As charities, independent schools need to meet the new public benefit requirements. In particular, they must provide significant opportunity to those in the community who cannot afford their school fees.

In our September 2008 edition of Charities, we discussed the definition of 'public benefit' and how charities can ensure that they meet the criteria. Since then, the Charity Commission has issued further guidance in respect of the following charitable purposes:

  • education
  • relief of poverty
  • advancement of religion
  • fee-charging.

Independent schools will find the guidance on public benefit and fee charging most relevant, as their main aim is to provide education, and this is the service for which fees are charged. In particular, schools with high fee levels need to ensure that public benefit is adequately demonstrated, as the higher the fees, the more people there will be who cannot afford them.

The new Charities Act specifies that people in poverty, and those who cannot afford the fees, must not be excluded from the opportunity to benefit in a 'material' way that is related to the charity's aims. Note that the benefit must be related to the charity's aims. Thus, for an independent school, the benefit must be the provision of education. Allowing the general public free use of the sports ground, for example, would be an indirect benefit and not enough on its own to satisfy the requirement. The use of the word material is also relevant as the benefit must be significant and tangible. It is not enough to provide a token gesture.

According to the commission's guidance, offering bursaries is the simplest way for independent schools to meet the public benefit test. However, it does not give any indication of the size or number of bursaries that should be offered. Indeed, the guidance states that "...it is primarily for the trustees of the charity to decide ... the extent to which they offer free or subsidised access, and how much to offer to how many people..."

There are other ways in which schools can provide significant opportunity to benefit those who cannot afford the fees. For example, they can work in partnership with a state school or an overseas school to provide education for children who cannot afford to pay for it.

The Office of the Scottish Charity Regulator (OSCR) has published results from its assessment of Scottish charities and public benefit. As part of the OSCR's review, six mainstream independent schools were selected and, of those six, only two were found to provide public benefit. The main conclusions to be drawn from the OSCR's findings are that means tested benefits are preferable to non-means tested, and there have to be a significant (more than 5%) number of pupils in receipt of the benefit. The England and Wales regulator has yet to start its review and it is not possible to say whether it will use the same approach as the OSCR, but for now the OSCR findings are a good indication of how the Charity Commission might approach this issue.

Trustees need to consider whether their charity would pass the public benefit test, and if not, develop a strategy to remedy this. The commission does not expect any charity to change overnight, but if change is found to be necessary a strong commitment from the trustees is required to ensure that the public benefit requirement is satisfied.

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.