Part 1 - Definition of “charity”, “charitable company” and “charitable trust”
2.Paragraph 1 sets out the broad conditions an organisation must meet if it is to be defined as a charity.
3.Sub-paragraph (1) requires a charity to be established for charitable purposes only and, in addition, to meet three further conditions: the jurisdiction condition (defined in paragraph 2 of the Schedule), the registration condition (defined in paragraph 3 of the Schedule)) and the management condition (defined in paragraph 4 of the Schedule)).
4.Sub-paragraph (2) defines a charity that is a body of persons as a charitable company and a charity that is a trust as a charitable trust.
5.Sub-paragraph (3) makes plain that the new definitions of “charity”, “charitable company” and “charitable trust” are subordinate to any definitions already in the statute. The effect of this provision is that the new definitions will not apply unless the previous definitions are expressly repealed.
6.Sub-paragraph (4) refers to section 2 of the Charities Act 2006 for the meaning of “charitable purpose”. The charitable purpose must fall within a list of descriptions of purposes set out in the 2006 Act and must also be for the public benefit. The reference to public benefit is to that term as understood for the purposes of the law relating to charities in England and Wales.
7.Sub-paragraph (4)(a) makes it plain that charitable tax reliefs and exemptions are available to organisations only if they meet the definition of charitable purposes as defined in section 2 of the Charities Act 2006, wherever the organisation is established.
8.Sub-paragraph (4)(b) makes plain that in the context of tax the definition of “charitable purposes” applies also for the purposes of the law of Scotland and of Northern Ireland.
9.Paragraph 2 sets out the details of the jurisdiction condition (paragraph 1(1)(b)). Under sub-paragraph (1), in order to meet the jurisdiction condition a body of persons or trust must be subject to the control of a relevant court in the UK with respect to charities or a corresponding jurisdiction outside the UK in the EU or a specified relevant territory.
10.Sub-paragraph (2) defines what is meant by a “relevant court in the UK”. The courts are the High Court in England and Wales, the Court of Session in Scotland and the High Court in Northern Ireland.
11.Sub-paragraph (3) defines a “relevant territory” as being a member State of the EU other than the UK or a territory specified in regulations made by the Commissioners for HMRC.
12.Sub-paragraphs (4) and (5) provide that regulations specifying a relevant territory are to be made by statutory instrument. Such regulations will be subject to the negative resolution procedure.
13.Paragraph 3 sets out the details of the registration condition (paragraph 1(1)(c)). Sub-paragraph (1) introduces two conditions, condition A and condition B which a body of persons or trust must meet in order to meet the registration condition. Condition A applies to organisations in England and Wales, and condition B applies to organisations outside England and Wales.
14.Sub-paragraph (2) sets out the details of condition A. If the charity is required to be registered under the Charities Act 1993 then it must be so registered.
15.Sub-paragraph (3) sets out the details of condition B. Where the law of the territory requires a charity to be registered in a register corresponding to the register of charities held by the Charity Commission in England and Wales then the charity must be registered in order to meet the registration condition.
16.Paragraph 4 sets out the details of the management condition (paragraph 1(1)(d)). Sub-paragraph (1) requires managers of a body of persons or trust to be “fit and proper” persons in order to meet the management condition. “Fit and proper” is not defined in the legislation so takes its natural meaning. HMRC will issue guidance on how it will apply this test. Sub-paragraph (2) defines a “manager” as a person having general control and management of the administration of the body or trust.
17.Paragraph 5 introduces a relaxation to paragraph 4 such that, depending on the circumstances, the Commissioners for HMRC may treat a charity as having met the management condition throughout the period of appointment of a manager who is not “fit and proper”.
18.There are two circumstances where the relaxation under paragraph 5 may apply:
where the manager is not in a position to prejudice the charity’s delivery of its charitable objects then sub-paragraph (2)(a) may apply and the charity may be treated as meeting the management condition; or
where, taking account of all the circumstances, it is just and reasonable for the charity to be treated as meeting the management condition then sub-paragraph (2)(b) may apply.
19.Paragraph 6 allows HMRC to publish a list of the names and addresses of organisations who have claimed, and appear to be, or to have at some time been, eligible for, charitable tax reliefs.
20.Paragraph 7 applies the new definition of a charity in Part 1 of the Schedule to income tax, capital gains tax, corporation tax, value added tax, inheritance tax, stamp duty, stamp duty land tax and stamp duty reserve tax.