Independent Schools Council wins judicial review of Charity Commission`s interpretation of the law on public benefit

The Charities Act 2006 removed the legal presumption that all charities with aims for the advancement of education, religion and relief of poverty are for the public benefit. All charities regardless of their aims must now actively demonstrate that their objects are for the benefit of the public.

Before the 2006 Act came into being, the majority of charitable independent schools met the legal presumption because their object was the advancement of education. This legal presumption was removed by the Act when it came into force. The result is that all charities, including charitable independent schools have to actively demonstrate that they satisfy the public benefit requirement to maintain their charitable status.

Meeting the public benefit test in the context of the Charity Commission's public benefit guidance has proven problematic for charities which traditionally charge higher fees for their services, in particular independent fee-charging schools and some private care homes. In the case of Re Resch [1969] the court considered the impact that a charity charging fees would have on the public benefit requirement. It was confirmed that whilst fee-charging charities could be charitable, excluding those who could not afford to pay the fees from the opportunity to benefit was not charitable.

In 2008 the Charity Commission carried out its first public reviews on 12 charities, including five independent schools. At the time three of the schools were deemed to be for the public benefit and all of these three schools offered bursaries to pupils who would otherwise not been able to afford to attend. The Charity Commission seemed to be satisfied that by offering bursaries the schools were accessible to everyone, regardless of income and that the schools were operating for the benefit of the public.

Two of the schools were deemed by the Charity Commission not to meet the public benefit requirement in the context of its public benefit guidance. The key difference between those schools that were deemed to be operating for the benefit of the public and those which were not seemed to lie in the percentage of pupils in the school who were able to attend due to a bursary being offered. In the two schools which failed the public benefit test either no bursaries were offered or only a very small percentage of the pupils at the school were attending due to being given a bursary. The two schools which initially failed the public benefit test have since introduced a mix of new and additional bursary assistance, and the Charity Commission has concluded that the schools are now operating for the public benefit.

Dissatisfaction with the Charity Commission`s guidance has become evident, with independent schools unclear on what measures they should be taking to qualify as giving a public benefit. There is also some debate about whether the Charity Commission`s public benefit guidance is legally correct. The Attorney General has asked the Charity Tribunal to review the way in which the public benefit test has been applied by the Charity Commission in regard to independent schools. It is also hoped that clear guidance will be issued on what independent schools need to do in order to meet the public benefit test.

Furthermore the Independent Schools Council (ICS) has welcomed the Attorney General referring the issue to the Charity Tribunal to review and is bringing its own case for judicial review. The ICS is keen for the courts to look at the implications that the Charity Commission's public benefit test will have on the independent schools sector, and also for some clarity and guidance with regard to the correct legal position. It remains to be seen whether as a result of this the Charity Commission will need to re-write some, or all of its guidance.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.