Bates Wells Briefing for Charities & Social Enterprises | 11 December

Bates Wells highlights

Social Enterprise

The Charity Commission has just published the outcome of its review of charitable status and complementary and alternative therapies. See today’s Briefing for details.

Benjamin Thomas, Solicitor in Bates Wells’ Charity & Social Enterprise team, has written for Law in Sport on the key considerations sports clubs should bear in mind when weighing up whether to establish charitable foundations. Click here for more details.

At a glance

The Charity Commission has issued a regulatory alert to charitable think tanks.

The government has published its response to the House of Commons International Development Committee’s report on Sexual exploitation and abuse in the aid sector.

The Government has announced it will launch a new scheme creating partnerships between independent schools and councils to boost opportunities for looked after children, including mentoring and scholarships.

Rules have been published for a new insolvency regime in further education.

Companies House has announced the introduction of new checks whether a proposed new company has links with a “designated person”.

Charity Commission

The Charity Commission has this week published the outcome of its review of charitable status and complementary and alternative therapies (CAM). The review concluded that the underlying legal principles around charitable status and the promotion of CAM remain unchanged. However, as a result of the review, the Commission is updating its approach to assessing the charitable status of CAM organisations. That approach is reflected in revised internal guidance. The Commission has also published a report setting out the outcome of the review. The Commission says its guidance is now clearer that CAM organisations applying to register as charities will need to provide evidence that matches the claims that they make in order to demonstrate that they provide public benefit:

  • those organisations that claim to treat or cure a disease or condition will need to provide appropriate scientific evidence.
  • those organisations that instead claim to provide comfort and relief to patients, may be able to rely on other types of evidence, such as reports by patients, or observational studies based on patient responses, to demonstrate their public benefit.

Changes to Board/Governance

The Department for Culture, Media and Sport has announced that Tony Cohen, Ian Karet and Nina Hingorani-Crain have been appointed as new members to the Commission’s Board and will take up their posts in from 1 January. The terms of office of current board members Tony Leifer and Eryl Besse will come to an end in December. In the commission’s own press release it also states that, following an update to its governance framework, Commission CEO Helen Stephenson has joined the board. The Commission says that this change means that “the CEO’s role as accounting officer is more clearly represented at the highest level of corporate decision-making and brings the Commission into line with recommended governance practices of other similar bodies.” The commission’s governance framework has been published (and is stated to have been updated on 6 December but that the changes are effective from September 2018).

Baroness Stowell speech

The transcript of Baroness Stowell’s speech on the theme of “Forging Community” (which includes comments about her vision of the Commission’s new strategy) at the NAVCA conference has been published.

Inquiry reports

The commission has published its inquiry report into the charity (MA 1985, formerly known as Muslim Aid, 295224). The report stated that the inquiry was opened in November 2013 to investigate concerns regarding financial loss to the charity, serious governance failures, poor financial controls and loss or misuse of charitable funds for improper purpose and was prompted by a serious incident report from the charity in 2012, setting out financial irregularities and unmanaged conflicts of interest in two of the charity’s field offices in Africa. Following the appointment of an interim manager and a new CEO the charity was restructured into a new charitable incorporated organisation (now named Muslim Aid, with assets and liabilities transferred from MA 1985 to Muslim Aid; MA 1985 has since ceased to exist and has been removed from the charity register) and a new trustee board was appointed on 31st January 2018.The inquiry concluded that the former trustees of the charity had not complied their duties to act with reasonable care and skill and fell short of their responsibilities under charity law. However, the inquiry recognised the significant progress which has been made to address the governance and improve oversight and control by the new trustees. The Commission issued a new action plan in April 2018 to ensure the new trustees comply with their legal duties and responsibilities. (See also the Commission’s press release).

The commission has published its report of the inquiry into The Great Generation, which works to help achieve the UN’s sustainable development goals in various countries around the world. The charity was previously part of the class inquiry into “double defaulting” charities, but was removed from that inquiry when it filed its outstanding accounting information. However, when the charity later failed to file accounts on time, and the commission discovered that accounts previously filed by the charity did not comply with legal requirements, and that there was only one active trustee, in contravention of the charity’s governing document, the commission opened a new inquiry into the charity’s governance and administration. The Commission concluded that there had been mismanagement in the administration of the charity prior to the Commission’s intervention due to the trustee’s repeated failure to comply with their legal obligations to file accurate accounting information with the commission within the statutory timeframe; and the charity’s governance and management was inadequate, as the sole trustee was unable to legitimately administer the charity and adequately manage any potential conflicts of interest. The commission has set the charity an action plan to improve its governance, which includes appointing additional trustees. (See also the commission’s press release).

Notice of intention to wind up a charity

The commission has issued public notice of its intention to make an order to direct the winding up of the charity Afghan Heroes under section 84B Charities Act 2011 on the basis that the charity does not operate and winding it up would be expedient in the public interest.

The public notice can be viewed on the schemes and orders page of the commission’s website and sets out how representations can be made in respect of the order.

Regulatory alerts

The commission has issued a regulatory alert to charitable think tanks to remind their trustees of their legal obligations and duties. The alert covers: understanding the charitable objects (particularly regarding education), having control of your charity, protecting the charity’s reputation and avoiding unacceptable political activity. The advice has been sent to all charitable think tanks and the commission has published the accompanying letter from Helen Stephenson which states that the advice is being given under section 15(2) of the Charities Act 2011.

This follows last week’s media reports that charitable think tank, IEA, has been ordered by the Commission to remove a report about Brexit from its website.

Financial Action Task Force (FATF) report

The commission has welcomed the recent FATF report whereby a team of international assessors evaluated the UK’s technical compliance with FATF standards as well as the effectiveness of the UK’s anti-money laundering and counter terrorist financing regime. The commission says that the report recognises the effectiveness and importance of its work as civil regulator.


The commission has published a blogpost marking Anti-corruption day on 9 December.

Serious incident reporting

Rosamund McCarthy, Partner in our Charity & Social Enterprise team, and Lucy McLynn, Head of Employment, have written for the latest issue of Charity Finance on the Charity Commission’s revised serious incident reporting (SIR) guidance. The article sets out the headline changes that the Charity Commission announced on 17 October, as well as how a serious incident is now defined by the regulator. Both authors also explain how they believe that uncertainty is still a problem for many charities, especially with regards to what they need to report in relation to work-placed incidents.

Tax and VAT

Charity Tax Group reports HMRC is to appeal the recent VAT Tribunal ruling in favour of Wellcome Trust, in relation to the application of the reverse charge to the receipt of investment management services by Wellcome from its non-EU suppliers. HMRC is appealing on the basis that the Tribunal erred in its interpretation of the law.


NCVO has been taking a closer look at information in its annual Civil Society Almanac relating to ‘super-major’ charities – those with income over £100m. You can read the full research briefing here – in summary, these are some of the main findings:

  • Many super-major charities have an international focus.
  • Their number and income are both growing.
  • Like other charities, they receive the greatest proportion of their income from individuals.
  • Super-majors spend a similar proportion as others on charitable activities.

NCVO also reports the Carnegie UK Trust has launched Kindness, emotions and human relationships: The blind spot in public policy, a report written by Julia Unwin CBE. The report argues that the great public policy challenges of our time demand an approach that is more centred on human relationships. With technology and artificial intelligence transforming the world at speed, emotional intelligence is equally important and needs investment. The report also includes insights from the first ever quantitative survey on kindness.


Revocation of Art 50 notice

As you may know, on 4 December 2018, Advocate General Sánchez-Bordona gave his opinion on a reference from the Scottish Court of Session’s Inner House, to the effect that the UK government could unilaterally revoke the notice it issued under Article 50 TEU of the UK’s intention to withdraw from the EU.

The Advocate General’s opinion included that:

  • Withdrawing from a treaty was “by definition a unilateral act”.
  • The wording of Article 50(2) requires member states to notify the European Council of an “intention” to withdraw from the EU, rather than taking a (binding) decision to do so.
  • It appeared illogical to force a member state that had decided not to withdraw to continue to negotiate a withdrawal agreement and to withdraw from the EU, and this was not accommodated by Article 50.

The Advocate General added that revocation of a withdrawal notice was subject to prescribed conditions and limits. In response to an issue raised by the European Council and the European Commission, the Advocate General did not accept that revocation of notice to withdraw under Article 50 TEU could only be effected following a unanimous decision of the European Council. (Case C-621/18 – Wightman and others v Secretary of State for Exiting the European Union, opinion of Advocate General Sánchez-Bordona, ECLI:EU:C:2018:851 (4 December 2018)).


The government has published its response to the House of Commons International Development Committee’s report on Sexual exploitation and abuse in the aid sector. Civil Society Media reports that in the response the government has:

  • partially challenged some of the International Development Committee’s recommendations, seeking to shift much of the responsibility onto the wider international development sector.
  • “partially agreed” to 11 of the 18 points raised in the IDC report, while fully agreeing with the remaining seven recommendations.

Data protection

Our Head of Data Privacy Victoria Hordern has written an article regarding how widely GDPR (General Data Protection Regulation) applies. The article notes that when considering the scope of the GDPR application provisions, it is important to consider the main reason behind them. Click here to read the full article.


A former headteacher has been prosecuted and fined in court for unlawfully obtaining school children’s personal data from previous schools where he worked. Darren Harrison of Twickenham, obtained the information from two primary schools were he had worked, and uploaded it to his then current school’s server. As he had no lawful reason to process the personal data, he was in breach of data protection legislation. He was fined £700, ordered to pay £364.08 costs and a victim surcharge of £35.



In a response to a Parliamentary question, the Government has said that during the first half of 2019 it plans to publish its formal response to this year’s consultation on society lotteries.



See under Data protection, prosecutions above.

The Government has announced it will launch a new scheme creating partnerships between independent schools and councils to boost opportunities for looked after children, including mentoring and scholarships.

The Department for Education reports the first 16 schools to receive funding from the £50m Selective School Expansion Fund have been confirmed and all have set out clear actions that will prioritise access for children on the pupil premium and are undertaking outreach work with local schools.

Further Education

Thirty six FE colleges across England are to receive funding totaling £5.5 million to help drive up standards.

Rules have been published for a new insolvency regime in further education. The Education Administration Rules 2018 (SI 2018/1135) (EAR 2018) have been published following the government’s response to a consultation, which ran from 18 December 2017 to 12 February 2018. The EAR 2018 come into force on 31 January 2019. The explanatory memorandum states that the Department for Education will publish two sets of general guidance before the EAR 2018 come into force, providing information to FE college governors on their duties and liabilities and a high-level overview of the key modifications made to general insolvency law for this new SAR.


The Minister for Education has asked universities to do more to contact families if a student is at risk of a crisis.


The government will introduce a new Mental Health Bill to transform mental health care, following publication of the final report from the Independent Review of the Mental Health Act 1983. The government is accepting 2 of the review’s recommendations to modernise the Mental Health Act:

  • Those detained under the Act will be allowed to nominate a person of their choice to be involved in decisions about their care. Currently, they have no say on which relative is contacted. This can lead to distant or unknown relatives being called upon to make important decisions about their care when they are at their most vulnerable.
  • People will also be able to express their preferences for care and treatment and have these listed in statutory ‘advance choice’ documents.


The Communities Secretary has unveiled the government’s next steps to help people off the streets and meet its target to end rough sleeping for good by 2027. These include:

  • New Work Coaches for every single Jobcentre Plus by summer 2019 – helping the homeless to navigate the support available to them.
  • An expectation placed on all councils to publish detailed rough sleeping and homeless strategies by winter 2019 – setting out how councils plan to provide specialist support and accommodation for vulnerable people on the street. Government will take action where councils fail to do so.
  • Carrying out a comprehensive government study into the links between homelessness and the LGBT community – making sure the right support services are in place to help LGBT homeless people off the streets and into stable accommodation. The study will be published in summer 2019.

Social finance

Third Sector reports on the launch of Civil Society Involvement – a new programme to help charities access European funding over the next two years to replace funding after the UK leaves the EU. This initiative has been part-funded by the European Social Fund.

Charity Finance has published this article “’Just because you are investing ethically, it doesn’t mean you are investing sustainably‘.

Local authorities

The Local Government and Social Care Ombudsman (LG&SCO) has published a new report, Under Pressure, based on 40 case studies arising from complaints regarding systemic problems stemming from councils’ redesign of service provision in order to cope with budget constraints, changing demands and technological advances. The key message identified in the report is that authorities should not “throw out the rule book” when redesigning their services and ensure that any transformed services continue to meet statutory levels and timescales.

Alongside the report, the LG&SCO also published a revised Principles of Good Administration Practice document. It provides a shared understanding of what good administration looks like and is intended to be consistent with those used by other UK ombudsmen, particularly the Parliamentary and Health Service Ombudsmen.

Organisations working internationally

BOND reports the House of Lords has passed a crucial amendment to the Counter Terrorism and Border Security Bill, which BOND says would have severely restricted NGOs’ ability to operate in some of the world’s worst humanitarian crises. The amendment to the bill now exempts aid workers and others with a legitimate reason to travel to areas where extremist groups operate, from prosecution.

Faith based organisations

See under Health above.

The Faith Minister has launched  a national tour to celebrate the role of faith communities.

The Christians in Parliament All-Party Parliamentary Group has launched an inquiry into ‘Being a Christian in the UK Today’. It seeks to explore the experience of Christians in the UK in 2018. In particular it is concerned with how living out Christian faith interacts with public institutions such as parliament, central and local government, and other professional and regulatory bodies. The consultation is open until 16th December.

Culture and creative

The Government has announced £20 million funding to boost creative industries across England, with projects ranging from a new Creative Careers Programme to funding of computer games development.



Benjamin Thomas, Solicitor in Bates Wells’ Charity & Social Enterprise team, has written for Law in Sport on the key considerations sports clubs should bear in mind when weighing up whether to establish charitable foundations. Click here for more details.


Campaigning and elections

Stuart Etherington of NCVO has published this blog about recent Government statements about charities’ rights to campaign.



The Office of the Scottish Charity Regulator (OSCR) has published  details of seven whistleblowing reports it received under the Public Interest Disclosure Act 1998. Four of these reports led to OSCR opening an inquiry and using other statutory powers as appropriate; two of these inquiries remain ongoing. Three of the reports were considered not appropriate for OSCR to take forward as a formal inquiry.

OSCR has published a blogpost by David McNeill, SCVO’s Director of Digital, called “Cyber Essentials – 5 basic questions” which discusses ways to help protect your organisation from cyber attacks.

OSCR has published the December edition of its newsletter, OSCR reporter. Topics covered include OSCR’s new guidance on charity investments and making changes to your charity and the Cyber Essentials security scheme.


Northern Ireland

The Charity Commission for Northern Ireland (CCNI) has published its interim inquiry report into Victoria Housing Estates Limited (VHE), a housing charity managing over 420 properties which was set up in the 1950s as an Industrial & Provident Society. The inquiry was opened in 2012 following concerns raised by HMRC and an Interim Manager (IM) was appointed to conduct a forensic examination of the charity. The IM’s report highlighted a number of areas regarding the misapplication of funds, including that over £13,000,000 of charity assets had been advanced as loans to various companies of which one of the trustees had an interest. The charity has a new board, which has identified that over £21,000,000 is required to bring the charity’s properties to an acceptable standard. The charity has also been presented with a large HMRC bill (approximately £2,800,000) as a result of the former charity trustees failing to use the charity’s assets solely for charitable purposes. The charity’s new board has joined CCNI in the legal pursuit of recovery of misappropriated charity funds from three of the charity’s trustees. CCNI anticipates that it will produce a more detailed report at the end of the inquiry.


Companies House

New registrations – potential delays due to new checks

On 5 December 2018, Companies House announced the introduction of new checks on whether applications to register certain types of body corporate contravene UN financial sanctions. Companies House will be checking if a proposed new company has links with a “designated person”. A “designated person” is an individual or entity on a list kept by the UK Office of Financial Sanctions Implementation of persons/entities subject to financial sanctions under UK or EU legislation. These checks could lead to delays with certain registrations.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of December 11, 2018.