What is public benefit?

Applies in: England and Wales · Scotland · Northern Ireland. The statutory position in all three is established from the Acts themselves. What is not covered here is how the regulators apply it in practice: the Charity Commission’s public benefit guidance suite has not been read, and neither has OSCR’s or CCNI’s.

Two things founders are told wrongly about public benefit

The test applies purpose by purpose, so it follows from the charitable purposes you choose. This page explains the test. You apply it when you show public benefit in your application.

First: Northern Ireland’s test is not materially different from England and Wales, and has not been since 2013. This is worth saying plainly, because the opposite is widely repeated.

The original 2008 wording was different and was heavily criticised. The Charities Act (Northern Ireland) 2013 replaced it, with effect back to 25 September 2009. That unusual step shows how much trouble the original wording caused.

The current s.3 matches Charities Act 2011 s.4 in structure, word for word. A source from before 2013, or a later one that was never updated, will state the old test.

One difference remains, and it is not in s.3 itself. Northern Ireland follows the law relating to charities in Northern Ireland. That is a different body of case law, even where the statute is the same. Do not assume an English case is good law there.

Second: s.4 does not tell you what public benefit is. Founders read Charities Act 2011 s.4 expecting a definition and find a cross-reference.

s.4(3) sends the reader straight back to the general law. It refers to “the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales”. The content of the test is not in the statute at all.

What s.4 does do: it abolishes the presumption

s.4(2), verbatim: “In determining whether the public benefit requirement is satisfied in relation to any purpose falling within section 3(1), it is not to be presumed that a purpose of a particular description is for the public benefit.”

Before this, three kinds of purpose were presumed to be for the public benefit unless shown otherwise:

• the relief of poverty
• the advancement of education
• the advancement of religion

They no longer are. Every purpose must now show public benefit. And under s.4(4), the no-presumption rule overrides the link to case law in s.4(3). So old cases that relied on a presumption no longer count. Old cases on the substance of public benefit still stand.

All three jurisdictions have abolished the presumption. Say you draft an application as if a religious or educational purpose speaks for itself. Any of the three regulators will query it.

Scotland: a statutory test with factors to weigh

England and Wales and Northern Ireland both say “no presumption” and then leave the rest to case law. Scotland says “no presumption” and then sets out what must be weighed. Under s.8(2) of the Charities and Trustee Investment (Scotland) Act 2005, regard must be had to:

• how any benefit gained or likely to be gained by members of the body, or by any other persons other than as members of the public, and any disbenefit incurred or likely to be incurred by the public, compares with the benefit gained or likely to be gained by the public; and
• where benefit is provided to a section of the public only, whether any condition on obtaining that benefit — including any charge or fee — is unduly restrictive.

Three things there have no English statutory equivalent:

1. It is a net benefit test. Private benefit and public disbenefit are both weighed against public benefit. “Disbenefit” is a striking idea in a statute. Harm the body causes counts against it as part of the test, not just as a factor in the background.
2. Fees are expressly named as a possible unduly restrictive condition. In England and Wales the same point comes from case law about fee-charging schools. In Scotland it is in the Act, and it applies to every charity, not only schools and colleges. A Scottish applicant that charges for anything should expect to justify the charge.
3. It is about activity, not only paper. The test asks whether the body “provides or intends to provide” public benefit. s.7(1)(b) places that “in Scotland or elsewhere”.

One more Scottish point sits next to public benefit rather than inside it. It catches people out, because it can sink an application that passes both other limbs. Under s.7(4), a body does not meet the charity test at all if:

• its constitution allows property to be distributed or applied for a non-charitable purpose
• its constitution expressly lets Scottish Ministers or a Minister of the Crown direct or control its activities
• it is, or advances, a political party

A dissolution clause that allows payouts to members is fatal, however good the rest of the constitution is. That clause is settled when you agree powers, membership and dissolution.

What this means for your application

In England and Wales and Northern Ireland the test is not written into statute. So you cannot pass it by repeating the words of the Act.

The Commission’s own named reason for querying applications is a failure to “fully explain how your charity’s purposes are for the public benefit and will be carried out for the public benefit”. The Commission asks about both. Half an answer, covering the purposes but not how you will carry them out, gets a query.

In Scotland, deal with the factors in the Act before you are asked. Set out:

• who benefits privately
• what harm the activity might cause
• if you charge anything at all, what the charge is, who it excludes, and what concession or waiver exists

This page cannot tell you what evidence each regulator’s own guidance asks for. That guidance was not read: [no fact — not established].

What to do about it

Next: Show public benefit. That step produces the written public benefit statement. It covers both the purposes and how you will carry them out. If your purposes are not settled yet, write your purposes first. You draft the two against each other. Once the charity is registered, you write the public benefit statement for your annual report each year.