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Charitable Trusts Notes

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Charitable Trusts The charitable trust exception: Charitable trusts are an exception to the rule that purpose trusts are not permitted due to the absence of any Bs to enforce the duties of the trustees.Benefits the public and so charitable trusts can be enforced by the Attorney-General. Charitable trusts are exempt from the certainty of objects requirement (Morice v. Bishop of Durham (1805)).

Test: A valid charitable trust must:

1. Have a recognised charitable purpose;

2. Be for the 'public benefit'; and

3. Have exclusively charitable purposes. The significance of being a charitable purpose trust:

(i) (ii) (iii) (iv)

Numerous tax advantages - E.g. charitable trusts exempt from income tax, capital gains tax and stamp duty. Entitled to 80% relief on non-domestic rates. Charities are able to claim additional gift aid on donations made by taxpayers, and gifts made and exempt from inheritance and capital gains tax. Rule against perpetuities - In contrast to other trusts, property can be dedicated indefinitely to a charitable purpose trust. By allowing charitable trusts to exist indefinitely, they can become better at what they do through the development of greater expertise and resources. Recognition that a purpose or body is charitable is viewed by many as a state-sanctioned stamp of legitimacy or approval, and may affect the way in which the body or purpose is viewed by the public. Charities must register their existence with the Charity Commission and provide info on a periodic basis. Registration imposes obligations on those who operate the charity, and on the Commission to oversee that charity.

Occasionally courts consider the consequences of finding that a purpose or body is charitable when deciding whether to grant charitable status in the first place:Dingle v Turner [1972] AC 601; Facts: Concerned whether a trust for poor employees of a company who were aged or incapacitated was a charity. Decision: Lord Cross stated, 'the courts cannot avoid having regard to the fiscal privileges accorded to charities'. 'In deciding that such and such a trust is a charitable trust the court is endowing it with a substantial annual subsidy at the expense of the tax payer'. 'As things are validity and fiscal immunity march hand in hand' - although Cross thinks they should be regarded as two different questions and not automatically attract fiscal immunities. These factors were also viewed as important in Oppenheim v Tobacco Securities Trust Co Ltd and Re Compton.

The Charities Act 2006 Charitable purposes were first defined in the Preamble of the Statute of Charitable Uses 1601. Old test: The Pemsel heads of charityCommissioners for Special Purposes of Income Tax v. Pemsel [1891]; Lord McNaghten identified four heads of charity:

1. The relief of poverty;

2. The advancement of education;

3. The advancement of religion;

4. Other purposes beneficial to the community - includes analogous purposes.

The Charities Act - Two-stage test:

Thirteen purposes set out in s.2(2) are as follows:

S.3 guidance - it confirms that a purpose must be for the public benefit, but provides that 'it is not to be presumed that a purpose of a particular trust is for the public benefit' (s.3(2)).

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