Why are universities, churches and private schools charities?

The law relating to charitable status has developed over a number of centuries, which means the picture can be a bit complicated.

Many organisations which operate for ‘public benefit’ but are not part of the state hold charitable status, such as universities, housing associations, and certain museums. A number of other organisations, while they are charities in law, don’t need to register with the Charity Commission.

Universities, housing associations, certain museums

Some charities, for example, universities and housing associations, are known as ‘exempt charities’. While they are charities in law they do not have to register with the Charity Commission. They are regulated instead by other bodies. (For example the Higher Education Funding Council for England in the case of universities in England, or the Homes and Community Agency in the case of housing associations in England.) A number of specific museums, set out in law, are regulated by the Department for Culture, Media and Sport.

Churches and Scouts and Guides groups

Some charities are ‘excepted’ from charitable registration. They are still charities, and are still regulated by the Charity Commission, but they’re not required to register with the Commission or to submit annual returns to it provided their income is below £100,000 a year. The main types are churches of specified denominations and Scouts and Guides groups. The exception for churches is due to end in 2021, when they will need to register as charities.

Independent schools

Most independent schools are registered charities. This means that they cannot operate for profit, and must show that they are creating public benefit.

This has been a controversial area in the recent past.

Prior to 2006, when the law changed, independent schools could automatically claim charitable status. After this, they had to demonstrate that they were creating public benefit in order to maintain their charitable status. The Charity Commission at the time tried to impose a number of requirements on schools regarding how they went about this, such as defining what bursary schemes they must offer. This was challenged by independent schools, and in 2011 the high court decided that the Charity Commission was being too prescriptive.

The court said that independent schools had to generate a meaningful amount of public benefit (i.e. benefits for the public, in addition to the benefits that fee-paying pupils received), but that it should be up to individual schools how they go about doing this.