By Emma Hurrell, Private Client Partner at B P Collins
Many trustees in England and Wales dedicate significant time and energy to their charities to ensure they meet their objectives and support their cause. However, these objectives might not always be met. The Charity Commission has identified two main categories of charities that can fall into this category: those considered inactive and those classed as ineffective.
An inactive charity is one that has either not submitted an Annual Return for five years or has consistently reported no income and no expenditure over that period. An ineffective charity is one that has remained compliant with its Annual Return submissions but has spent less than 30 per cent of its combined income across the last five years.
These issues often arise for reasons outside trustees’ control. Some boards find it difficult to recruit new trustees or identify suitable beneficiaries. Others struggle to use income effectively within the confines of their charitable objectives or simply cannot devote the time needed to administer the organisation. In some cases, funds remain stuck in bank accounts that trustees cannot easily access.
If your charity falls into one of these categories, it is important to see the situation as an opportunity to take stock and ensure charitable resources are put to best use. Trustees have several options available to them.
Options available to trustees
- One route is to transfer the charity’s assets to another charity with similar purposes, particularly if that charity has the structure and resources to deliver the intended benefits more effectively.
- Another option is to close the charity altogether, particularly where no assets remain and winding up the organisation provides a clean conclusion.
- Alternatively, trustees may consider amending the charity’s purposes if the existing objectives have become too narrow or outdated. A broader or updated remit may allow the charity to operate more successfully in today’s context. However, it is important to note that any amendment to a charity’s purposes and its governing document must be approved by the Charity Commission.
- For those facing the practical challenge of accessing dormant bank accounts, the Charity Commission has powers in certain cases to direct banks to release those funds so that they are used for charitable purposes.
Navigating these decisions can feel daunting, but trustees should take comfort in knowing that they are not alone. Seeking legal advice at an early stage can help clarify the best route forward, protect trustees from unnecessary risk, and above all, ensure that charitable funds continue to make a meaningful difference.
If you are concerned about the future of your charity or would like guidance on the options available, please contact Emma Hurrell, private client partner, B P Collins at 01753 889995 or email emma.hurrell@bpcollins.co.uk
