Update on the Implementation of the Charities Act 2022

The third tranche, which was due to be implemented in Autumn 2023, is now due by the end of 2023. The exact dates are yet to be confirmed by DCMS.

The key changes to be aware of are described below.

Second Tranche of Provisions

Permanent endowment and social investments

Permanent endowment is property gifted to a charity on the basis that the capital of the fund cannot be spent. The capital is to be invested and only the income generated from the investment can be spent on the purposes of the fund, unless the charity obtains consent from the Charity Commission (Commission) to spend it all or it can rely on a statutory authority to do so.

The 2022 Act introduces changes to the rules governing permanent endowment, in particular the new power to borrow and the addition of social investment powers under total return arrangements (sections 9-14 and 35(a)).  

Charities may wish to revisit their plans for social investment using their permanent endowment in light of these changes, but be mindful that the terms of the endowment still apply when making decisions.

Charity land

The updated implementation plan now sees the provisions relating to charity land being split between the second and third tranche of implementation. The provisions being implemented in June principally relate to the content of reports on disposals and who can provide them (sections 17 and 19-22). Charities planning property disposals should monitor the introduction of these provisions so they can take advantage of the welcome simplifications introduced by the 2022 Act.

The remaining provisions relating to charity land are now intended to come into force by the end of 2023, as explained in more detail below.

Charity Names

The 2022 Act gives the Commission wider powers in relation to charity names (sections 25-28). The Commission will now have the power to direct a charity (whether registered or not) to change its legal and working name; this can be during the life of a charity or at the registration stage. We recommend that you consider the following in respect of this:

• For registered charities, we recommend that you regularly check that your entry on the Register of Charities is correct and up to date for your formal and working names. This is important to comply with current rules, the Commission's expectations and to protect the names the charity uses against subsequent charity registrations.

• As the Commission will have wider powers in relation to names in future, when considering changing your charity's name or adopting a new working name, additional care and checks will be needed against the names used by other charities, registered or not, which will need to be factored into your planning.

The second tranche of provisions also will introduce changes which modernise language defining connected persons (sections 38 and 39) and minor and consequential amendments (part of section 40 and Schedule 2).

 Third Tranche of Provisions

Charity land

As explained above, the implementation plan has also been updated to say that the third tranche of provisions is due to be implemented by the end of 2023 (previously Autumn 2023) and will include the following provisions on charity land reform that we had expected to come into force in June 2023:

• Section 18 on changes to the exceptions to the general restrictions on disposing of or mortgaging charity land; and
• Section 23 on the information that must be included in statements and certificates for both charity land disposals and mortgages.

The delay and splitting of different changes between different tranches of implementation relating to charity land disposals mean extra care is needed with any live or proposed projects involving the disposal of land. Particular care will be needed to ensure reports are compliant with the content and provider requirements which apply at the time in question, and that legal documents include the correct statements and/or certificates according to the law in force at the time in question. Teams working on property disposals or projects should ensure they are up-to-date with the new programme.

Further provisions that are now expected to come into force by the end of 2023 include those relating to:

• charity constitutions (section 1-3);
• powers relating to appointments of trustees (section 29);
• remuneration of charity trustees (section 31), and
• charity mergers (sections 33, 34 and 35(b)).

Future changes

Charities whose land transactions are subject to the Universities and Colleges Estates Act 1925 can now expect the simplifications under section 24 of the 2022 Act to be implemented in Spring 2025.

The sections of the 2022 Act which relate to ex gratia payments are still under further consideration prior to commencement.

For further advice on how to take advantage of the regulatory reforms under the 2022 Act or for support with subsequent actions, please contact Shivaji Shiva in our Charities team on 0121 227 3724 or complete the form below.