Beginner’s Guide on Starting a Charity Organization in the United Kingdom
You can give back to society in many ways, and starting a charity organization in the United Kingdom is one of them. Pre-pandemic statistics show that there are more than 166,000 registered charities and 20,000 charitable status organizations in the UK. Their contribution to the economy approximates GBP12 billion annually. Running a charity can be a lot of hard work, but the rewards more than make up for it.
Industry Practices For Charity Organizations
Before starting your charity organization, you must first understand what you require to run such organizations and how other such entities in the UK are functioning.
Charity organizations are a great way to help the needy or less fortunate. It helps society remain ethical while improving the lives of its less privileged members. A charity’s overall aims and missions are to have a societal impact that adds value.
Charity organizations do not make any profit. Instead, all revenue is employed to sustain the charity’s cause, its operations, and incidentals. Hence, while the purpose of business is for charitable causes, it is still run as a proper business.
A charity organization in the UK must be run only for charitable purposes and needs to exist only for the benefit of the public. Every charity with an income is higher than £5000 per year must register with the Charity Commission.
Benefits of Registering Your Charity
- It will be easier for you to receive grants. Many funders provide grants to only registered charities.
- By registering, you let the public understand that yours is a legitimate organization and that the Charity Commission is monitoring your activities.
- You receive relief on many taxes.
- You pay a lesser rate for your business premises.
- With Gift Aid, you can reclaim the tax that you pay on donations from individuals.
After registering your charity organization, you cannot carry on both charity and non-charity work together. So, if you want to start a profitable business that will use a portion of its earnings for charity, you will need to start something like a community interest company. Running a charity is a noble deed, and the satisfaction you get from helping needy people is more valuable than any profit you could make.
Defining the Purpose of Your Charity
As such, before starting a charity organization, you should begin with a business plan that identifies your charitable purpose. This should be within the ambit described by the Charities Act and must be for public benefit.
Charitable Purposes List
- Relief from poverty
- Advancement of education
- Prevention of sickness or human suffering
- Promoting amateur sports
- Encouragement of arts, science, or culture
- Promotion of environmental protection
- Promoting the efficiency of fire, police, and rescue services
However, there are some activities that you cannot conduct. These include some types of political activities, taking personal financial incentives from the charity organization, etc.
Another significant factor is to decide how you will fund your organization. Most charities are dependent on the donations of others, and therefore, you must work out whom to target to receive your funds. You also have other options for getting funds, like availing government grants or directly raising funds from the public. It would also help to find out the number of charities in your area. That will help you avoid making mistakes and run your charity smoothly.
Rules Charities Need to Follow
Every charity must strictly adhere to the rules laid down by the Charities Act. Some of the essential rules charities need to follow include:
- The rules do not allow charities to pay their trustees. This is to ensure that they meet the public benefit requirement.
- They must maintain proper records of their charitable activities, trustees, and finances. They must provide the Charity Commission with information every year. The organization must follow all the rules laid down in the governing document.
- The law does not permit a charity to take part in certain political activities like campaigning.
Business Registration Process for Starting a Charity Organization
A well-written plan will enable you to write your governing document and decide what business structure suits you best. According to the UK Government website, charities can be structured as an unincorporated association or a company limited by guarantee. It can also be a CIO or a Charitable Incorporated Association. 3E Accounting, with its experience in providing company incorporation services, will help you decide the right structure for your charity.
Types of Legal Structures for Charities
These are the main legal structures for charities:
It is run by a small group of people who appoint every trustee instead of electing them. The trust cannot enter contracts or be the owner of properties. Its trustees are personally responsible for all its liabilities.
It is a membership organization that can carry out the activities chosen by its members. It cannot own properties or enter into contracts on its own. The members are personally liable for any liabilities the charity incurs.
Charitable Incorporated Organisation (CIO)
A small group or a membership organization can operate it. It has a separate legal existence, and so, it can enter into contracts on its own. The trustees have no personal responsibility for any liabilities.
Community Benefit Society
The members who hold shares are the owners of this organization. The Charity Commission does not regulate this type of entity.
It is a limited company run for charitable purposes and has a separate legal existence. To get the status of a company, you have to register it with Companies House. You also need to register with the Charity Commission if its income exceeds £5000 per year.
Incorporated structures will have separate legal identities and become corporate bodies that offer the protection of limited liability. They have the same powers, responsibilities, and disadvantages as any other incorporated business. Trustees will assume the role of shareholders and the board of directors. They should have the relevant experience to carry out their functions, so you should choose your trustees carefully.
The Charity Commission of the UK regulates all charities. You will need to register your charity if:
- It is based in England or Wales.
- It is incorporated.
- Has an annual potential minimum income of GBP5,000.
How to Apply to the Charity Commission
First, fill an online application form with all details, answer all questions, and attach all necessary documents. The Charity Commission will verify your governing document and ann your answers on the form. Your charity group’s aims must indicate that your main purpose is charity, and you must state how you will attain these aims. The answers should match with what is written in the governing document.
Licenses, Permits, or Documents Needed
3E Accounting’s team is an expert in UK company registration procedures and will provide you with all the essential guidance you may need. To register your charity, you will need to do a name search on the Commission’s website. Similar to naming a business, there are quite a few rules that you need to observe. Other documentation that needs to be provided includes a copy of the governing document, bank account details, trustees, etc. The governing document determines how you will be running your organization and what rules you will be following. You should also register with HMRC for tax benefits and get a website to create awareness for your charity.
If none of these structures is what you have in mind, there are other avenues to explore. You could set up a Community Interest Company (CIC), a Social Enterprise, or a community fund. These are not charities but do have objectives that aim to support environmental or community causes.
Starting a charity organization in the UK can be a walk in the park with proper assistance. 3E Accounting, your trusted United Kingdom corporate service provider, provides comprehensive company formation packages that will get the job done in no time. Our experts will do all the heavy lifting, providing you with the freedom to focus on running your business. All our business solutions are fully customizable and can be curated to fit just about any budget. Contact 3E Accounting today to experience innovative and fully digitalized services that offer best-in-class solutions.