The Upper Tribunal (Tax and Chancery Chamber) published its decision on 14 October 2011 regarding the public benefit requirement for charitable independent schools following a Judicial review by the ISC and a reference from the Attorney General concerning the Charity Commission's guidance.

This decision consequently affects the Charity Commission's guidance on public benefit as it relates to educational charities. The Tribunal has confirmed the Commission's view that these charities must operate for the public benefit and that this means they must make provision for the poor to benefit from the charity. However, the Tribunal said that the Commission's guidance is not clear in respect of the adequacy of the provision for the poor which should be made. The Tribunal has said that the Commission's guidance should be corrected and so the Commission will amend the guidance.

Meanwhile trustees of educational charities should look at the Tribunal's decision, which can be found on the Tribunal's website.

In particular, trustees of educational charities might want to consider the following parts of the Tribunal's judgment (from paragraphs 217-220):

"It is for the charity trustees of the school concerned to address and assess how their obligations might best be fulfilled in the context of their own particular circumstances. We have indicated some of the benefits which they might consider in paragraph 196 above. Not all of the benefits which the school provides to those other than students paying full fees need to be for the poor. We see no reason why the provision of scholarships or bursaries to students who can pay some, but not all, of the fees should not be seen as for the public benefit. Provided that the operation of the school is seen overall as being for the public benefit, with an appropriate level of benefit for the poor, a subsidy to the not-so-well-off is to be taken account of in the public benefit. It is certainly our view that in the right circumstances, remission of fees for an existing student who has become unable to meet any of the fees due to changed circumstances, should be seen as being not only for the public benefit but as a benefit provided to a person who has become 'poor'.

We have focused on the payment of fees and the provision of benefits. But those are not the only questions which trustees need to consider. They need to consider the question of access more generally and how to treat all their potential beneficiaries fairly. This is not to say that trustees cannot properly make policy decisions which have the effect of ruling out of consideration large numbers of potential beneficiaries. But such policy decisions must be rational and justifiable in the promotion of the public interest. They certainly cannot be capricious.

Quite apart from questions of impediment to access by reason of financial means, any school will need to consider whether the provision of some of its facilities can really be justified as either part of or properly ancillary to the advancement of education. This is the 'gold-plating' aspect referred to by the ERG [Education Review Group]. We have to say that some of the activities and facilities revealed in the promotional material produced to us in the case of two schools might well seem astonishing to those who are not familiar with such matters. We recognise that the extent of the activities and facilities provided in any particular school will depend on the school's historic endowment as well as the fees currently charged. In our view, however, where facilities at what we might call the luxury end of education are provided, it will be even more incumbent on the school to demonstrate a real level of public benefit. This is not to impost different standards on different schools; it is simply that where such luxury provision is made, a stringent examination of how it is provided and how the public benefit is satisfied is appropriate.

This is all a matter of judgment for the trustees. There will be no one right answer. There will be one or more minimum benefits below which no reasonable trustees would go but subject to that, the level of provision and the method of its provision is properly a matter for them and not for the Charity Commission or the court."

Trustees of educational charities may also want to look at paras 237-258 of the judgment, where the Tribunal answers some questions posed by the Attorney General which consider some hypothetical examples of educational institutions and whether they are operating for the public benefit.

The steps the Charity Commission will in due course take in reviewing and amending our guidance will be signalled on our website.

14 October 2011