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Key UK Charity Commission Regulations Every Charity Should Know

Charities around the world rely on trust, but trust cannot exist outside a set of regulations that define and measure it. In the UK, the Charity Commission is the centre of charity work. As a trustee, you are required by the law to follow its regulations, proving not only compliance but a commitment to manage your charity’s resources responsibly.

The Charity Commission’s goal is to increase public trust in charities through its regulations, and it managed to obtain notable results over the years, with 63% of UK citizens familiar with the Charity Commission expressing high trust in not-for-profit organisations.

However, like most independent regulators, the Commission aims to stay relevant for the public, so its regulations may be subject to updates. Today we are looking at the most important Commission rules a charity should follow to stay compliant in 2024.

What Does the UK Charity Commission Do?

Since the Charity Commission for England and Wales was established in 1853, its role has been to provide guidance on aspects such as trustee appointment and roles, proper finance management, and finance accountability.

Beyond guidance, the Charity Commission manages charity registering and monitors their evolution to ensure they stay true to their mission. If a charity is suspected of misconduct or financial mismanagement, the Commission can take action based on the gravity of the situation.

For instance, if trustees fail to fulfil their legal obligations, the Commission has the authority to suspend them from their role.

8 UK Charity Commission Regulations You Should Be Aware Of

From UK charity registration regulations to the steps you need to follow to protect your organisation from financial risks, here’s what you need to know:

1. When Do Charities Need to Register with the Charity Commission?

As a charity functioning in the United Kingdom, you must register with the Charity Commission if your annual income exceeds or is expected to exceed £5,000. Some charities with an income over £5,000 can be exempted or excepted from following the regulations.

For example, exempt charities, such as those included in Schedule 3 to the Charities Act 2011, have a principal regulator instead of being directly regulated by the Commission.

On the other hand, excepted charities, such as Christian churches and chapels or student unions with an income equal to or under £100,000, are exempted only from registration but need to follow the Commission’s regulations.

Important: If your charity doesn’t meet the UK charity registration requirements, you still need to comply with the Charity Commission law, but you cannot register until acquiring the legal structure of a Charitable Incorporated Organisation (CIO).

2. Appointing Trustees for UK Charities

The legal minimum age for a person to become a trustee is 16 years old for Charitable Incorporated Organisations and 18 years old for other types of charities. However, this is not the only criterion. When selecting trustees, charities need to consider the following restrictions:

• The candidate must not have a criminal conviction for certain offences, especially those involving dishonesty.
• The candidate must not have an individual voluntary agreement.
• The candidate must not have been declared bankrupt (undischarged).
• The candidate must not be on the sex offenders list.

When appointing trustees, most charities rely on their government documents. This document establishes the ground rules, such as how the trustees are elected, for how long, and how they can be removed or resign. However, if the government document doesn’t include specific rules for this procedure, the organisation will follow UK charity law.

According to a 2024 survey by the Charity Commission, 31% of the respondents consider trustee backgrounds and skills highly important, whilst 43% see them as fairly important. Appointing trustees who can demonstrate the ability to manage finances responsibly and place the charity’s interest first can boost the public’s trust in your organisation.

3. Charities Must Comply with Their Governing Document and the Law

A charity’s governing document is a legal document, so you need to make sure every decision you and your co-trustees make takes it into account. It usually includes information regarding your charity’s purpose and objectives, trustees’ rules, and members’ acceptance, as well as the steps you need to follow if you decide to update the document or close your organisation.

It falls under your responsibility to ensure that the charity complies with its governing document and UK charity law, which is not always an easy job. However, you can find plenty of resources on the Commission’s website to educate yourself.

4. Handle the Charity’s Financial Resources Responsibly

One of the most important financial responsibilities of a charity leader is identifying the financial risks the organisation may face. This depends on its size, location, and mission.

For example, some charities act in sectors where the risk of financial fraud, extremism, and terrorism is higher, and as a trustee, you need to pay more attention to your income sources and beneficiaries.

Each charity needs to establish a budget that describes the organisation’s funding needs, the income streams trustees have identified, and how the money is going to be allocated.

Many organisations consider outsourcing their financial management needs due to a lack of financial expertise or time among trustees. Expert financial support can help trustees in tracking important KPIs and producing clear reports for their donors and the public.

5. Trustees Must Act in Their Charity’s Best Interest

Acting in the charity’s best interest means avoiding situations when your duty to the charity conflicts with your personal interests. Trustees shouldn’t pursue their own interests or the interests of donors and members. Instead, they should focus their decisions on funding the organisation’s causes and helping it fulfil its mission.

The Charity Commission recommends that you stay within your powers, take into account all the relevant factors, and keep track of your decisions, as you may need to explain them in the future.

6. Demonstrate Accountability to Your Donors

Being financially transparent shows your donors and the public that your charity is worthy of their trust, and this can win you more donations in the future. However, complying with the charity reporting obligations isn’t optional. You are compelled by UK law to keep accounts and provide a copy to anyone who requires them.

Depending on the level of income, your reporting obligations can be different:

• Income above £250,000 – you must follow the Statement of Recommended Practice – Accounting and Reporting by Charities (Charities SORP) regulations when preparing your accounts and annual financial report.
• Income above £25,000 – the regulations require submitting accounts and copies of your trustees’ annual financial report.
• Income exceeding £10,000 – you are required to submit only an annual report form.
• Income is under £10,000 – you only need to fill in the sections of the annual report that are relevant to your situation.

7. Report Serious Incidents

Solving regular issues within the organisation falls under the command of the trustees, but if a serious incident takes place, regulations require that you report it to the Charity Commission. If you were wondering what qualifies as a serious incident, the Commission identifies the following:

• Financial fraud
• Loss of the charity’s money or assets
• Damage to the charity’s properties
• Events that prevent volunteers and members from carrying out their duties

Important: Even if you have reported the event to the police, you need to notify the Commission about the situation and explain what measures you are taking to address it. The Commission can take action if it decides that the trustees don’t understand what they need to do to comply with the regulations or are unwilling to follow them.

8. The Main Purpose of a Charity Is Public Benefit

Every action the trustees undertake needs to have a charitable objective and adhere to the charity’s mission. To preserve transparency, charities must include the following elements in their governing document:

• The goals the charity aims to achieve.
• Who are the beneficiaries of the charity’s actions.
• How is the charity going to achieve its goals.

Trustees need to prove accountability by ensuring all funds are used for the charity’s causes, otherwise, they can be held responsible for poor financial management.

To make sure your charity aligns with its mission and can preserve the public’s trust, it is essential to implement strong evaluation structures and regularly review the organisation’s objectives.