Defining charitable trusts

When is a trust charitable?

For a trust to be charitable in law, it must be for a purpose which is considered in law to be prima facie charitable. The purposes considered to be charitable are all purposes which in a general sense can be considered to be beneficial. In addition to this requirement, the particular application contained in the trust must be for the public benefit. The rationale is that even if a purpose can be considered in a general sense to be beneficial, it should only secure the privileges of charitable status if benefits are conferred upon the public rather than being confined to a small group of private individuals. Finally if it is possible for funds to be applied in ways which are not considered to be charitable, this will prevent the whole trust from being considered to be charitable, even if parts, taken alone, could have been held charitable.

Statutory definition of ‘charity’

Until the Charities Bill 2005, there had been no statutory definition of charity. Given the significance of the distinction between charitable and non-charitable trusts, this might be thought surprising. Until the enactment of the Charities Bill into law, the meaning of ‘charity’ as a legal concept is therefore determined by reference to judicial precedents and the decisions of the Charity Commission.

The Charities Bill 2005 for the first time contains a statutory definition of charitable purposes. This definition has made almost no change to the law, and preserves the flexibility which was a fundamental feature of the previous categorisation of charitable purposes. The definition essentially consolidates the previous law, and has the advantage of providing a greater degree of transparency about the range of purposes which are currently considered to be charitable in law. The main drawback with the definition is that, because it incorporates a reference to the previous law, it is impossible to draw a line at the date of the enactment of the Charities Bill 2005 into law: it is also necessary to have regard to most of the case law prior to its enactment.

Relevance of previous law

The Charities Bill 2005, cl 2(2) provides a list of purposes which are prima facie considered to be charitable, but then states that any purposes which do not fall within the specific categories in the list shall be recognised as charitable if they are ‘recognised as charitable purposes under existing charity law.’ The statutory definition therefore adds to rather than replacing existing law.

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