The Charities (Jersey) Law 2014 (the "Charities Law") is a new piece of legislation which forms part of the Island's initiative to strengthen and develop Jersey's position as a centre of excellence for philanthropic wealth management. It is being brought into force in stages, to allow for preliminary matters to be completed first, before the Charities Law becomes fully effective. These preliminary matters include the appointment of the Commissioner (referred to below), the issuance of guidance by the Commissioner, and the introduction of supporting regulations and orders.
During this initial stage, whilst only certain provisions are in force, the remainder of the Charities Law will effectively be dormant, so that the customary law of Jersey in respect of what is charitable will continue to apply, and it will not be possible to register as a charity under the Charities Law.
This briefing reflects our understanding of the Charities Law at the present time: a more detailed analysis of individual issues will become possible in due course, once the additional legislative provisions and the Commissioner's guidance are in place.
Jersey is an attractive choice of jurisdiction in which to establish philanthropic structures for a variety of reasons. Chief among these are that the Island offers stability (politically, economically and geographically), a robust and highly regarded regulatory regime, a well-respected judicial system with adherence to the rule of law, and a depth and breadth of experience amongst its professional advisers. Added to this list is the fact that Jersey is readily accessible from the UK (with several daily flight connections and a flying time to London of under an hour) so that, for those clients with business interests or family connections in London or elsewhere in the UK, choosing the Island also makes logistical and practical sense.
Trusts and foundations are the two key structures used for philanthropy in Jersey, with the Trusts (Jersey) Law 1984 and the Foundations (Jersey) Law 2009 both placing a strong emphasis on the importance of flexibility, allowing for the creation of structures tailored to meet individual client requirements. The Charities Law complements these two pieces of legislation by offering a system of registration in the Island, for those wishing to register structures as charities.
Registration as a charity will be voluntary, but will be relevant in determining entitlement to certain charitable tax reliefs and to the use of the term "charity".
Key elements of the Charities Law are that it:
- provides for a Jersey Charity Commissioner (the "Commissioner"), whose functions include the issuance of guidance on the operation of the Charities Law, the operation of the charity register, the administration of the charity test to be satisfied by registered charities, and the supervision of compliance by charity governors with their duties under the Charities Law;
- establishes a register of charities, with general, restricted and historic sections, providing for differing levels of public access to information;
- defines the charity test to be satisfied by structures which are registered under the Charities Law.
In due course, it is proposed that the Charities Law should be extended in its scope, to introduce regulatory standards in relation to registered charities.
Who can apply for
The Charities Law provides for "entities" to apply for registration. The definition of "entity" includes, for example, the trustees of a Jersey trust, Jersey foundations and Jersey companies.
As noted above, trusts and foundations are the two key structures used for philanthropy in the Island, and this briefing therefore focuses on Jersey trusts and Jersey foundations: references to trustees of trusts and foundations should be construed accordingly.
The charity test
An entity meets the charity test if:
- all of its purposes (as defined) are charitable purposes or purposes that are purely ancillary or incidental to any of its charitable purposes; and
- in giving effect to those purposes, it provides (or, in the case of an applicant, provides or intends to provide) public benefit in Jersey or elsewhere to a reasonable degree.
However, an entity will not satisfy the charity test if its constitution expressly permits its activities to be directed or otherwise controlled by (or any of its governors to be) Jersey's Chief Minister, a member of the States Assembly, or someone holding an equivalent position in another jurisdiction, acting in his or her capacity as such.
Charitable purposes: part 1 of the
The Charities Law lists sixteen charitable purposes, as follows:
(a) the prevention or relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the advancement of health;
(e) the saving of lives;
(f) the advancement of citizenship or community development;
(g) the advancement of the arts, heritage, culture or science;
(h) the advancement of public participation in sport;
(i) the provision of recreational facilities, or the organisation of recreational activities, with the object of improving the conditions of life for the persons for whom the facilities or activities are primarily intended;
(j) the advancement of human rights, conflict resolution or reconciliation;
(k) the promotion of religious or racial harmony;
(l) the promotion of equality and diversity;
(m) the advancement of environmental protection or improvement;
(n) the relief of those in need by reason of age, ill-health, disability, financial hardship or other disadvantage;
(o) the advancement of animal welfare;
(p) any other purpose that may reasonably be regarded as analogous to any of the purposes listed in sub-paragraphs (a) to (o).
Paragraph (p) provides for other purposes, which are not specifically listed in paragraphs (a) to (o) but which can reasonably be regarded as analogous to any of those purposes, to be treated as charitable purposes. In addition, the Charities Law allows for the list of charitable purposes to be added to in due course.
Public benefit: part 2 of the
There is to be no presumption that any particular charitable purpose is for the public benefit.
For an entity to be registered, the Commissioner must be satisfied that it meets the charity test and, in relation to the public benefit element of that test, the Commissioner must have regard to how any benefit gained or likely to be gained by members of the entity or any other persons (other than as members of the public) and disbenefit incurred or likely to be incurred by the public, on the one hand, compares with the benefit gained or likely to be gained by the public, on the other hand, as a consequence of the entity exercising its functions.
If benefit is likely to be provided to a section of the public only, the Commissioner must also consider whether any condition on obtaining that benefit (including any charge or fee) is unduly restrictive.
The application to register
An entity wishing to register will be required to provide information to the Commissioner as prescribed, including:
- copies of its constitution and drafts of its registered charitable purposes and registered public benefit statement;
- evidence that it is a Jersey entity (as defined) or carries out or intends to carry out, in or from within Jersey, an activity that is substantial (in the Commissioner's opinion) and has a principal address in Jersey;
- details of the entity's status (for example, the trustees of a trust or a foundation), the names of its governors and of the address of any premises in Jersey (in addition to its principal address but other than a private dwelling house) from which the entity undertakes any activity;
- details of the entity's most recent (if any) financial accounts and of any payment made to any of the entity's governors in the 12 months before the application. (In relation to the remuneration of governors, there are enabling provisions within the Charities Law to allow for a statement to be provided as to the entity's current intentions with regard to the future payment of its governors).
Registration and name
When an entity has been registered, it will be given a certificate of registration, confirming its registered name and number and the date of its registration. A registered charity can apply for permission to change its name or to add an alternative registered name and further certificates will be issued once the changes or additions have been registered.
The register will be divided into general, restricted and historic sections.
It is envisaged that registration on the general section of the register will be sought by those entities wishing to register as a charity, to raise funds from the public, and to have full access to the Jersey charitable tax reliefs and to use of the term "charity".
The general section of the register will contain prescribed information, including:
- the entity's registered name and registration number;
- details of the entity's status (for example, the trustees of a trust, or a foundation);
- the names of the entity's governors;
- the entity's principal address;
- the address of any other premises in Jersey, other than a private dwelling house, at or from which the entity undertakes any activity;
- the entity's registered charitable purposes and its registered public benefit statement;
- the entity's registration date;
- confirmation as to whether or not the entity has submitted its annual return for the most recent year;
- reference to any required steps notice that has been served on the entity or on any of its governors;
- details of any previous registered names for the entity.
There are enabling provisions to allow for the inclusion on the general section of the register of statements as to the entity's intentions in relation to the future payment of its governors and of information taken from the latest annual return in relation to payments previously made to governors.
For those wishing to register as a charity in order to have full access to Jersey charitable tax reliefs and to use of the term "charity", but not wishing to seek donations from the public, it will be possible to apply to be registered on the restricted section of the register. With such a registration, the same information will be entered on the register as for registrations on the general section, but only a limited amount of that information will be publicly available. This form of registration is anticipated to be of interest to those wishing to fund a charity with their own moneys and who have concerns in relation to privacy and confidentiality.
The historic section of the register will contain prescribed information, including:
- the entity's former registered number;
- if the entity was entered in the general section, its registered names;
- a summary explaining why it was deregistered including, in the case of contravention of a required steps notice, the reason for service of that notice;
- the dates on which the entity was registered and deregistered.
Public access to information on the
The general rule will be that all of the information on the general and historic sections of the register will be publicly available. For those entities included in the restricted section of the register, only limited information will be publicly available, including:
- the entity's registered number, but not its name;
- details of the entity's status (for example, trustees of a trust, or a foundation);
- the entity's registered charitable purposes and registered public benefit statement;
- whether or not the entity has submitted its annual return for the most recent year;
- reference to any required steps notice that has been served on the entity or on any of its governors;
- a summary of the reasons for registration in the restricted section.
In addition, the Commissioner will have the power to designate a specified matter - on any section of the register - as not being a public part of the register for that particular entity. This power will be available if the Commissioner considers that the safety or security of any person, property or premises would be significantly put at risk by public access to the specified matter.
Effects of registration
The Charities Law details the effects of registration, which include a requirement that the entity must provide public benefit in accordance with its registered public benefit statement and, if it would like to amend that statement, must provide evidence of a reason justifying that request.
The Charities Law contains requirements for various matters to be reported to the Commissioner (such as changes to the information recorded on the register, and reportable matters), and provides for annual returns of prescribed information to be sent to the Commissioner. There are also enabling provisions within the Charities Law to require annual returns to include details of payments made to an entity's governors.
Governors of registered
The Charities Law introduces the term of "governor". The governors of a trust will be its trustees, and the governors of a foundation will be its council members. In addition to such governors' duties as trustees or as council members, the Charities Law introduces a duty for governors of a registered charity to seek, in good faith, to ensure that the charity:
- acts in a manner that is consistent with its registered charitable purposes and with its registered public benefit statement; and
- complies with any direction, requirement, notice or duty imposed on it by or under the Charities Law.
The Charities Law details the circumstances in which a governor will be considered to have engaged in misconduct, lists reportable matters (including misconduct), requires a governor of a registered charity to report reportable matters promptly to the charity and to the Commissioner, and contains prohibitions against acting as a governor of a registered charity after a reportable matter has been reported, unless permitted to do so by the Commissioner or by the Royal Court. Contravention of these prohibitions can constitute an offence, liable to imprisonment for one year and to a fine. The Charities Law also empowers the court to issue a disqualification order, preventing a person from acting as a governor of, or from being otherwise involved in the management of, a registered charity. A disqualification order can be for a maximum of 15 years and contravention of such an order constitutes an offence, liable to imprisonment for 2 years and to a fine.
Required steps notice
A required steps notice can be served by the Commissioner on a registered charity and/or any of its governors, requiring steps to be taken to remedy an identified issue.
The Charities Law confers powers on the Commissioner to call for the provision of information (from a registered charity or an entity that was formerly a registered charity and (in each case) its governors or former governors) that the Commissioner reasonably requires in order to decide whether or not to serve a required steps notice.
The Charities Law specifies circumstances in which the Commissioner can serve a required steps notice, including where the Commissioner believes that:
- there has been misconduct by a registered charity;
- a registered charity does not pass the charity test;
- a governor of a registered charity has engaged in misconduct; or
- a governor of a registered charity is unfit to act as such, because of a reportable matter.
An entity can cease to be registered as a charity - and be "deregistered" - on its own application or, in certain circumstances (such as where an entity no longer meets the charity test), by action on the part of the Commissioner.
The Charities Law prescribes the effects of deregistration, one of which is a requirement that the entity must continue to apply its remaining property in accordance with its registered charitable purposes and registered public benefit statement, as in place immediately before deregistration, unless a court order is obtained to amend this requirement.
Powers of the Royal Court
The Charities Law empowers the Royal Court to make orders, as it sees fit, to remedy misconduct in the administration of a registered charity, to protect its property or ensure that it is applied properly in accordance with the charity's registered charitable purposes and registered public benefit statement.
The court's powers are separate from the Commissioner's powers to take action under the Charities Law in respect of any misconduct.
Appeals to Charity Tribunal
The Charities Law provides for the establishment of a tribunal to be known as the Charity Tribunal, and allows for appeals to be made against decisions of the Commissioner in certain circumstances. For example:
- applicants for registration can appeal against the Commissioner's refusal to register an entity as a charity;
- a registered charity can appeal against the Commissioner's decision to deregister the charity;
- third parties can appeal against the Commissioner's decision to register an entity as a charity, on the ground that, at both the time of the application to register and the time of the appeal, the applicant did not meet the charity test.
The Charities Law also allows for appeals to be made from the Charity Tribunal to the Royal Court.
Registered charities will be eligible for the full range of Jersey charitable tax reliefs, which are as follows:
- exemption from income tax;
- entitlement to recover income tax on certain donations received by way of a lump sum payment or pursuant to a deed of covenant;
- entitlement to reclaim any goods and services tax ("GST") paid and exemption from the requirement to register for GST;
- entitlement to reduced rates of stamp duty and land transaction tax.
For trustees or foundations not wishing to register as charities, exemption from Jersey income tax will be available on satisfaction of certain conditions. In addition, tax neutrality is to be preserved for structures with no beneficiaries in Jersey and no income deriving from land and buildings in Jersey.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.