Will independent schools retain their charitable status or will the Charity Commission succeed in opening them up to a wider public? What will be the implications for the charity sector as a whole? All will be revealed once the result of the Attorney General’s reference to the High Court is made public.
The background is well known and relates to the ISC challenge to the lawfulness of the Charity Commission public benefit guidance for fee charging charities, particularly independent schools. The Attorney General’s reference to the High Court seeks a comprehensive opinion on several case scenarios for typical independent schools, with varying objects clauses, all of which are designed to explore the extent to which fee charging affects charitable status. The questions also attempt to explore whether other factors could be significant, such as a greater involvement in the local community, support for local state schools or academies, specialist teaching and scholarships based on merit rather than income.
The outcome of the case is important for governors of independent schools. If the schools are found to be fundamentally uncharitable, they could face a loss of valuable tax reliefs and, at worst, insolvency, the compulsory replacement of governing bodies or merging with other schools considered to be satisfactorily complying. If the schools are charitable, it may be considered that the governors themselves have been acting in breach of trust in the way they have run the organisations. This could have personal implications for this voluntary group of individuals.
Independent schools themselves have not simply sat and waited. Many have already implemented bursary schemes, entered into community partnerships, set up relationships with overseas schools and even amended their purposes to ensure that community involvement ‘counted’ in the public benefit assessment. For many schools the inevitable consequence of the bursary schemes is that fees have to rise, thereby ensuring that the students are polarised between the very rich and the very poor.
The results of the case could also have great significance for the charitable sector as a whole. If the Charity Commission judgement is found to be flawed in this case, will this undermine confidence in their guidance in other areas? Will this require secondary legislation to rectify?
It is hard to guess which way the case will go. There is a popular perception that independent schools should not be charitable anyway, on the basis that their beneficiaries are not in ‘need’. However, there are as many people who believe that the Charity Commission has pursued a political agenda in this issue and that the Attorney General’s reference is a long-awaited opportunity for the Court to carefully consider and clarify the legal position. This is no doubt why the judgement has not yet been published. Indeed the ISC think that it will be published during the summer recess.
There is no doubt that the Charity Commission has a mandate to educate trustees and that there has been a change in the need for justification of public benefit for certain types of charity. The question is to what extent and how? How individual does the sector guidance need to be to suit particular types of charity? Both schools and their advisors are eagerly awaiting the results of the case.
Barlow Robbins LLP