Material is Copyright, VolResource - please contact if you wish to re-use it.
Skip to: Site menu | Main content | Accessibility

This version of VolResource is no longer being updated. Please use our #volsec reboot instead:

If you want to access the old pages for any reason (e.g. smaller file size):

and do check all information thoroughly

Registration:

Charity and/or Company

Updated 25/11/13

Follow the trail

This page

The basic issues on formalising the status of an organisation:

We suggest starting at the introduction!

Elsewhere

  • Legal Issues page for other operational matters for your organisation to consider.
  • Legal Services to find experienced sector lawyers.
  • Taxation issues This basic briefing page is essential reading, whatever your legal status.
  • Governance includes a checklist for Directors/Trustees.
  • Starting Up A checklist for those thinking of setting up a new organisation.


Introduction

It is possible to be both a charity and a limited company, and either or none. There is a whole range of issues which should be considered before you decide what is right for your organisation. It often comes down to the trade off between initial cost and ongoing bureaucracy versus lack of status (with potential donors and suppliers) and open-ended liability.

NOTE: Reform to charity law is in process. A new legal form, the Charitable Incorporated Organisation (CIO), avoiding the need to have 'dual' registration, is in the Charities Act 2006 but the legal model will now probably be available in 2010. Scottish law also changed, and is close to that in England and Wales, from April 2006 - CIO likely available there in 2010. Northern Ireland has different legislation too, but again similar to the rest of the UK with new law approved September 2008.

Many of the registration thresholds and costs given below are in need of revision, summer 2007.

Charity Registration

There are a number of advantages to registering as a charity. The main ones are

However, paying tax as an organisation is not so closely connected with registration (unless you are based in Scotland). If you have a constitution which clearly demonstrates the non-profit making nature of your activity, the Inland Revenue will (with a bit of persuasion) normally treat any surplus (='profit') as not chargeable for Corporation Tax or any other. Bank interest gained and any trading not directly related to your normal activity will usually be exceptions.

The downside of registration is the bureaucracy involved. You need to send regular (usually annual) information to the Charity Commission and conform to particular requirements. Many of these are good practice, and your auditor may want you to follow them anyway. Normally you have to hold Annual General Meetings - see Trustee/Member Issues. The Charity Commission does have very heavy powers if they think you are abusing charitable status.

Not all voluntary organisations can be charities - those which are mainly about campaigning for instance. The Commission has been holding a series of reviews of the Register, to look a different borderline or unclear areas, such as urban regeneration. On the other hand, organisations meeting the charitable nature test are obliged to register (but see next paragraph) if their turnover is over £1000 a year. This has not been heavily enforced so far.

Some charities are 'excepted' from registration, due to annual income of 1,000 or less (unless they have permanent endowment or the use or occupation of land), some religious and armed forces charities, but can register if they wish. There is also a category of exempt charity, which cannot register, and includes many state schools, universities, some industrial and provident societies, and a number of national museums.

Please be aware that every organisation has its own unique circumstances. You may not need to pay for professional advice on the subject, but do think carefully (and remember our site disclaimer).

More information is available through the Charity Commission web site. Phone 0845 300 0218 (this is a central switchboard for all offices), textphone (Minicom) service on 0845 300 0219. There is also a Welsh Office. The website is relatively clear and holds details of registered charities which you can search in various ways, downloadable publications (including most of their important leaflets), roadshows or other advice events, and further contact details.

Scotland and Northern Ireland

The law differs here.

In Scotland, the Office of the Scottish Regulator (OSCR) was fully established in 2006.

Northern Ireland Please check for updates as the new charity law (approved Sept 2008), including a charity register, comes into force - see Charity Commission for Northern Ireland, or NICVA governance pages. Currently charities should contact HM Revenue and Customs, FICO, St John's House, Merton Road, Bootle, Merseyside, L69 9BB. The compilation of a charity register by CCNI is imminent, autumn 2013.

Company Registration (limited liability status)

Reasons

There are a variety of reasons for getting limited liability via registering as a company. It limits the liability of company directors, which usually equates to those on the management committee (who will also be the charity trustees if it is a charity). They are still liable for negligent conduct - lawyers will find some other exceptions but that is the main one. Employing staff, taking up a lease or owning property are common prompts to get limited liability.

There is a general lack of knowledge that there are two ways of becoming a registered company - the 'normal' commercial approach of being 'limited by shares', and the general model used by voluntary organisations 'limited by guarantee', where members guarantee to meet the debts of the company if necessary, but only up to a limit which is almost always £1. Both will require the company to make annual returns, keep various registers and proper accounts which will usually need to be audited professionally. See Accountants or Finance Topic Review for sources of info. and services.

It is also possible to get limited liability by registering as an Industrial and Provident Society (IPS), which is a fairly normal approach for co-operatives, mutual societies or those businesses conducted for the benefit of the community. Greater protection of original rules (e.g. guarding co-op or community status) and the ability to advertise and issue loan stock to the public are quoted as advantages of IPS. Where the objectives are wholly charitable (e.g. set up for community benefit), the IPS will be an 'exempt' charity not required (or allowed) to register with the Charity Commission, although if you arent using accepted model rules (see below) it may be worthwhile getting approval from Inland Revenue before adoption. Many of the largest housing associations are IPS, as are the retail co-op societies. Try Co-operative UK mentioned below. Registration is now via Financial Services Authority (took over from Registry of Friendly Societies and Assistant Registrar for Scotland, Dec 01), 25 The North Colonnade, Canary Wharf, London, E14 5HS, phone 020 7676 9442/9756/5474 (separate office in Scotland?).

Companies House is where all the paperwork gets processed (except for IPS), but it is often easiest to do it via a solicitor, or use one of the specialist services around. Otherwise it can be tricky to make sure that the constitution meets legal requirements (especially if you also want to register as a charity) and gives you the scope to do what is necessary. Their web site is a good place to check out if somebody has already taken 'your' name, order a starter pack or essential forms.

Limited Liability Partnerships (introduced 2000 basically to provide a form of corporate status for accountants, solicitors etc) might be appropriate for the odd social enterprise.

Community Interest Company model

The Community Interest Company (CIC) model, designed for social enterprises, became available July 05 - two years later it had reached 1,000 registrations. While there is some extra paperwork involved in setting up and running a CIC, the charity team at Russell-Cooke Solicitors point out that funders and other stakeholders may see this as an attractive model as there is no potential for asset stripping, and that (unlike most charities) directors may be paid as long as the remuneration is not excessive. See the CIC Regulator for information, forms etc.

Model constitutions for CICs:

Model constitutions and advice

Various model constitutions are available. This can reduce legal costs - for some you won't need a lawyer at all, and for IPS (with Registrar of Friendly Societies), model rules can cut the registration fee significantly. There are apparently over twenty IPS promoting bodies providing model Rules already approved by the Registrar - some are below.

Advice and rules

Model rules

Implications of registration

Some of these are dealt with above. The following are only the most noteworthy.