Capitalism has many checks and taxes to aid social welfare, hopefully without hindering forward progress, but unfortunately many still often fall through the cracks and require assistance. Those organisations who want to make a difference have the option to set up a charitable foundation to help those that would benefit from funding support.
But what do you need when setting up a charitable foundation? In this article, Real Business will outline the legal requirements, essential governing documents, types of charity structure available and more to help you make an informed plan and get your charity foundation off the ground.
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How To Set Up A Charity Foundation?
To set up a charitable foundation, you need to gather some foundational requirements and have a plan that will keep your charity functioning. The following steps will outline these requirements…
1. What Is Your New Charity’s Purpose?
The charitable purposes of your own charity foundation must align with one of the thirteen outlined under the Charity Commission, the governing body of UK charities:
- The prevention or relief of poverty
- The advancement of education
- The advancement of religion
- The advancement of health or the saving of lives
- The advancement of citizenship or community development
- The advancement of the arts, culture, heritage, or science
- The advancement of amateur sport
- The advancement of human rights, conflict resolution, or reconciliation, or the promotion of religious or racial harmony, or equality and diversity
- The advancement of environmental protection or improvement
- The relief of those in need due to youth, age, ill-health, disability, financial hardship, or other disadvantage
- The advancement of animal welfare
- The promotion of the efficiency of the armed forces, police, fire, or ambulance services
- Any other purposes recognised as charitable under existing charity law and the decisions of the courts
2. What Is Your Desired Charity Structure?
There are four main types of charity structures:
- Charitable Incorporated Organisation (CIO) – This legal structure is designed exclusively for charities and is registered only with the Charity Commission. It combines the benefits of incorporation (limited liability for trustees), only with reduced administrative burdens.
- Charitable Company Limited by Guarantee – A corporate charity structure that offers limited liability, registered with both the Charity Commission and Companies House.
- Charitable Trust – This charity structure is used by those managing investments or properties. They are governed by a trust deed and managed by trustees, who are all personally and legally liable.
- Exempt Charity – This charity is exempt from Charity Commission registration. It still operates as a charity, but they are regulated by other bodies, such as universities regulated by the Office for Students.
3. What Are The Requirements To Apply For Charitable Status?
To apply for charitable status, you need the following:
- Governing document – The governing document is a constitution, trust deed or articles of association that outline the charity’s rules, purpose and structure. For a governing document template, check here.
- Three trustees – A trustee is an individual who is responsible for the management and decision-making within the charity, and you need at least three or more.
- Charity name – A name which complies with Charity Commission rules, meaning it must be unique, it must not mislead or be offensive.
- Evidence of income – An annual income of over £5,000 requires an organisation to register.
- Financial details – A clear plan for managing funds, such as a budget and plan for funding.
- Contact details – Contact details and address for official communication.
4. Where Do I Apply For Charitable Status?
Technically anybody can set up an organisation that they call a charity foundation and begin providing support or assistance, but to be trusted by third parties (including donors), you have to apply for charitable status.
Application is usually straight forward enough. With all the requirements listed above at hand, simply go to the Charity Commission page on GOV.UK and create an account there. Fill in the application form and provide details about your organisation’s purposes, activities and public benefit and upload the required documents.
The Charity Commission will review your application and make a decision about whether your organisation meets the requirements for charitable status. If accepted, congratulations, you can count yourself among registered charities in the UK.
What Are Effective Ways To Raise Money For Your Registered Charity?
Whilst charity is not for profit, the money it requires to pursue its purposes must come from somewhere. There are various sources you can tap into, including regular donations, grants, corporate fundraising events, and Gift Aid donations.
Some fundraising advice includes:
- Put politics aside – Humanitarian efforts should have no political leaning. You may well have plenty to say about Eurozone bailouts and Whitehall’s search to differentiate between its elbow and posterior, but leave it out of your charity fundraising entirely. Not only can it polarise donors, but it’s also against charitable purposes.
- Long-term over the short term – People are more likely to give little amounts to charity, and not often. That’s why it’s better to pick a plan that will spread the word wide, and stay consistent. Make sure you also update people on how much the public benefit of the charity has paid off. Foundations not only allow business people to give something back, but they also allow them to use their entrepreneurial eyes for long-term sustainability.
- Go digital – Give your charity a presence on social media platforms and track figures to update the world on ongoing fundraising efforts. This sense of progression has been proven to increase engagement.
- Gift Aid – Make use of this option whereby you can claim tax relief on the donations that individuals make. You don’t have to be a registered charity to claim Gift Aid though you do have to be registered with HM Revenue and Customs (HMRC).
What Are Some of the Requirements When Running A Charity Foundation?
While charitable foundations are tax exempt, there are still some admin steps that need to be adhered to depending on the size of donations.
A charity foundation must submit a trustees’ annual report and accounts to the Charity Commission. Additionally, all registered charities with a gross income exceeding £25,000 must file their accounts and annual report online detailing he charity’s activities, financial performance, and how it has met its charitable purposes.
Charities with a gross income exceeding £10,000 must also complete and file an annual return online. This will provide basic financial information, contact details, trustee information, and details about the charity’s activities and classification.
Charities with income exceeding certain thresholds may need to have their accounts independently examined or audited. For example, charitable foundations with a gross income within certain boundaries must adhere to the folowing:
- £25k to £250k – All paperwork and submissions must first be looked over by a competent individual
- £250k to £500k – As above, but the competent individual has to be qualified ie: an accountant
- £500k+ – Accounts must be properly approved by an independent auditor.