The Regulator for Charities in England and Wales
(Version - August 2000)
Annex A deals with these points in further detail.
A1. Three key elements must be satisfied before an organisation is entitled to charitable status under s.1 of the Act. They are that:
A2. To be charitable under the act all three elements must be met. It is not sufficient for an organisation to meet only one or two of them. We have therefore looked in detail at what each of these requirements mean.
A3. We interpret this widely: it seems potentially to extend to any activity people undertake for their own enjoyment outside work. However, this does not mean it is necessarily charitable to provide those facilities. To be charitable the social welfare and public benefit requirements must also be met.
A4. The Act provides (in s.1(2)) that the social welfare requirement will not be met
"unless -
A5. There are two elements to this question. Firstly, the object of improving the conditions of life must be the only object or purpose of providing the facilities, irrespective of the motive of those who may use them. Secondly, the facilities must be capable, on an objective basis, of improving the conditions of life of those for whom they are provided.
A6. There is no requirement for this purpose that those for whom the facilities are provided should be deprived or disadvantaged in some way: peoples' conditions of life may be improved for this purpose regardless of their social or economic position. (See Guild v IRC [1992] 2 AC 310.)
A7. Clearly, facilities provided for the purpose of promoting healthy recreation will improve conditions of life. But, in some circumstances, facilities which are not aimed at improving health may also be regarded as improving conditions of life. Examples include facilities of the kinds specifically referred to in s.1(3) of the Act, namely village halls and community centres.
A8. It may therefore be possible to conclude that facilities are capable, objectively speaking, of improving conditions of life where the dominant feature of the facility is that it will:
Special classes referred to in s.1(2)(b)(i) of the Act
A9. Where facilities are provided for a particular class of person identified within the Act, such as poor, sick, young or elderly people, little difficulty generally arises in accepting those facilities as charitable. Such groups of people may be regarded as having special needs because they are at some disadvantage, compared to the rest of the community, when it comes to finding, providing, financing, organising or managing suitable facilities for recreation or other leisure-time occupation. Providing recreational facilities for such groups might easily therefore be considered to meet a social need.
A10.We also accept that certain groups, such as some ethnic minority groups(see note 1), may be able to demonstrate a special need for the recreational facilities in question, due to their social or economic circumstances.
Public at large
A11. The effect of s.1(2)(b)(ii) of the Act is that, where facilities are not provided with the object of improving the conditions of life of a class of people as identified in section 1(2)(b)(i), then, to be charitable, the facilities must be available to "the public at large". To meet that requirement we consider that facilities must be available to anyone who wishes to use them, without being subject to any election to membership or payment of a prohibitive entrance fee. Neither should anyone be excluded from using the facilities due to their lacking (or having) any personal qualification - whether to do with their age, gender, race, or financial circumstances, or their social, religious or political views.
A12. We regard facilities as being available to the public at large, even if used only or mainly by clubs, provided that the facility is available to all clubs which wish to use them.
A13. In our review, we considered whether s.1 of the Act contained an exhaustive definition of the social welfare requirement. Our view is that it does not. Ordinary principles of statutory interpretation, supported by statements made by Ministers when the Act was passed, in our view make it clear that s.1(2) was not intended to be an exhaustive definition of the meaning of "the interests of social welfare". It seems, instead, that it should be understood in the sense in which it had been judicially interpreted in the context of other legislation. While no all-embracing definition has ever been given, decided cases in other contexts suggest that the expression implies elements of both altruism and social obligation.
Altruism
A14.This involves seeking to provide something for the benefit of others rather than oneself. So if people band together for their own benefit (for example, to establish a social club for their own benefit) they are not engaged in social welfare. In practice an organisation will meet this requirement if it is not 'self regarding' (see paragraph A34).
Social obligation
A15.This involves providing facilities which ought to be provided as a matter of social obligation, because if they are not people's conditions of life will be inadequate. 'Adequacy' for this purpose should be assessed by reference to the reasonable needs of the community as a whole in respect of social contact, mental stimulation and physical exercise.
A16.The following factors might be relevant in considering whether the facilities were ones which ought to be provided as a response to inadequate community provision of this kind:
A17.What may represent an appropriate level of facilities may of course change over time. We will therefore need to take account of changing social circumstances in considering whether there is a social need for a particular recreational facility.
A18. By virtue of s.1(3), the Act extends not only to the provision of facilities but also to the organising of activities. Where an organisation is organising activities as well as providing facilities, those activities must also meet the social welfare requirement if it is to be regarded as charitable under the Act.
A19. This does not mean, though, that the activities of the separate organisations which use the facilities have to meet the social welfare requirement: the Act is only concerned with the activities of the organisation providing the recreational facilities itself. Thus there is no requirement that the organisations using a village hall or community centre should be charitable or that their activities should meet the social welfare requirement.
A20. Consistently with what is said above, there is no objection in principle to a charitable organisation set up under the Act providing premises for general public use which may then be used by individuals or groups for the purposes of social contact or entertainment. (Village halls and community centres provide examples of this.)
A21. The position is more complex where the organisation itself provides social contact or entertainment. Where that is the case, we would not generally accept that doing so met the social obligation aspect of the social welfare requirement: we would not generally regard the provision of facilities of this kind as meeting a social need of the kind which ought, as a matter of social obligation, to be met.
A22. For example, it is charitable to provide a community centre which might be hired for any purpose, such as playing bridge, line dancing or running whist drives. But the groups hiring the facilities for those purposes would not themselves be charitable. Nor would it generally be charitable to provide facilities specifically for one of those purposes.
A23. Of course, the conditions of life of some people (eg elderly people) may well be such that providing them with facilities for social contact or entertainment could be seen as meeting the social welfare requirement because they have need of those facilities by reason of their age. Exceptionally, the same might be true in relation to the inhabitants of a particular geographical community (eg an isolated community with few or no facilities, whose members have insufficient resources of their own to provide facilities of the kind most people would take for granted). Additionally, there is no objection to the provision of entertainment on an occasional basis where it is undertaken for the purpose of fund-raising.
A24. In principle the Act can apply to multi-purpose sports facilities, such as sports centres or recreation grounds (which can be charitable under other principles of charity law even if the Act does not specifically apply to them). Although such facilities are, of course, used by clubs and teams for playing competitive sport, they are provided for use by the public at large - by people of all ages, of varying degrees of proficiency and of varying states of health. No special equipment is needed (or at least none which cannot be provided through a modest entrance fee). Such facilities are therefore fairly characterised as ones for healthy recreation rather than ones for the promotion of sport and are, therefore, facilities provided with the object of improving conditions of life.
A25. However, facilities of this kind can be contrasted with facilities for a single sport, which are used only for the purpose of playing that particular sport. In considering the scope of s.1 of the Act, it is more difficult to regard a facility for the playing of a particular sport as one that is provided with the object of improving conditions of life, since it seems to be concerned essentially with the promotion of the sport in question. It may also be difficult to accept that the provision of facilities for a single sport meets the social obligation aspect of the social welfare requirement, particularly if they can only be used by people who have acquired a given level of skill.
A26. Whilst the provision of facilities for a single sport may fall within s.1 of the Act, therefore, we shall always need to examine carefully whether they also meet the social welfare and public benefit requirements. Whether they do so will depend on the facts of the particular case.
A27.Section 1(1) of the Act preserves the general requirement that to be charitable an organisation must be established for the benefit of the public. This requirement normally has various aspects:
In the case of organisations claiming charitable status under the Act, however, it is only requirements b) and c) which are preserved by s.1(1) of the Act: the existence of benefit recognised by the law is decided under s.1(2), ie on the basis that the social welfare requirement is met.
A28.Complying with the public benefit requirement does not normally present a difficulty where facilities are to be provided for the public (or female members of the public) at large.
A29.However, where facilities are provided for a restricted class of people under s.1(2)(b)(i), notwithstanding that they may be capable of meeting a social need, it may be questionable in some cases whether the public benefit test is satisfied: difficult questions can arise in determining whether a class of people constitutes a sufficient section of the public for the purposes of the public benefit requirement. These issues also arise in relation to purposes beneficial to the community generally, though, and these questions will need to be decided in each case on the basis of general principles.
A30. Many recreational organisations channel the benefits they provide through a membership structure. This raises the question of whether facilities provided in this way are available to the public, or a sufficient section of it, so as to meet the public benefit requirement.
A31.Where benefits provided by a club or association are restricted either formally or in practice to its members, the common characteristic of membership may cast doubt on whether the members are a section of the public, as opposed to being merely a private group.
A32. However, whether or not the members of a club or association constitute a section of the public is better seen as a question of degree. We believe that where benefits are confined to members of an organisation the public benefit test will be satisfied, provided that:
A33.The requirement at (b) above will only be met if:
A34. Even if it has an open membership, an organisation existing substantially for the benefit of its own members (sometimes described judicially as a mutual benefit society or 'self-regarding' members organisation) cannot qualify as a charity(see note 2).
A35. But the mere fact that the benefits of an organisation are confined to its members or subscribers does not automatically mean that it is a self-regarding members organisation. Whether that is the case seems to be a question of poise. The question is whether the adoption of the membership structure, and the benefits members receive under it, are strictly necessary for the achievement of the charitable purpose.
A36. Whilst the law in this area is not clear, we take the view that the public benefit test will not be met where, although the purposes of a recreational organisation extend to a charitable class (such as the public at large), use of its facilities is subject to a legally binding preference in favour of a non-charitable body or class (such as the members of a particular social club).
A37. This principle only applies where there is a legally binding preference in favour of a non-charitable body or class. The trustees of a charity in providing facilities under the Act are free to decide, in a proper exercise of their discretion, that a particular body or group should use the facilities at a particular time.
General provision as to recreational and similar trusts, etc