For whose benefit?

Last year, when the Charity Commission issued its guidance on public benefit, I expressed concerns at the way in which that guidance may adversely affect arts organisations (AP151). It seems those concerns are now a reality. Of concern is the increasing difficulty that arts organisations have in convincing the Commission that they are eligible for registration as a charity, and amending their objects where the changes require Charity Commission consent.
The Commission has also published guidance on specific types of charity (referred to as ‘sub-sector guidance’), and the guidance on fee-charging and education is relevant to arts charities. There is no specific consideration of arts charities, but there are references to them in the guidance. There will be no sub-sector guidance specifically dealing with arts charities. Parliament handed the Commission an unenviable task when, as a result of political wrangling, it passed on the responsibility for determining what public benefit means. Prior to the Act, the focus when applying for registration was whether the constitution of the organisation was exclusively charitable. Now organisations must also demonstrate that their activities will satisfy the public benefit test. If an organisation has more than one charitable object, as is increasingly common following the Act, it must demonstrate the public benefit activities relating to each object.
On new registrations, the practice is for the Commission to ask for increasing amounts of information before being satisfied – this process can go on and on. Given that the public benefit guidance is expressly meant to interpret the current law rather than make new law, to my mind this approach is conceptually wrong. Organisations are essentially being asked to prove they will undertake activities that satisfy the test, when it is more appropriate for a charity’s activities to be reviewed after the event as to whether the criteria have been met. The result has the effect of making the requirements for registration far more stringent.
The box (right) shows that the issues affect many aspects of an organisation’s operation and, I feel, there are questions as to whether these issues are appropriate. It is not that arts organisations do not satisfy the requirements, but that the way in which the issue is approached is disproportionate. The need to provide ever-increasing amounts of proof means the registration process is taking longer and is more costly. Some of the current delays are due to many of the Commission’s legal department working on forthcoming sub-sector public benefit guidance, and responses can take over two months. Bates Wells & Braithwaite has fed in its concerns through its membership of various Charity Law Association committees which engage with the Commission on these sorts of issues, but if readers have any other particular concerns I would be happy to feed them into this process. I should add that the Commission staff are helpful and doing their best to work under this new regime. The problems are that when seeking to apply the public benefit guidance there is a relative lack of understanding at the Commission coalface of how arts charities
operate.

The types of issues we have seen include:
Private benefit to artists
The Commission is concerned that charities keep in mind their underlying objects when promoting the work of artists, so that the charity’s purpose is not presenting the work of that artist. It can be challenging to satisfy this requirement when the company’s work is focused on one artist. Though this is more obviously an issue in relation to dance companies, it is still relevant to theatre and how work and creative teams are selected, particularly if artistic directors stand to earn additional sums if they write or direct work for the company.
The process for selecting work
This is relevant particularly where there are competitions, open auditions or scholarships awarded, which are considered to further the objects of a charity. The same approach does not apply to commissioning work. You may need to demonstrate how the best candidates are chosen and that the selection process is clearly fair.
Venues
The Charity Commission wants to see performances and exhibitions in less traditional spaces, such as shopping centres, youth centres and schools – attracting new audiences and benefiting as wide a section of the public as possible.
Concessions policy
The Commission will expect that arts charities selling tickets are not unreasonably excluding members of the public due to financial constraints. Charities will need to have a comprehensive and fair concessions policy offering free and reduced tickets to those with limited ability to pay. It will not be enough to state that such a policy exists, they will need to specify how the policy will operate.
Intellectual property
The Charity Commission will accept that many artists do not assign their intellectual property over to the charity, but does want to see that trustees realise the importance of protecting their charity’s intellectual property (IP) and to ensuring the charity has a wide licence to use IP in the future.