ireland and only limited provision for enforcement of charity law. The NI Charities Act established a new body, the Charity Commission for Northern Ireland, to regulate charities working there. It also introduced a register of charities and a Charity Tribunal.

On 16 December 2013 the Charity Commission for Northern Ireland announced the commencement of the compulsory registration of charities in Northern Ireland and launched Northern Ireland’s first register of charities which is a publicly accessible and up-to-date register of all charities operating in Northern Ireland.

COMPULSORY REGISTRATION

The Charity Commission for Northern Ireland (“the NI Commission”) has now started the process of compulsory registration of all organisations that operate for charitable purposes in the Country. This is the first time that charities in Northern Ireland have been subject to registration. It is estimated that approximately 7,000 charities currently operate in Northern Ireland.

All organisations that are, or could be, charitable must apply for registration when called forward by the NI Commission. The charity trustees of an organisation which must apply for registration, but do not come forward to do so, are in breach of their duties under the NI Charities Act.

Compulsory registration with the NI Commission remains different from registration with HMRC for charitable tax exemptions. Therefore even if a charity has an HMRC registration number it must still apply for registration with the NI Commission. In the future, charities in Northern Ireland will only be able to register for charitable tax exemptions if they are registered with the NI Commission.

WHICH ORGANISATIONS MUST REGISTER?

The registration requirements apply to all charities operating in Northern Ireland, irrespective of their size, annual income or whether or not they are registered with HMRC for charitable tax purposes. An organisation must apply for registration as a charity in Northern Ireland if it satisfies the following three conditions:

1. It has exclusively charitable purposes in law. The relevant legislation is the NI Charities Act. Each purpose of the charity must be one that is defined by s.2 of the NI Charities Act as (i) falling under one or more of the list of 12 descriptions of purposes under the Act and (ii) being for the public benefit.

2. It is governed by the law of Northern Ireland. The following are relevant indicators (i) the organisation is a company registered in Northern Ireland; (ii) the organisation’s governing document says that it is governed by the law of Northern Ireland; or (iii) a majority of the charity trustees are resident in Northern Ireland and there is no reference to any other legal framework in the governing document.

3. It has control and direction over its governance and resources. Guidance published by the NI Commission indicates that this requires the organisation to be separately constituted, control how money is raised and spent, and direct how resources are used. Complications arise where the organisation is part of a larger charity operating elsewhere. The NI Commission is of the view that an organisation does not have control and direction over its governance and resources where it is a branch of a larger organisation, has no governing document of its own or management committee, does not decide how or where its money is spent and is reliant on its larger parent organisation for governance structures. Such an organisation will not be required to apply for registration.

An organisation which is not a charity under the law of Northern Ireland but which operates for charitable purposes in or from Northern Ireland may, however, still apply for registration by submitting an Expression of Intent Form (see below). Regulations are expected to determine the requirements of such organisations in due course and as the deadline for submitting this form is not until 31 December 2014 it is possible to maintain a watching brief for the moment.

In contrast, an organisation operating in Northern Ireland which has its own governing document, decides how and where its money is spent and has its own governance arrangements, will be required to apply for registration whether or not it is a branch.

WHEN MUST THE ORGANISATION REGISTER?

As the registration of all charities in Northern Ireland will take some time applications are being called forward by the NI Commission to apply to register in tranches. In order to be invited forward, a charity must be on one of the NI Commission’s lists of organisations seeking registration. The NI Commission has three lists:

1. The deemed list. This comprises organisations registered with HMRC for charitable tax exemptions by 19 August 2013. The deemed list has been separated into those organisations for which the NI Commission has contact details, and those for which it does not. Organisations should check if they are on either of the two deemed lists on the NI Commission’s website: http://www.charitycommissionni.org.uk If an organisation is not on the deemed list but it held charitable tax status granted by HMRC before 19 August 2013 or it is on the list but its details are incorrect then it should contact the NI Commission.

2. The non-deemed list. This comprises all other organisations, whether long established or newly established who are not registered with HMRC. Organisations will be added to this list as and when they come forward. Organisations should apply to the NI Commission using the Expression of Intent Form by 31 December 2014.

3. The special circumstances list. This comprises organisations which have made a case to have their application brought forward. An organisation may wish to have its application brought forward where the NI Commission has agreed to assess large numbers of similar organisations working to an approved governing document, or where registration is a condition to use a particular power.

Selection by the NI Commission for registration depends on which list the organisation appears:

1. For those on the deemed list, organisations from different income bands are randomly selected using a computer formula;

2. Those on the non-deemed list are selected in order of date of application; and

3. Those on the special circumstances list are selected in priority date order, determined by the NI Commission.

Organisations that are already regulated by a charity regulator in another jurisdiction, but which operate in Northern Ireland, will be called forward last. The NI Commission will know if the organisation falls into this category when the organisation completes the Expression of Intent Form. The NI Commission will publish each of the lists and organisations included in each tranche on their website. They will keep the organisation informed of the tranche they are currently processing, together with the projected date they intend to call forward the next tranche.

CONSEQUENCES OF FAILING TO REGISTER OR AN UNSUCCESSFUL APPLICATION

If an organisation does not make its application for registration within three months from the date at which it is called forward, the NI Commission will notify HMRC that the application has not been submitted. The organisation’s Gift Aid entitlement may be withdrawn or suspended until the application is submitted. Similar consequences arise if the organisation fails to supply the NI Commission with the required documents and information. HMRC will also be notified if the organisation is not successful in the registration process. Any decision to remove charitable benefits will be reassessed by HMRC.

CONSEQUENCES OF A SUCCESSFUL REGISTRATION

Prior to the commencement of the compulsory registration of charities, charities in Northern Ireland were not required to submit annual monitoring returns or accounts and reports to the NI Commission for inspection. Once an organisation is registered under the new regime, however, it will be compulsory for all registered charities to provide certain information to the NI Commission on their activities, governance and finances on an annual basis and submit their accounts and reports to the NI Commission for inspection. Currently it is intended that the annual reporting will consist of an annual monitoring return, annual accounts and a trustee annual report.

Reporting requirements are not, at present, finalised. As they have been the subject of a recent public consultation it is likely that there may be further developments in this area.

Once registered, the trustees will have to notify the NI Commission of any changes, for example if the charity closes.

COMMENT

The changes in Northern Ireland bring the charity sector there into line with the rest of the United Kingdom where charities are already regulated by the Charity Commission in England and Wales and the Office of the Scottish Charity Regulator in Scotland respectively. It will take some time to complete the registration process for all charities and at present only those organisations which have been called forward by the NI Commission, and have received an application password, will be able to apply to register as a charity on the NI Commission’s website.

There is, however, work for every charity to be doing at present. First, every organisation should consider if the requirement to register applies to them. Particular care needs to be taken here to determine if the organisation is operating in Northern Ireland either entirely or under a separate branch which is subject to Northern Irish jurisdiction, or whether it is operating for charitable purposes in or from Northern Ireland but is not a charity under the law of Northern Ireland.

Second, if the registration rules apply to the organisation, it should check to see if it is on the deemed list and, if so, if its details are correct. If the organisation is either not on the deemed list but thinks it should be, or it is on the list but its details are incorrect then it should contact the NI Commission. Organisations not on the deemed list should ensure that they submit an Expression of Intent Form to the NI Commission by 31 December 2014.

Finally, charity trustees could use any time they may have before their organisation is registered to ensure that their organisation, and its internal governance procedures are suited to the new reporting requirements which are to be put in place. As trustees of charities in Northern Ireland will soon find themselves subject to the similar burden of regulatory requirements as in the rest of the UK this may be time well spent.

For further information please speak to Richard Monkcom, Partner, and Matthew McCormick, Solicitor, both of Druces LLP’s Charities team.

This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in January 2014.