Charities Act 2022
The Charities Act 2022 received Royal Assent on 24 February 2022. It contains some quite significant changes for charities, primarily coming from recommendations made by the Law Commission. These revisions are aimed at making things easier for charity trustees by reducing bureaucracy and cost.
Here we look at a couple of the updates which will hopefully have a significant, and positive, impact on legacy administration, making matters more straightforward.
Disposal of charity land
The current regime, contained in sections 117 to 121 of the Charities Act 2011, requires charity trustees to take valuation advice from a qualified surveyor, before disposing of land or any interest in that land. If land has been appropriated to charities in the administration of an Estate to avoid a Capital Gains Tax liability, these requirements will commonly take effect. The report – “a section 119 report” – must be written solely for the charity, or charities, and must cover 9 points, including:
the most appropriate method of disposal,
how best to advertise the property,
the current value, and
any development potential.
The charity trustees must then advertise the property as the surveyor advises and be satisfied that the terms agreed for the disposal are the best that can reasonably be achieved.
The new rules will allow charities to take advice from a wider pool of advisers – a designated adviser, rather than a qualified surveyor - potentially including internal trustees, officers, or employees if they are qualified to provide a report or advice.
The rules about the nature of the advice which is required will also be more straightforward, and proportionate to the size of the transaction, for example removing the obligation to advertise in accordance with the advice.
Ex gratia requests
It is perhaps not widely known, certainly among the general public, that when it comes to accepting requests for payments from the estate which are not part of the deceased’s wishes as set out in their Will, or to reject a gift or legacy, charities are very tightly constrained by the Charites Act 2011.
Commonly known as an ex gratia payment, charities have very little freedom, and even where a charity is very sympathetic to a genuine request, their hands may be tied, and they may be unable to assist.
Examples of ex gratia requests would include a situation where a Testator passed away before executing a new Will which had been drafted for them, or, where assets were sold by an Attorney without realising that they were specifically gifted under a Will. Where a charity benefits because of situations like this then they may feel a moral obligation to make a payment to the party or parties who have lost out.
Under the existing requirements, charities must obtain authority from the Charity Commission, the Court, or the Attorney General, if they wish to make a payment out of their funds which they feel morally obliged to make, but for which there is no legal basis.
The new provisions include a statutory power allowing charities to make small ex gratia payments without the need for such consent. The size of that allowance will depend on the charity’s gross income in the last financial year.
For larger charities, this could allow them to make payments of up to £20,000 without requiring permission, although records will still need to be kept and such payments reported in annual accounts. The charity will still need to be satisfied that the moral obligation test has been met.
It is worth noting though, that charities can choose, internally, to exclude or restrict this new power, so practitioners will not be able to make any assumptions based on the published income of the charity.
The test of whether there is a moral obligation currently rests with the charity trustees, but in the new rules, a slight change to the wording means that this can be delegated to legacy managers. Those legacy managers may also be delegated the authority to make applications for consent where the request exceeds the small payment level. Again, this should save time and cost in burdensome administrative processes.
It remains to be seen when the individual provisions of the Act will be brought into effect, perhaps between now and Autumn 2023, but we hope that they will allow our trustees greater flexibility, and more agility, in the legacy administration sector.
Rod Etherington, Legacy Management Specialist
Talk to your Legacy Partnership Manager if you have any questions about this blog post.
Each year we process over 6,000 gifts in Wills, making us the leading experts in the sector. Our team of Legacy specialists can provide you with all the information and support you need to help create a future where everyone survives cancer.