Charity Law: Public v Private benefit
Posted: Monday 16 January 2012
The BBC recently reported http://www.bbc.co.uk/news/uk-england-london-16548387 that the Charities Commission will not investigate the Royal Albert Hall after it emerged that as a result of what the BBC calls a ‘legal loophole’ its members and trustees could make money by reselling tickets. Calling it a ‘legal loophole’ might be stretching it a bit, but the case does raise interesting questions about charities having to strike a balance between public and private benefit.
In essence, the Royal Albert Hall’s ‘complex constitution’ permits a certain number of tickets to be given to members and directors, who can then resell them (at a premium). There are suggestions that some members have made thousands of pounds doing so.
The Stage www.thestage.co.uk/news/newsstory.php/34913/royal-albert-hall-denies-charity-commission, and Third Sector www.thirdsector.co.uk/go/news/article/1112024/royal-albert-hall-told-breaking-rules/ have also published articles on this matter. While there seems to be some confusion over the extent of the Commission’s intervention, the Royal Albert Hall has denied that it has been cautioned by the Charity Commission, but rather that it is engaged in dialogue with the Commission, and that the Commission is satisfied the trustees have "put in place appropriate plans to address these issues, including the level of benefit received by seat holders".
So, what has this got to do with Scottish charities? We’ve explained before that charity law north and south of the border is different, but it is worth noting that both jurisdictions require there to be public benefit in order for the charity test to be met. And, in assessing that public benefit requirement, the Charity Commission and OSCR both consider the degree to which members or any other person may gain a private benefit.
OSCR has issued guidance www.oscr.org.uk/media/32303/meeting_the_charity_test_full_guidance.pdf on meeting the charity test, and this includes a section on private benefit. It recognises that individuals can and should benefit from the activities of charities, but that such a benefit should arise as a result of the charity’s activities and in furtherance of its purposes. When the benefit to individuals is not in furtherance of the charity’s purposes, then any private benefit must be “necessary or incidental to” the pursuit of the charity’s purposes. OSCR goes on to explore what they mean by “incidental” and “necessary”. The important point to bear in mind is that just because a Scottish charity provides a degree of private benefit does not necessarily mean that the charity test will not be met. OSCR will make a judgement on the balance between private and public benefit. We have seen an analysis of this balance before in the context of private schools, but the Albert Hall story offers another ‘real life’ example of where the regulator has had to grapple with this.
It is easy to see that if a charity in Scotland has similar arrangements to those of the Royal Albert Hall, OSCR may want to take a closer look.
If you are a trustee and you are concerned about private benefit, or you would like to find out more about charity law in Scotland, please contact our charity law expert, Lauren Scott.
