Charitable status is awarded to bodies accepted as having objectives which are exclusively charitable for tax purposes.
A charity must have one or more of the following purposes:
- the relief of poverty
- the advancement of education
- the advancement of religion
- other purposes beneficial to the community (including
the provision of recreational or leisure facilities in the interests of social
welfare.)
If your organisation has one or more of the above purposes you must then submit to the Financial Intermediaries and Claims Office (FICO) of the Inland Revenue, a copy of your constitution, which may be a memorandum and articles of association, or trust deed, reflecting your charitable aims and which has been adopted by your membership. Approval by this office must be given before your organisation can describe itself as a Scottish charity. It is advisable to submit a draft of the proposed constitution to FICO and ask for an opinion of eligibility for recognition. Once provisional recognition has been given, you can go ahead and apply for definitive recognition.
Recognition of charitable status is given in a formal letter from the Inland Revenue. All Scottish Charity numbers begin with the letters ‘SC’ and should be shown on all stationery and particularly in dealings with the public.
WHY WOULD WE NEED CHARITABLE STATUS?
Benefits
There are some tax-related benefits including VAT exemptions on certain
activities, relief on rates and at the moment water charges, but this
is currently under review by the Scottish Parliament, income tax concessions
on charitable giving.
Charitable status is beneficial to fundraising. Many grant-giving trusts
and foundations will only give funding to recognised charities. Being
a charity can increase public confidence in giving to your organisation.
Limitations
In Scotland, charities are principally governed by the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990. Measures in the 1990 Act go some way towards ensuring accountability by requiring a charity to make available information about its activities. If you opt for becoming a company limited by guarantee, you will be required to comply with Companies Law. (see section on proposal for becoming a company limited by guarantee)
WHAT IS A CONSTITUTION?
A constitution defines what your organisation aims to achieve (purpose
and objects), the means it can use to achieve them (powers), who can join
(membership), how it is run (the appointment of honorary officers and an
executive committee) and how it will be answerable
to its members (meetings, minutes and accounts).
WHY HAVE A CONSTITUTION?
To provide a framework for resolving difficulties. To satisfy financial bodies when applying for funds or grants. To help with applying for charitable status.
Furthermore, if your organisation intends to acquire premises or employ staff it will enter the field of legal responsibilities which must be regulated by a constitution appropriate to its activities and circumstances.
The Main Types of Constitution
There are five main types of structure, these are:
an association, society or club governed by a constitution
a friendly society governed by rules and registered with the Registrar
of Friendly Societies,
a trust governed by a declaration or deed of trust
a company limited by guarantee and incorporated under the Companies Act
1985
an industrial provident society incorporated under the Industrial and Provident
Societies Act 1986.
Once a group of people have decided to draw up a constitution the following points need to be considered:
What the organisation has been created to achieve (i.e. what its purposes
are)
Who can become a member
Who is to be responsible for managing and controlling it
What the ‘managers’ and ‘controllers’ are authorised
to do and how they are appointed.
Whether the organisation can borrow money and give grants or loans to other
projects
How members meet and take decisions.
