Academic journal article Vanderbilt Journal of Transnational Law

U.K. Charity Law: Is It Creating a True Democracy of Giving?

Academic journal article Vanderbilt Journal of Transnational Law

U.K. Charity Law: Is It Creating a True Democracy of Giving?

Article excerpt


In November 1999, the British government announced important legislative reforms affecting the various methods of providing charitable contributions. The government expressed its desire to create a "democracy of giving" by expanding tax relief for charitable donations. These changes took effect in April 2000.

This note argues that the recent legislation reforms, while a step in the right direction, do not create a true "democracy of giving." In arriving at this conclusion, the note will outline the evolution of British tax law related to individual charitable donations. The note will also explore the problems experienced by the charitable sector that prompted legislative reform, and will provide an overview of recent reforms in this area. An overview of the recent reforms will be provided. Finally, the note suggests that adopting U.S.-style tax relief for charitable donations would better achieve the British government's goal of creating a true "democracy of giving."


Approximately 300,000 charities operate in the United Kingdom.(1) These charities employ over half a million people and create roughly 12 billion(2) [pounds sterling] in economic activity.(3) Approximately one-third of the income of these charities is generated by individual donations.(4) Tax relief is available for these donations under certain circumstances.(5)

Despite the availability of tax relief for individual donations, the last two decades have shown a decline in the number of people giving to charity.(6) In response to this problem, the Government initiated a consultative process in order to draft new legislation related to charitable giving.(7) The Government announced several important legislative reforms in November 1999 intended to create a "democracy of giving."(8) These changes took effect in April 2000.(9)

This note will examine the charitable sector in the United Kingdom from the viewpoint of an individual donor. In particular, the note will analyze the primary methods of making tax-efficient gifts. The Government's consultative process will also be discussed and the legislative reforms will be outlined. Finally, this note will argue that the proposed legislative reforms do not adequately address the scope of the problem facing the charitable sector. It will be suggested that the Government adopt a U.S.-style system of income tax relief for charitable deductions in order to create a true "democracy of giving."


A. What is a Charity?

Under English law, a charity is a trust, corporation, or unincorporated association established for purposes (or objects) that are "exclusively charitable."(10) The preamble to the Statute of Charitable Uses 1601 (commonly referred to as the Statute of Elizabeth) listed a number of objects considered to be charitable.(11) The current leading authority on charitable purposes, Income Tax Special Purposes Commissioners v. Pemsel, 1891 App. Cas. 531, defines charitable purposes as (1) the relief of poverty, (2) the advancement of religion, (3) the advancement of education, and (4) other purposes beneficial to the community not falling under the previous headings.(12)

This definition does not permit what might be described as essentially "political" activities unless they are ancillary to the main objective of the charity.(13) This is not always easy to determine.(14) In McGovern v. A-G, the court concluded that a trust which included any of the following as its direct and principal purpose would not be charitable: (1) to procure changes in English law or the law of a foreign country; (2) to further the interests of a political party; or (3) to procure changes in government policy or administrative practice, whether in United Kingdom or abroad.(15)

English charities are registered with, and supervised by, the Charity Commission.(16) The Charity Commission is the Government department whose aim is to give the public confidence in the integrity of charity. …

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