A 6 Step Guide to help new Charities
A 6 Step Guide to help new Charities will help you to identify and focus on the key requirements to get you up and running so that you can start to provide the benefits and service the needs of those that you are seeking to support with your charity.
Find trustees for your charity – you usually need at least 3.
A/ identify the need for new trustees – you may well be one of these so include yourself in this.
B/ write a job description and person specification for the skills, experience and knowledge needed, even if you are a small start up charity, having a clear role between the 3 trustees is important. Whether the individual will be taking an active role in the day to day running of the charity or not, the trustee as well as having legal obligations over the running of the charity, should also have a defined area of responsibility.
C/ agree responsibilities and a process for recruitment of other roles
This guidance is relevant to you if you are setting up a new charity.
Make sure the charity has ‘charitable purposes for the public benefit’.
Your charity must have ‘charitable purposes’ that help the public (known as being ‘for public benefit’).
Charitable purposes include things that contribute to:
- relieving poverty
- education
- religion
- health
- saving lives
- citizenship or community development
- the arts
For guidance on writing your charitable purpose visit here:
Choose a name for your charity.
Your charity name must not:
- be similar to the name of an existing charity (unless you can prove you need to use it)
- use words you don’t have permission to use, for example a trademark
- use offensive words or acronyms
- be misleading, for example suggest your charity does something it doesn’t
Search the charities register to check the names of registered charities. Unregistered charities won’t appear in the register.
Additional names
You can use:
abbreviations, for example National Society for the Prevention of Cruelty to Children is known as NSPCC
alternative names, for example Comic Relief is a working name for Charity Projects
You must list any alternative or working names your charity uses when you apply to register.
Non-English names
You must include a translation of any non-English words in your charity’s name when you register.
Using ‘charity’ in a name
You can use the words ‘charity’, ‘charities’ or ‘charitable’ in your charity’s name but you need approval from the Charity Commission if you use them when you register a company name with Companies House.
Choose a structure for your charity.
There are 4 common charity structures
1. Charitable company
Your charitable companies will have to be limited by guarantees rather than shares when you register. Select ‘private company limited by guarantee’ on the form.
Trustees have limited or no liability for a charitable company’s debts or liabilities.
Apply online
You can apply online to register a charitable company with Companies House.
Apply by post
Fill in the form to register a charitable company with Companies House by post.
It costs £40.
You may also need a Welsh version of the form Charitable incorporated organisation (CIO)
2. Charitable incorporated organisation (CIO)
A CIO is an incorporated structure designed for charities. You create a CIO by registering with the Charity Commission. You don’t need to register with Companies House.
Trustees have limited or no liability for CIO debts or liabilities.
3. Charitable trust
- A ‘charitable trust’ is a way for a group of people (‘trustees’) to manage assets such as money, investments, land or buildings.
4. Unincorporated charitable association
An ‘unincorporated charitable association’ is a simple way for a group of volunteers to run a charity for a common purpose.
Unincorporated charitable associations can’t employ staff or own premises.
Create a ‘governing document’.
You must create a ‘governing document’ (or ‘rulebook’) for your charity that explains how your charity is run.
Your governing document lets trustees and other interested parties find out:
- your charity’s purpose
- who runs it and how they run it
- how trustees will be appointed
- rules about trustees’ expenses
- rules about payments to trustees
- how to close the charity
What type of governing document you need depends on your charity structure.
Read guidance on writing your governing document, including example templates.
You can create your governing document using your own templates but it may mean registration takes longer.
The trustees must meet to sign the governing document. You’ll need an independent witness if you’re setting up a charitable trust.
Register as a charity if your annual income is over £5,000 or if you set up a charitable incorporated organisation (CIO).
You must apply to register your charity if:
- its income is at least £5,000 per year or it’s a charitable incorporated organisation (CIO)
- it’s based in England or Wales (the rules are different in Scotland and Northern Ireland
Supporting documents
When you apply you’ll be asked:
- about your charity’s charitable purposes
- how you run your charity for public benefit
- for proof that your charity’s annual income is above £5,000, unless you’re a CIO
You’ll also need to give your charity’s:
- name
- bank or building society details
- most recent accounts
- contact details, including a postal address
- trustees’ names, dates of birth and contact details
- a copy of your charity’s governing document (in PDF format)
- Proof of income
- Proof of income, if needed, can be any one of:
- your charity’s latest ‘published’ annual accounts (in PDF format) – they must have been approved as proof of income by an independent examiner or auditor
- a recent bank statement (as a scanned image)
- a formal offer of funding from a recognised funding body (as a scanned image)
Tax relief for charities
As a charity you don’t pay tax on most of your income and gains if you use it for charitable purposes – this is known as ‘charitable expenditure’.
This includes tax:
- on donations
- on profits from trading
- on rental or investment income, e.g. bank interest
- on profits when you sell or dispose of an asset, like property or shares
- when you buy property
To get tax relief you must be recognised by HM Revenue and Customs (HMRC).
1 – GiftAid How to Reclaim
Overview
- You can claim back 25p every time an individual donates £1 to your charity or community amateur sports club (CASC). This is called Gift Aid.
- You must be recognised as a charity or CASC for tax purposes.
- There are rules on which donations you can claim Gift Aid on.
- You can claim Gift Aid online – you should get your payment within 5 weeks.
- Use a HMRC certified software package to verify and submit your claim.
What the donor needs to do
The donor must: - have paid at least as much in Income Tax or Capital Gains Tax in that tax year as you want to claim in Gift Aid
- make a Gift Aid declaration that gives you permission to claim it
If the donor has not made a declaration you may still be able to claim on cash donations of £30 or less, for example from a collection.
Bank Interest
You can arrange to receive interest without tax deducted. Show your bank your letter of recognition from HM Revenue and Customs (HMRC).
If tax has already been taken from your interest you can claim it back for:
- the current tax year by asking your bank
- previous tax years by claiming it from HMRC