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This publication is available at https://www.gov.uk/government/publications/exempt-charities-cc23/exempt-charities
This guidance explains what exempt charities in England and Wales are and:
- what parts of charity law apply
- how they are regulated
- how the Charity Commission can help them
What is an exempt charity
An exempt charity has charitable status and is required to comply with charity law, but unlike other charities it:
- cannot register with the Charity Commission (Commission)
- is not directly regulated by the Commission and instead has (or will have) a principal regulator
- may only be investigated by the Commission as part of a statutory inquiry at the request of its principal regulator
A charity is exempt if it is:
- included in Schedule 3 to the Charities Act 2011 (the Charities Act)
- a common investment fund or a common deposit fund which is only open to exempt charities, or
- made exempt by some other legislation
How exempt charities are regulated
An exempt charity’s principal regulator is normally the body or authority responsible for regulating the charity under another legal framework.
A principal regulator:
- must promote charity trustees’ compliance with charity law
- checks charity law compliance
- can ask the Commission to open a statutory inquiry into an exempt charity
- works with the Commission to make sure exempt charities are accountable to the public
- receives any reports of matters of material significance made by the auditor of an exempt charity
You should contact the principal regulator first if you have a query or concern about an exempt charity as they have primary responsibility for regulating the exempt charity. They will share information and work with the Commission to resolve any concerns about a charity if needed.
The Commission does not expect exempt charities to report serious incidents to it directly. Trustees should instead understand and comply with any requirements to report to their principal regulator.
Where the principal regulator does not have the power it needs to address abuse or wrongdoing, it is responsible for referring the concern to the Commission, which will then consider whether regulatory action is needed.
The Commission must consult the principal regulator before using any of its powers. The Commission can only open a statutory inquiry into an exempt charity if the principal regulator asks it to.
The Commission has entered into a memorandum of understanding (MoU) with each of the principal regulators. The MoUs explain how we work together to regulate and share information about exempt charities in more detail.
Responsibilities of trustees of exempt charities
All charity trustees share the same general duties and responsibilities, including the charity trustees of an exempt charity.
For example, they should regularly review the effectiveness of their charity and must:
- ensure their charity is carrying out its purposes for the public benefit
- comply with their charity’s governing document and the law
- act in their charity’s best interests
- manage their charity’s resources responsibly
- act with reasonable care and skill
- ensure their charity is accountable
Read The essential trustee: what you need to know, what you need to do for more detail on what is required.
How the Charities Act applies to exempt charities
Exempt charities must comply with general principles of charity law. But, some parts of the Charities Act:
- do not apply to any exempt charities
- only apply to exempt charities with a principal regulator
An exempt charity cannot register with the Commission. An exempt charity must not:
- describe itself as a registered charity
- use a registered charity number (even if it used to be registered)
Accounts, auditing and annual reports
All exempt charities must produce proper accounts, as they are publicly accountable. However, unlike registered charities they do not need to submit these to the Commission each year and the form and content of the accounts may differ.
In general, an exempt charity must:
- keep proper accounting records and accounts as required by its own legal and regulatory framework. These frameworks will differ between exempt charities
- prepare consecutive statements of account. These must consist of:
- an income and expenditure account for a period of not more than 15 months
- balance sheet relating to the end of that period
- keep records and statements for at least 6 years unless the charity closes and the Commission gives written consent to their disposal
- provide a copy of its most recent accounts to anyone who makes a written request, within 2 months. It may charge a reasonable fee to cover the costs of doing this
Exempt charities that are companies must produce accounts that give a ‘true and fair’ view. They must also follow UK-Irish Generally Accepted Accounting Practice, including the Statement of Recommended Practice (SORP) - Accounting and Reporting by Charities unless an alternative SORP or accounting framework applies.
Land disposals and mortgages
Exempt charities do not need authorisation from the Commission to dispose of land or obtain a mortgage.
But trustees of all exempt charities must:
- fulfil their general trustee duties when dealing with land disposals and mortgages
- include the statements required by the Charities Act in disposal and mortgage documents. Trustees should seek legal advice on these matters
Rules on disqualification of trustees and senior staff
Some people are disqualified by law from acting as a trustee or senior manager of a charity. These rules apply to all exempt charities.
The Commission has the power to grant a waiver from such a disqualification, but must consult the charity’s principal regulator before doing this.
Read Why some individuals can’t act as charity trustees for more detail.
Exempt charities must comply with the law and their trustees’ must fulfil their legal duties when fundraising.
Read the Code of Fundraising Practice for details of the legal requirements and standards that apply to charities that fundraise.
The Commission’s regulatory powers over exempt charities with a principal regulator
After consulting the principal regulator, the Commission may:
- require an exempt charity to change its name
- open a statutory inquiry at the request of the principal regulator
- order someone to give it information or documents in their possession
- use its protective powers to suspend or remove trustees, freeze bank accounts and so on
- give directions about dormant charity bank accounts where the charity or its trustees cannot be traced
- order a disqualified trustee to repay any sums received from the charity whilst disqualified
Exempt charities with a principal regulator must get consent of the Commission (or the court) before:
- incurring expenditure in preparing or promoting a Bill in Parliament
- beginning charity proceedings in the courts
How the Commission can help exempt charities
Exempt charities can ask the Commission to help them by using its powers to provide advice, guidance and assistance to charities. This section gives some examples.
The Commission can only use these powers after it has consulted the principal regulator.
Amending or replacing a governing document
Exempt charities can apply to the Commission for an order or scheme to modify or replace the charity’s governing document. The Commission will only make orders or schemes where there is no other provision for changes to be made.
Read Changing your charity’s governing document for full details.
Official Custodian for charities
All exempt charities can ask the Commission to make an order to vest title to land in the Official Custodian for charities.
Common investment and common deposit funds
Two or more exempt charities can apply to the Commission for a scheme to establish a common investment fund (CIF) or a common deposit fund (CDF).
CIFs and CDFs are investment vehicles in which only charities may take part.
Each CIF and CDF is a charity. If only exempt charities can take part then the CIF or CDF is an exempt charity.
Giving trustees specific authority to do certain things
All exempt charities who want to do something which
- is not specifically forbidden by law or their governing document, and
- will benefit their charity, but
- they do not have the power to do
can apply to the Commission for an order to allow this. For example, the Commission can make orders to authorise a trustee conflict of interest.
Authorising ex gratia payments and waiving rights to receive property
All exempt charities can apply to the Commission for permission to:
- make an ex gratia payment
- waive rights to receive property to which the charity is otherwise legally entitled
Read Ex gratia payments by charities for more detail.
Formal advice to trustees
All exempt charities can ask the Commission for formal advice. For example, advice on whether they would, by taking a particular course of action, be acting properly as trustees.
Certificates of incorporation
All exempt charities can apply for a certificate of incorporation of the trustees as a body corporate. Read Incorporation of Charity Trustees for more detail.
Financial benefits for exempt charities
All exempt charities can claim the same tax reliefs as registered charities, including:
- relief from income tax, corporation tax and capital gains tax
- exemption from inheritance tax
- relief from business or non-domestic rates
To benefit from most reliefs, the charity must be recognised by HMRC. See HMRC Charities and tax for more information.
How exempt charities prove they are charities
They can refer to this guidance, which lists the exempt charities in Schedule 3 of the Charities Act
Those claiming charity tax relief can use their HMRC reference number.
Those with a principal regulator can ask their regulator to confirm they are charities.
Advice for exempt charities
If you need advice you should contact your principal regulator if you have one. They may refer the matter to the Commission.
List of exempt charities
Listed here are the exempt charities included in Schedule 3 to the Charities Act. Institutions listed in Schedule 3 are only exempt in so far as they are charities. Charities that are closely connected with the charities listed in Schedule 3 are also exempt.
This category includes most English universities and Higher Education Institutions, Academy Trusts (England only), the governing bodies of foundation and voluntary schools, sixth form college corporations (England only) and Further Education Corporations.
Charities in this group include the universities of:
- King’s College London
- Open University
- Queen Mary and Westfield College in the University of London
Other educational charities include:
- any other university, university college or connected institution in England that is made exempt by order in Council
- any other relevant higher education provider declared by an Order of the Privy Council to be an exempt charity
- English higher education corporations and any successor company
The Office for Students (OfS) is principal regulator for these charities.
For a more complete list of higher education providers that are regulated by the OfS as exempt charities, see Annex B to OfS: Regulatory advice 5: Exempt charities: Guidance for higher education providers that are exempt charities.
The higher education providers listed in Schedule 3 will only qualify as exempt charities if they are “relevant higher education providers”. This means they must be registered with the OfS and:
- receive (or be entitled to receive) funding from the OfS under section 39 or 40 of the Higher Education and Research Act 2017, or
- provide higher education courses that are designated for the purposes of section 22 of the Teaching and Higher Education Act 1988
If a higher education provider in Schedule 3 ceases to meet these criteria, it will no longer be an exempt charity and may be required to register with the Commission.
A few charitable English HE providers have never been made exempt and are therefore registered with both the Commission and the OfS. From 1 August 2019, these charities can apply to become exempt charities by Order of the Privy Council if they are “relevant higher education providers”.
This group of exempt charities does not include the following related charities which cannot be exempt:
- any college in the university of Oxford
- any college or hall in the university of Cambridge or Durham
- any students’ union
- HE Institutions in Wales
Further Education Corporations
Academy Proprietor (Academy Trust)
A qualifying Academy Proprietor (Academy Trust) as defined by the Academies Act 2010. These include:
- Free Schools
- University Technical Colleges
- Studio Schools that are managed or controlled by Academies
These charities only exist in England. The principal regulator is the DfE.
The governing body of any foundation, voluntary (aided or controlled) or foundation special school. A foundation body established under section 21 of the School Standards and Framework Act 1998.
In England the principal regulator is the DfE. In Wales the principal regulator is the Welsh government.
Sixth form college corporation
A sixth form college corporation (within the meaning of the Further and Higher Education Act 1992).
These charities only exist in England. The principal regulator is the DfE.
Museums, galleries and other institutions of national importance
This category includes the Board/Trustees of:
- The Victoria and Albert Museum
- The Science Museum
- The Royal Armouries
- The National Museums and Galleries on Merseyside
- The British Museum
- The Natural History Museum
- The National Gallery
- The Tate Gallery
- The National Portrait Gallery
- The Wallace Collection
- The Imperial War Museum
- The National Maritime Museum
- The British Library
The principal regulator is the Department for Digital, Culture, Media and Sport (DCMS).
The principal regulator for The Board of Trustees of the Royal Botanic Gardens, Kew is Department for Environment, Food and Rural Affairs (DEFRA).
Charitable registered societies, including social housing providers
This category includes charitable community benefit societies and friendly societies.
These charities are registered with the Financial Conduct Authority but currently have no principal regulator. Many of them are also social housing providers registered with the Regulator of Social Housing.
Church of England and Methodist Church Investment Funds
Charities in this category include any investment fund or deposit fund within the meaning of either the:
- Church Funds Investment Measure 1958
- Methodist Church Funds Act 1960