Charity and not for profit organisations have always raised for funds activities to assist those in need. From helping children and young people to mental health support and tackling complex social issues, we all owe more to the work of charities than most of us will ever realise.
The challenge for small charities is having enough funds to deliver the projects they know will make a difference.
At LawBite, we are committed to providing quality legal advice to charities. To assist you, as a charity, understand charitable fundraising and the legal considerations attached, we have answered the most common questions.
Before you apply for funding, register your charity
To register with the Charity Commission, the regulator that oversees charities, you will need to show your charity’s annual income will be more than £5,000. As long as you clearly state you are not yet registered with the Charity Commission you can raise money before officially registering.
If you need assistance with registering your charity, we can help support you. We have created a number of affordable fixed priced packages to help deal with the formation of a new charity in England and Wales.
Legal duties and responsibilities for charity fundraising
The Charity Commission’s guidance on charity fundraising sets out six principles to help a trustee of a charity comply with their legal duties.
The six principles are:
- Planning effectively - set out, agree and monitor your approach to fundraising
- Supervise your fundraisers - establish a system to oversee your fundraising methods and fundraising carried out on behalf of the charity
- Protect your charity - make sure there is strong management of your assets and resources
- Comply with the fundraising laws and regulations - in particular in areas such as data protection and licensing laws
- Follow recognised fundraising standards - the Code of Fundraising Practice outlines the legal rules that apply to fundraising
- Be open and accountable - make sure your charity is well run and you comply with the statutory accounting and reporting requirements
A checklist is available to help trustees evaluate their charity’s performance, at suitable intervals, against the legal requirements and good practise recommendations set out in the guidance.
How to get funding for a charity?
The main ways charities raise money to finance projects are
1. Applying for local or central government funding (known as statutory funding)
Whilst the Charity Commission itself does not fund charities, you can get funding from some government departments where your cause lies within their current priorities. There are government funding programmes and - you can find out more about these. Increasingly, government organisations are contracting for services from the voluntary sector.
2. Applying for grant funding from other charities and private bodies
There are several foundations and trusts in the UK that are set up to donate grants (non-repayable funds) to other charities. Each trust has its own favoured cause or geographical area of interest and will support charities that further these aims.
These grants are not usually for large amounts so it’s probably not wise to use them as your primary source of income. However, their simple procedures and flexible process mean you should certainly look at what’s on offer.
3. Receiving money through Wills and legacies
Some people set up a charity having unexpectedly received a large sum of money in a will or your charity might be left a sum in someone else’s will (perhaps a previous beneficiary).
This is naturally a sensitive subject and as such you must follow best practice guidelines and act to the highest standards. Donors should use their own solicitors if they would like to leave a donation in their will. Sometimes, a charity can offer to pay for the will of the donor to encourage people to donate. The solicitor will, however, be acting in the best interests of the donor and not the charity.
4. Public donations and fundraising activities
When you think of raising funds for a cause or charity, you almost immediately think of the more ‘direct’ forms which you see as street fundraisers, door-to-door requests and bucket collections.
Whilst this might be an effective way to engage with the public about your cause and drive revenue to support it, there are strict guidelines to follow. The government is cracking down on tactics which could come across as intimidating and you might want to consider whether these tactics are effective overall for your cause.
You should also have an accessible complaints procedure in place which will promote confidence and protect you against fraudulent activity (side note: if you ever suspect your organisation has been a victim of fraud, report this to Action Fraud).
5. Gift aid, which allows charities to reclaim tax on donations
You know when your friends run half-marathons and do crazy things for charity and you see that ‘claim Gift Aid’ button when you donate? Well, this is actually something a charity can register for to increase the value of donations from UK taxpayers.
In a nutshell, charities can reclaim tax from HMRC on any donation made by a taxpayer-provided the donor has made a Gift Aid declaration and the charity can prove how much each donor has given. In these cases, You can claim 25p for every £1 donated. Register for Gift Aid.
What is the Fundraising Regulator?
If you are raising money from the public you may wish to register with the Fundraising Regulator to increase trust and confidence in your organisation. The Fundraising Regulator is an independent regulator for charitable fundraising for UK registered charities.
It was established following a cross-party panel government review in 2015 following serious complaints about aggressive and unethical fundraising activities by a minority of charities.
If you register with the Fundraising Regulator you must commit to abide by the principles set out in the Fundraising Promise. The principles state that registered charities must:
- Ensure that fundraising activity is legal, open, honest, and respectful
- Adhere to the standards set out in the Code of Fundraising Practice
- Monitor compliance with the Code of Fundraising Practice by volunteers, fundraisers, and third parties contracted to raise funds
- Display the Fundraising Regulator badge on fundraising material
- Provide a complaints procedure for the public to access
Although it does not possess statutory powers, the Fundraising Regulator can investigate complaints from anyone who claims to have been affected by poor fundraising practices.
What are the annual reporting requirements for charities?
At the end of a financial year, depending on their size and type, a charity may have to submit:
- An annual report
- A set of accounts
- An annual return to the Charity Commission
Your charity’s trustees must understand:
- What type of accounts are required and must be prepared
- What information is needed in the trustees’ annual report
- Whether the accounts require an independent examination or audit
- The information is required annually by the Charity Commission
If you do not submit the required information within the necessary timeframes you may face regulatory action by the Charity Commission.
Get legal assistance from LawBite
Navigating the complexities of the charity sector, including forming a new charity, expressing your charity’s purposes and the law around fundraising can be daunting. Our expert charity lawyers can support you with some of the toughest charities small charities face. Find out more about our fixed price charity packages.