Charities in general, whether incorporated or not, are subject to the provisions of the Charities Act 2006. (If the charity also happens to be a company, then it will have to comply also with the provisions of the Companies Act 2006.) The Charities Act is a large body of legislation which has been designed as a means of restructuring the legal framework around which charities operate. Until recently, charities were subject in the main to the provisions of common law. The Act has thus been seen as an attempt to bring charity law into a codified statutory form, while at the same time updating the rules concerning the process of setting up as a charity and the prerequisites to qualification for charitable status.
To be a charity an organisation must have exclusively charitable purposes (i.e. a charity cannot have some purposes which are charitable and others which are not). The Charities Act 2006 lists thirteen charitable 'heads' under which a charity can operate. These are:
To be 'charitable' under the meaning of the Act, the purposes of the charity must fall under one of the categories listed above. They must also, though, be demonstrated as being 'for the public benefit' (this is sometimes known as 'the public benefit test'). In particular, there are two key principles of public benefit:
It is up to the charity to show explicitly that its activities fall under one or more of the heads listed above, and that they are being pursued for the public benefit in line with the requirements of the Act.
The 2006 Act also provides that charities whose turnover is under £5000 per annum need not register with the Charity Commission, in order to cut administration costs for small charities (previously, this threshold was set at £1000). Such charities are instead regulated by HMRC.