CC20a: Charities and Fund-raising: A Summary

(Version - March 2002)

Introduction

Effective charitable work depends on securing adequate resources. In many cases, this depends on effective fund-raising. It is very important that trustees manage and control fund-raising efficiently and economically. The highest standards need to be adopted and systems for protecting the moneys raised put into place.

Our guidance CC20 Charities and Fund-raising gives more detailed advice on the topics covered below.

Effective Fund-raising

The choice of fund-raising methods is a matter for trustees to decide. However, charities which are supported by donations should be alert and sensitive to public opinion and criticism. Fund-raising methods which meet with disapproval can damage the charity and reduce public confidence in the sector as a whole.

Before undertaking any fund-raising exercise, it is essential to spend time developing a strategy. Fund-raising can be costly and it is important to ensure that the costs will be justified.

We recommend that trustees ask the following questions:

• how much money is needed?
• are the funds required for a special project, or part of the charity's rolling programme of work? Would it be possible to collaborate with other charities operating in the same field?
• are grants available from local or central Government, grant-making charities or companies?
• what resources are available to support fund-raising?
• what proportion of the gross receipts will remain with the charity after fund-raising costs have been met? We strongly recommend that trustees agree, in advance, the likely proportion of income to expenditure; monitor performance against that target; and satisfy themselves that the expenditure is justified.

Appeals for Special Projects

When considering appeals for specific projects, trustees need to have the following points in mind:

• the purpose of the appeal needs to be clearly expressed. The public must know whether they are contributing to a particular project, or to the general work of the charity;
• plans need to be in place to deal with any surplus money, we advise that these should be clearly explained in the fund-raising literature;
• any funds raised for the special appeal must be accounted for separately;
• where possible, set an end date for the appeal, particularly if the duration of the appeal is outside the control of the trustees;
• all contributions need to, as far as possible, be made directly to the charity and be under the control of the trustees.

N.B. If a general appeal is made, any particular project which is mentioned in the appeal document should be clearly identified as an example of the charity's work.

Statutory Provisions Controlling Fund-raising

Street Collections and House-to-House Collections

Street collections and house-to-house collections usually require a permit or licence from either the appropriate local authority, or, if you are in London, the local police or the Common Council of the City of London.

The term "house-to-house collections" includes visits to public houses, factories and offices to collect money or to sell things, on the basis that part of the proceeds will go to a charity.

Lotteries

There are two main types of lotteries of interest to charities, regulated by the Lotteries and Amusements Act 1976 (as amended):

• small lotteries (held as part of a fête, etc.) - these do not have to be registered with a local authority or with the Gambling Commission; and
• society lotteries - these are public lotteries which have to be registered with the local authority or the Gambling Commission.

Professional Fund-raisers and Commercial Participators

Trustees may decide to raise funds by employing a professional fund-raiser, or by entering into a promotion with a commercial participator (as defined in section 58 of the Charities Act 1992, as amended). If so, they need to be aware of the provisions of Part II of the Charities Act 1992, and The Charitable Institutions (Fund-raising) Regulations 1994 (which came into force on 1 March 1995) which include requirements for:

• a written agreement, in a prescribed form, between the charity and the professional fund-raiser or the commercial participator;
• a clear statement to be given to inform potential donors what proportion of their donation will be used to pay the costs of the fund-raiser;
• the public to be informed how the charity will benefit from its involvement with a commercial participator;
• transfer of funds raised by professional fund-raisers or commercial participators to the charity.

The Home Office has produced detailed guidance on the new controls, which includes a copy of the Regulations. Copies are available from The Stationery Office price £5.50, (Charitable Fund-Raising: Professional and Commercial Involvement - ISBN 0 11 341133 2).

Injunctions To Prevent Unauthorised Fund-raising

Under new rules which came into force on 1 March 1995, charities are now able to seek an injunction to prevent unauthorised fund-raising on their behalf.

Part II of the Charities Act 1992 and The Charitable Institutions (Fund-raising) Regulations 1994 provide that, where a commercial participator or professional fund-raiser is acting without an agreement with a charity (or in accordance with an agreement which is not in the prescribed form), the court may grant an injunction restraining the fund-raising.

In addition, it is also possible for trustees to stop funds being raised in the name of their charity where:

• the fund-raiser is using methods to which the charity objects;
• the fund-raiser is not a fit and proper person to raise funds for the charity;
• the charity does not wish to be associated with that fund-raising venture.

The Home Office guidance (mentioned above) and our guidance CC20 Charities and Fund-raising give more comprehensive advice.

Fund-raising and Tax

Charitable activities are exempt from most kinds of taxation, including income tax. Fund-raising is not a charitable activity in itself, even though the purposes or institutions for which funds are being raised are themselves charitable. However, if funds are donated, they are generally not taxable. It is only where funds are raised from a trading activity that tax liabilities may arise. There are certain concessions for small events, such as bazaars, jumble sales and fêtes, and for lotteries. Detailed information can be obtained from the Inland Revenue.

Sources of Advice

Advice to charities in individual cases may be obtained from the Commission's Contact Centre on 0845 300 0218 (professional fund-raisers and general fund-raising queries).

• Institute of Fundraising, Park Place, 12 Lawn Lane, London SW8 1UD.
  Telephone: 020 7840 1000
• Gambling Commission, Lotteries Section, Berkshire House, 168/173 High Holborn, London WC1V 7AA.
  Telephone: 020 7306 6200
• Inland Revenue (IR Charities), St. John's House, Merton Road, Bootle, Merseyside L69 9BB.
  Telephone: 0845 302 0203

Remember that this is only a summary of the guidance for charity trustees. More information can be found in the Commission's publication: "Charities and Fund-raising" (CC20), which is available by telephoning our Contact Centre on 0845 300 0218.

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