A charity case?

Churches and Christian charities are now subject to closer scrutiny by the Charity Commission. Although this gives rise to some concerns, the new obligations also give opportunities for the gospel.

The legal landscape within which churches and Christian charities operate has changed radically in recent years. The Charities Act 2006 contained two particularly important provisions. The first is that all churches with an annual income of more than £100,000 must now register with the Charity Commission. The second is that all charities are required to demonstrate and report on the way in which their activities benefit the public.

Registration

The obligation to register as a charity encompasses all churches that were previously ‘excepted’ from registration. Churches have always been regarded as charities in legal terms, and the Charity Commission has had power to investigate churches. Until the 2006 Act, however, most churches were not required to register, and there was, therefore, no regular oversight of them. The state effectively acknowledged that its jurisdiction did not encompass ongoing supervision of excepted churches. That acknowledgment has ended. (Those with an income of less than £100,000 will probably also no longer be excepted after 2012.)

The churches now required to register include PCCs in the Church of England and the Church in Wales, Methodist, URC, Baptist Union churches and those affiliated to the Grace Baptist Association, the FIEC, Congregational Federation, the Presbyterian Church in Wales and the Evangelical Fellowship of Congregational Churches. (At the risk of stating the obvious, churches that were not previously expressly excepted from registration should already have done so, and the income threshold that applies to them is £5,000 p.a.) The obligation took effect in January 2009, although, because of the volume of registrations, the Commission is working to a rolling timetable, and that process is continuing.

* Requirements

Applying for registration is not difficult — the forms and guidance notes are available from the Charity Commission (http://www.charitycommission.gov.uk).

Some churches have a structure which means that the building from which the church operates is owned by a separate body (either an organisation, or a group of individuals acting as trustees of the property). The fact that the legal owner of the building may already be a charity does not mean that the church itself can avoid registration.

One of the requirements of registration is that the church provides a constitution. This should set out the charitable purposes for which it exists (see further below) and the framework for how the church operates. Many churches will already have some kind of constitution, and in some denominations the constitution applies automatically to all churches within the denomination, usually by statute. In others, constitutions have been adopted by the individual churches, and may deal more with theological and doctrinal matters than with ‘governance’ concerns such as who the church’s trustees are, what powers they have, etc.

As a result, many churches are revisiting their constitutional arrangements. Given the scale of the task that confronts the Charity Commission, and the logistical difficulty of addressing individually each church’s application, the Commission has been working with a number of umbrella bodies to produce template constitutional documents. These are available from the representative listed on the Commission website in the section relating to the Excepted Church Charity programme (http://www.charitycommission.gov.uk/registration/charprog.asp).

* Annual returns and accounts

Churches that operate independently may choose to change the template constitution as they think appropriate, although the templates have already been approved by the Commission, and churches using one of these templates can therefore be confident that it will be accepted.

Nevertheless, it is worth reviewing the template to see whether it fits with what the church regards as biblical church governance and with how the church functions in practice. Legally, the constitution is the church’s governing document and members are agreeing to be bound by it once it is adopted. A church should not, therefore, simply assume that another document, such as a doctrinal statement, will take precedence in the event of a disagreement.

Registration also has practical implications. Churches will need to submit annual returns and accounts to the Commission, and to state on financial documents (including those requesting funds) that they are registered charities, with their charity number. Trustees of churches that work with children will probably need to have CRB checks. Registration may highlight areas of liability and risk that should be addressed, such as ensuring that the church has appropriate insurance arrangements.

In general these are matters of good practice and stewardship. While the requirement may not be welcome theologically, in administrative terms registration does not currently impose much greater burdens on a church beyond what the Lord might expect of those who are faithful in looking after his people and resources. This is a good time to reflect on whether things are being done well, and in a way that would commend Christ to outsiders.

Public benefit

There are additional reasons, however, for churches to use this opportunity to engage with the world around them. As part of the annual reporting obligation, churches will now need to describe the ways in which their activities are of public benefit. The background to this is a fundamental shift in the basis on which charities are assessed as charitable. Before the 2006 Act, charities that existed to advance religion or education, or to prevent or relieve poverty, were presumed to be of public benefit (unless they had no discernable engagement with the outside world, as in a cloistered community). Now, however, all charities must demonstrate that their purposes benefit the public. Charity trustees must have regard to the Commission’s guidance on public benefit in overseeing the charity’s activities, and describe in their annual report how the public benefit test is being met.

The advancement of religion is in itself recognised as a charitable purpose, apart from any other ‘charitable’ endeavour that may flow out of a life of faith. While most churches will adopt this as their primary charitable purpose, they and other Christian organisations may want to include other charitable purposes in their aims, such as the relief of poverty or the advancement of education. If an organisation has more than one purpose, it must demonstrate public benefit in relation to each of them.

* Two key principles

The Commission will assess charities against a series of criteria when reviewing the public benefit requirement.

The two key principles are: 1) that there must be identifiable benefits related to the charity’s aims and balanced against any potential detriment; and 2) that the benefits must be available to the public or a section of it, without unreasonable restriction or more than incidental private benefits.

The Commission’s recent assessments of United Christian Broadcasters and the Church Missionary Society described how those organisations provided public benefit. The assessors observed that UCB’s broadcasting promoted the gospel and reinforced Christian values, and that its telephone prayerline, available to members of the public, provided spiritual and moral guidance as part of the charity’s pastoral work. Similarly, the fact that CMS founds churches, equips people for mission and to bear witness to the Christian faith, and encourages people to live with simplicity and a commitment to serve others, formed part of the basis on which the public benefit test was satisfied.

The Commission has recognised that some benefits are intangible and difficult to quantify, but should still be taken into account. We can give thanks that the law still enshrines advancing religion as a charitable purpose. There are some indications in these initial assessments, however, and in the Commission’s guidance on the subject, that the Commission will find it easier to identify benefits such as the promotion of moral values or the provision of pastoral support as being of clearer public benefit than, say, proclamation of the gospel per se.

* Two challenges

There are two key challenges here. The first is for churches to consider whether they are, in fact, demonstrating the goodness of Christ to a world that needs him. We are commanded to do good to all people, as we have opportunity, and especially (but not exclusively) the family of believers. Are we encouraging each other to live such good lives that those around us will be brought to glorify God, even if in the short term they may accuse us of wrong? In what ways can each church and Christian organisation show the world, in proclamation and action, that what God says is not only true, but also right and good?

Secondly, although the legislation is now fixed, its implementation is only just beginning. As Christian charities report on their public benefit each year, they may get into the habit of stating that their promotion of Christianity is of public benefit because it leads to transformed lives and good works. It should — but if that becomes our focus, over time we risk forgetting that the gospel is the good news about who God is, not who we are. The Commission cannot (indeed, should not) adjudicate on the truth claims of Christianity, and will undoubtedly face difficult decisions about when advancing religion is or is not publicly beneficial. Christians, too, may at some point have to choose between seeking the glory of God and meeting a public benefit test as applied by a secular government agency. We will be better prepared for that choice, should it arise, if we keep Christ central. Every church with the gospel at its heart should take the opportunity that annual reporting gives them to articulate why hearing about Jesus and responding to him is the best benefit the public could ever have.

Caroline Eade,
a charity lawyer, and a trustee of the Jubilee Centre in Cambridge

An explanation of charity law for churches