Charities can have connections to non-charities. In many cases, these links are essential in helping to deliver services, raise funds or extend the charity’s reach or profile. Connections may be operational or administrative in nature and can come in different guises – a charity can set up a non-charity and vice versa, or both entities can be independently established and find it beneficial to work together.

The application form will ask what connections exist between the connected entities. As with all aspects of the registration process, detailed responses will allow the Commission to make a full assessment and reduce the risk of the application being returned as incomplete.

Trustees should be free to make their own decisions in the administration of their charity. Any arrangements must be in the best interests of the charity and further its charitable purpose. Trustees must be able to show that their decision-making is not unduly influenced or controlled by the connected entity in any of the following areas:

• Structure and governance;
• Decision-making about service delivery and accepting or allocating funding;
• How meetings where decisions are made are conducted and recorded;
• How property and funds are held and accounted for;
• Choice of accounting and legal services; and
• Identifying and managing any conflicts of interest.

Once an organisation is registered as a charity, the Commission expects trustees to manage the relationship with the connected entity so that it always furthers its charitable purposes for the public benefit. Trustees should identify, review and address any risks which come from the connection.

Not doing so may raise issues of independence and, in certain cases, may throw doubt on an organisation’s status as a charity. A link to a non-charity may impact a claim to charitable status where:

• That link fundamentally affects the organisation’s independence;
• The link means that the personal benefit to the non-charity is more than incidental;
• The organisation may have a non-charitable purpose.

For example, if a non-charity is setting up a charity, it is essential to demonstrate that the applicant organisation is established for exclusively charitable purposes only, not to further the purposes of the non-charity and not to provide the non-charity with personal benefit that is more than incidental. For example, if a non-charitable company that sells medical treatments establishes an organisation that furthers education solely about those treatments, the applicants should be able to demonstrate how the purpose of the proposed charity is not in practice to further the aims of the non-charitable company.

If you are applying to register a corporate foundation (i.e. vehicles established by businesses as a means of structured, strategic engagement in charitable activity), then the following guidance will be helpful.

If the applicant organisation will be involved in the delivery or supply or services on behalf of local or national government, then the following guidance will be helpful.

• How does the relationship benefit the applicant organisation?
• How are the trustees satisfied that the applicant organisation will not stray into furthering the non-charity’s purposes?
• Is the non-charity receiving a personal benefit from the links to the applicant organisation, how, and to what extent?
• If goods and services are being provided from one to the other, are contract arrangements in place and do they comply with the charity’s governing document and charity law?
• Have the trustees reviewed the risks involved in any non-charity connection?
• Does the make-up of the trustee board enable it to make independent and unconflicted decisions?
• How does the charity make decisions, and does that comply with our guidance on trustee decision making?
• Will the non-charity provide any funding with terms attached? Do those terms prohibit or restrict use of the funding in ways that may compromise the proposed charity’s purposes or independence?
• Does the charity have a conflicts of interest policy?
• Do the trustees identify, record and appropriately manage actual or perceived conflicts of interest?
• Can the public tell the charity and the non-charity apart? Have the two organisations done enough to make that separation clear?
• Our connections to non-charities guidance lists the documents you should send as part of any registration application. Has your organisation got these in place?

This article concludes the ‘Registering a charity’ series from the Commission’s Registration Division. We hope that you have found these articles useful and we hope to post articles about ongoing or developing issues in the future. We’d also be keen to hear from you about any topics that you would like to be covered in future.

If there are other aspects of the charity registration process in England and Wales that you would like us to cover, please send your requests to ICAEW.