All charities have for some time been waiting for the Charity Commission to announce the second phase to the implementation of the Charities Act 2022 in relation to Permanent Endowments, as well as the roll out of other changes (see Newsflash: Reforms to Charities Act 2011). The changes came into force on 14th June with little notice as well as the Charity Commission releasing their updated guidance on the same day.
TMCP is now in the process of updating the guidance on permanent endowments, which will be made available on the TMCP website shortly. In the meantime, please contact us if you are in the process of making any changes, or considering any changes, to the purposes of permanent endowments so that we can assist you with any resolutions passed before 14th June 2023 and provide guidance on the next steps.
You should also contact us if guidance on passing resolutions under the Charities Act 2011 (as amended) was given to you before the 14th June 2023 but the resolution has not yet been dealt with by the Managing Trustees. This is because there are some provisions which have changed number or have been removed altogether. As we say above, we are on hand to provide help and assist.
To update Managing Trustees generally we have provided a brief outline below as to the main changes brought in by the Charities Act 2022 which affect permanent endowments:
- Consent from the Charity Commission is required for all permanent endowments where the capital value exceeds £25,000 when resolving to release the capital.
Previously, consent was required from the Charity Commission if the annual income from a permanent endowment did not exceed £1,000 or the capital value of the permanent endowment did not exceed £10,000.
- The provisions relating to the amendment of permanent endowment purposes have changed.
In reality, the changes made by the new Charities Act 2022 will not affect how the purposes of trusts are amended but will simply be passed under a different section of the Charities Act 2011 (as amended)
- A new provision is included which enables managing trustees to borrow up to 25% from permanent endowments providing it is repaid within 20 years; and
- A new provision is included which will enable managing trustees to make a total return approach to the investment of the permanent endowment.
With the consent of the Charity Commission, this approach allows any increase in the value of the permanent endowment to be used as income.
We are liaising with the Charity Commission to ascertain whether they would be willing to accept resolutions which have been passed after the implementation date under the old regime for a short period of time and will update managing trustees accordingly.
In the meantime, please continue to contact TMCP Legal to discuss any permanent endowments and we will provide assistance to ensure that Managing Trustees can continue to deal with such matters effectively and efficiently as possible.
If Managing Trustees have any queries then please contact TMCP for further assistance.