Charities Act 2006 – An Update

Some sections of the Charities Act 2006 have now come into force following the first enabling Order passed under the Act. Its key provisions include:

* Registration Threshold:- charities with a gross annual income of less than £5,000 (increased from £1,000) will no longer be required to register with the Charity Commission although they may still do so voluntarily.

* Audit Thresholds, Examinations and Reports:- there has been an increase in the threshold at which charities must have their accounts professionally audited. Audited accounts are now only needed if the charity has:-

• an annual income of over £500,000; or
• (in the case of an unincorporated charity) an annual income of over £100,000 and assets in excess of £2,800,000; or
• (in the case of a charitable company) assets in excess of £2,800,000.

However, unincorporated charities which have an annual income or between £10,000 and £500,000 must have their accounts independently examined. Incorporated charities which have an annual income of between £90,000 and £500,000 must obtain an accountant’s report.

* Determining Membership:- the Charity Commission may now determine who the members of a charity are following an application from a charity or at any time after an inquiry into the charity has been launched. This could prove to be a useful power when a membership charity when its records have not been kept up to date over the years.

* Indemnity Insurance:- charity trustees can now purchase indemnity insurance out of the charity’s funds to cover most of their potential personal liabilities. This is the case even when a charity’s constitutional document does not expressly provide for this power. The trustees must still be satisfied that, considering the terms of the policy and the costs of the premiums, purchasing insurance is in the best interests of the charity.

* Power to Modify Powers and Procedures:- an unincorporated charity may now amend the administrative powers and procedures in its governing document without giving notice to the Charity Commission or to the public. These changes are subject to members’ approval.


The second Order is due in the second half of 2007. It is expected to give effect to a number of other key provisions in the Charities Act 2006. We will update you on these in our next newsletter.