Charitable trusts, what gives them charitable status Essay Example

s.96(1) of the Charities Act 1993. The definition of charity's heads was established in the leading case of Commissioners for Special Purposes of the Income Tax v Pemsel3. It was discovered for the first time that tax relief might be linked to a definition of charity.

Lord Macnaghten established four categories of charitable purposes: alleviation of poverty, promotion of education, promotion of religion, and other beneficial purposes for the community. The Williams Trustees v IRC ruling clarifies that when assessing whether a trust is charitable, it must align with the "spirit and intendment" of the Preamble.

Furthermore, the objective must be advantageous to society through charitable means, specifically in the alleviation of poverty. Trusts devoted to this cause are not subject to the public benefit prerequisite; however, poverty, in this context, does not imply complete destitution or being without funds. Courts have approved trusts aimed at aiding individuals identified as "distressed gentlefolk," and only those classified as impoverished can receive benefits.

According to the case of IRC v Oldham Training and Enterprise Council, giving gifts to elderly or disabled individuals can imply poverty. The purpose of Oldham TEC is to establish trade or business for unemployed individuals, helping them become self-sufficient and alleviate poverty in the community. This qualifies as a charitable trust.

Education has evolved significantly from the scope outlined in Act 1601 which referenced "schools of learning, free schools, scholars in universities". Now, it encompasses a wide range of activities such as nurseries, adult education centres, and societies dedicated to promoting training. Even cultural activities like music, drama and literature can be considered educational. Additionally, museums, zoos, and public libraries are viewed as institutions that

educate the general public. The importance of equality in education over selectivity, coupled with the tax benefits afforded to charitable organizations, raises concerns about the potential misuse of charity funds. It is essential to prevent charity law from becoming a means for affluent families to receive tax-free education for their children and for employers to exploit educational trusts for commercial gain.

The charitable trusts have two privileges: exemption from the rules regarding perpetuity and uncertainty, and protection of the public interest by the Attorney General, even if individual beneficiaries can't sue for their rights. The original concept of charities was to benefit the public, such as having highly educated children who contribute to the economy. However, if those children decide to move to another country, it could be seen as unfair that a large company gets an added advantage on behalf of taxpayers. As established in Re Compton, a gift where beneficiaries are defined by a personal relationship to a named propositus cannot be considered a valid gift based on principle.

'16 The House of Lords determined in Oppenheim v Tobacco Securities Trust Co Ltd17 to apply the test established in Compton, based on the existence of a personal tie by blood between the beneficiary and the propositus, given the personal connection between the employees and the organization. Nonetheless, some argue that the present soundness of legal decisions in Compton and Oppenheim is unjust, as evidenced by examples such as a trust for the benefit of the offspring of former students, where the link is one step removed.'

The individuals who will benefit are those who intend to attend the specified school rather than current students.

Hence, the beneficiary group is determined not by their affiliation with the school, but rather by their plans to attend. The first hyperlink, descendant-ancestor, is evidently individualistic, whereas the second, ancestor-school, is not. As a result, there is no direct contractual or personal connection between the possible student and either the grantor or the named school.

From the given example, it is evident that institutions are able to obtain charitable status in accordance with current laws, yet deserving institutions are not being granted charitable immunity. It seems unjust that cases involving personal relationships of employees' children are held as being eligible for employment contracts. It was also highlighted in Dingle v Turner19 that decisions regarding "poor members" and "poor employees" were a result of the development of "poor relations" decisions and differentiating between various forms of "poverty" trusts.

The 'Poor Relations' and 'Poor Employees' trusts have been present for numerous years and there are several of these trusts that exist. When managed accurately, these trusts can only benefit impoverished individuals. In his opposing speech, Lord Cross mentioned "If I were ever asked to make a decision on this matter...."

I am inclined to differentiate between the practical application of the Compton rule and the reasoning used by Lord Greene MR to defend it. The rationale, which is based on the distinction between personal and impersonal relationships, has never been fully convincing to me, and I recognize the validity of Lord MacDermott's criticism of it in his dissenting speech in Oppenheim. Rather than focusing solely on that distinction, I think it would be preferable to approach the issue from a broader perspective. Lord Cross's obiter dicta statement in Dingle

indicates that it is not prudent to grant tax benefits indiscriminately and underscores the significance of evaluating each case on its own merits. It proposes that justification for exemption from perpetuity should be specifically made rather than relying on a blanket exemption.

Regarding the advancement of religion, the Preamble only mentions the maintenance of churches. To qualify as a benefit to the public in court, evidence must be presented. In the case of Re South Place Ethical Society, Dillon J indicated that religion involves an individual's connection with God. However, Buddhism poses a challenge as they do not necessarily believe in a higher power.

Here, Buddhism is considered a special case, thus making it charitable to promote its advancement. Additionally, certain purposes that benefit the community, such as constructing a crematorium or commemorative monuments, are also deemed charitable. However, creating a monument in one's own honor does not fall under charitable purposes, as per Lord Reid's statement.

It seems that the courts are attempting to draw a comparison between a subject mentioned in the preface and the subject in question...

According to Lord Wilberforce, judges have been expanding their stance on charitable status by seeking analogies between established charitable objects and new ones in order to reach a decision. This has led to institutions with little connection to the Preamble's "spirit and intendment" being granted charitable status.

It is necessary to demonstrate that the purpose in question is beneficial for the public in order to qualify as charitable.

. As per the stated intention outlined in the preamble, judges bear the responsibility of making decisions that align with emerging social needs or eliminate outdated ones in relation to charity laws. It

is important to note that this responsibility does not solely hinge on the wording of the preamble, but rather on the decisions made that reflect its purpose. 27

To further its stance, the court and Commissioners may be involved in making subjective value judgements to determine where a specific purpose falls under, particularly in education. Other purposes for the benefit of the community may fall under various categories such as trusts aimed at promoting urban and rural revival, conserving national heritage and environment, promoting business ethics and responsibility, promoting fair trade, and trusts dedicated to recreational purposes. According to Section 1 of the Recreational Charities Act 1958, it is considered charitable to provide facilities for recreation or leisure-time occupation if it serves social welfare interests. When this act applies, the Preamble's spirit no longer holds significance, as a new head of charity is being added. Lord Hailsham argued that the law must adapt as social values evolve. This implies that purposes deemed non-charitable previously may now be considered charitable in contemporary society.

It has been suggested that organizations previously recognized as charities may no longer meet the criteria for being considered charitable. In a previous case, it was determined that in order for a charity to meet the requirements of section 1(1), the recipients must be limited to individuals who are considered "deprived persons." However, the judges did not come to a definitive conclusion on which approach should be taken.

The House of Lords ruled in Guild v IRC 34 that Bridge LJ's view on the matter was favored. According to Guild, it was considered charitable under section 1 (1) and (2) of the 1958 Act, thus making

it exempt from capital transfer tax. It was also acknowledged that the sports centre's facilities were available to the general public, meeting the requirements of subsection (2)(b)(ii). The only time Parliament intervened was through the Recreational Act 1958 due to the category becoming too similar to what was seen in Guild.

By reforming the current system, decision making on whether trusts or institutions are considered charitable could be simplified with the following ten purposes: 1. preventing and relieving poverty, 2. advancing education, 3.

Advancement of religion and health.

Sixthly, progress in social and community matters, and seventhly, development in the fields of culture, arts, and heritage.

The enhancement of non-professional athletics, the advocacy for human rights, conflict resolution, and reconciliation, and the improvement of environmental protection and preservation all contribute to the betterment of society.

In summary, the discussed topics illustrate that numerous trusts achieve charitable status by claiming benefits that are advantageous to large corporations. Unfortunately, some individuals who require relief from these charities do not receive it, while those who do not necessarily need it receive the status instead. The Dingle cases reflect this imbalance. If the ten charitable intentions mentioned above were incorporated into the law, it would simplify the jobs of the courts and Commissioners tasked with determining which trusts qualify as charitable. Other beneficial purposes to the community should also be considered.

Although there are still previous cases that require evaluation, it is necessary to revoke the charitable immunity granted to societies that do not deserve it.