Monday, 14 April 2008

What does it mean Charitable Status?

Review on “The Charitable Status: A practical Handbook by Andrew Phillips, with Keith Smith”

Most people being seriously involved in philanthropic activity sooner or later have to register their organization. In this case arise many questions like: what does the legislation say, regulating this sphere, what are the possible types of these organizations, what institutions have the right to register philanthropic organizations, what is the documents` set, required for the registration of the charity organization etc.

When I came across Andrew Phillips’s book “The Charitable Status. A practical Handbook”, I realized that this book can help to answer many of the questions I asked myself and open many doors into business, called philanthropy. This book has being edited for 5 times and still it is the best seller.

No need to tell who Andrew Phillips is. His is a big authority and great expert in philanthropy field.

So, this book provides you with the valuable information regarding why is a need to set up a charity organization, how to organize and manage it and the others. Nowadays there are about 180 000 registered charity organizations and every year this number is increased by 5 000–6 000 new players of the philanthropic activity. The reasons leading to the growth of the similar structures, from the one hand are stimulated by the legislative control, and from the other hand- are quite pragmatic. Alongside with the specific tax benefits, charity organisation – is a BIG opportunity to attract BIG companies, companions, investments and funds. The registration number guarantees voluntary helpers to control and aim the granted money exactly at the charity. Certainly, tax benefit’s availability leads to the tough norms of reporting and activity restrictions.

Setting up a charity organisation you have to pass through many stages. A good solicitor and legal advice are you best friends in sorting all necessary documents.

And what does it mean this thing “charity organisation”? And what kind of organisation might have a “charitable” status? This issue is adjusted by the British law, even in 1601 (in 1891 was updated a bit). Charitable activity has right to progress just in 4 directions:

  1. struggle against poverty
  2. education strengthening
  3. religion support
  4. social improvement
Along side with helping the poor notion “poverty” includes help to sick people, disabled persons, the elderly and the incapacitated. This help also can be realized indirectly, for example: to pay traveling expenses for the relatives wanting to see their family member in a prison.

“Education” embraces sport, culture and art, any researches and investigations.
“Religion” direction is in charge of dissemination various religions and religion confessions for social good.

There are some types of charity organizations. They are classified as:

  • mutual support groups (for example, a group of disabled persons, living in one particular house) organizations, sustaining a kind of activity (friends of museum)
  • associations, offering accommodation (shelter to victims of violence)
  • consulting (juridical issues)
  • organizations, helping to the being needy
  • organizations, offering alternative medicine and therapy in team building
  • ethnic and racial organizations
  • organizations, providing learning, training and working places(job)
  • organizations, supporting sport, including pinched categories of people
  • organizations, activating during natural disasters

A charitable organization must be registered in accordance with the legal forms:
  1. just formal registration
  2. constitutors` liability
  3. everyday management.
For example, even in case when losses are the result of external causes, constitutors have to compensate them from constitutors` own money. You may get the examples and forms of constituent instruments in any branch of Philanthropic Committee (they are responsible for offering the charitable status and the registration number).

In the United Kingdom the Institution of Trustees was founded in 1601. Well-known people and donors ere invited to join the Board of Trustees, this leads to new donations as well as reliable control of the funds` expenditures. That is why Andrew Phillips draws our attention to that fact that the Board of Trustees – is a very important point in setting and working a charitable organisation.

What about participation of non-commercial organizations in political life? This question might seem you a strange one. But, what does the British legislation say? If a charitable organization provides the State Authorities with all information on enquiry, supplies the Members of Parliament with a piece of advice, regarding their basic specialization, discuss the British Legislation with the Members of Parliament, considering Charitable Activity -then this kind of Political Activity is permitted by the British Law. Therefore of political activities organization has to pay back all tax remissions. If your organization is on the joint of the political or non political activity- then make up a list of “allowed/prohibited” things and share it among the constitutors and collaborators.

It might raise two very significant questions: 1) how to get money and 2) what are the possible tax remissions? Alongside with the sponsors` donations, usually charitable organizations sell something – services, products, produced at the businesses (enterprises), organized by the charitable union. One of the possible ways in the Great Britain to earn money- is to establish a commercial enterprise and its all profit turn into the charitable organization. Due to this fact charitable organization as well as a commercial one has to follow additional registration and strict accounting and reporting.

As for the tax remissions, the British system of taxation provides tax remissions for the charitable organizations (like privilege on income tax, organization tax) as well as a wide spectrum of tax benefits for donors.

Soon you get acquainted with the charitable profiles of the most famous charitable and non- commercial organizations.

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