An organisation does not need to be a registered charity to be considered a charity.
The essence of charitable status is that:
a) the organisation is set up for charitable purposes, and
b) the constitution does not permit any of the organisation’s money to be applied, in any circumstances, for a purpose which is not charitable. Amongst other things, this requires that the constitution states that on winding-up of the society any assets shall go to purposes which are charitable, for example to another charity.
The Charities Act 2006 defines a number of new charitable purposes, including the following:
• the advancement of education
• the advancement of health or the saving of lives
• the advancement of citizenship or community development
• the advancement of the arts, culture, heritage or science
Advantages of charitable status
The key benefits to voluntary or amateur music groups that obtain charitable status are:
a) They do not pay income and corporation tax, as long as any profits are used solely for the purposes of the charity. Tax deducted from its income can be reclaimed.
b) Tax can be recovered in respect of payments made to it under Deed of Covenant or Gift Aid.
c) VAT may be waived on one off charitable or fundraising events.
d) Many local authorities and sponsors have a policy of grant aiding/sponsoring only registered charities.
e) Charitable status gives credibility when raising money from public or private sources or from the general public.
Consequences of charitable status
Here is a short summary of some of the consequences of establishing charitable status. Please read our full advice in Information Sheet 12: Setting up a society or group, including a model constitution (https://services.makingmusic.org.uk/Services1/MembersArea/showInfoSheet.aspx?id=41)
a) The charity must comply with the relevant charity legislation.
b) Trustees cannot be paid for being trustees or derive any personal gain. However, the Charities Act 2006 has created more flexibility in the remuneration of Trustees who undertake other tasks, eg performing as musical directors or accompanists, but conditions do apply.
c) A charity may not trade specifically to generate income. It may, however, sell items that are ancillary to its normal activities, for instance publications, and may organise modest fundraising events.
d) Under the Charities Act 2006, any organisation in England and Wales with charitable status whose total annual income is £5,000 or more (before deducting expenditure) must register with the Charity Commission.
Becoming a registered charity
Charities registering with the Charity Commission can now complete and submit applications online so long as they are using approved governing documents such as the Making Music model constitution. Online applications will take an anticipated average of 10 days to process in this way.
