Starting a Charity
This guide may be useful if you are planning to start a new charity in Guernsey. It is not intended to be absolute or comprehensive, but indicates certain areas for consideration.
Each year many new organisations are planned, but few are ever started. At first, it may seem that where a particular need exists, an organisation could easily be set up to satisfy that need. However, in many instances, there is already a service available (whether provided by the States of Guernsey, the private sector, or a charitable organisation), or maybe an existing organisation would be able to widen its remit to incorporate some additional objectives.
The first thing to consider, therefore, is whether a new charity is really necessary. A good place to start is the internet, where a visit to The Association of Guernsey Charities website (www.charity.org.gg) may locate another local organisation with similar aims.
Invariably, it would seem preferable to enlarge the aims of an existing organisation, rather than start a new one, especially when considering areas such as fund-raising, and staffing the organisation. Most charities would also benefit from a larger membership (rather than many small organisations, each with a few members).
If you decide that there is a clear need for a new charity (for example, to provide a new service to the island), then there are several areas that require consideration.
Types of Charity
There are three types of charitable organisation:
1. A Charitable Trust
Normally applies to small groups, or groups that will not have a general membership. A Trust is run by Trustees and is governed by a Trust Deed.
2. A Charitable Company
A Company Limited by Guarantee may be desirable for organisations wishing to protect its members and officers (the Directors), as liability is limited to a nominal amount (as stipulated in the company Memorandum and Articles of Association).
3. An Unincorporated Charitable Association
Most charities fall within this group (i.e. they are neither a Trust nor a Company) since it is easier to set up and administer. Normally, an association has a membership who periodically elect members of a management committee to run the organisation and uphold the terms and conditions laid down in its constitution. As an association is unincorporated, there is no protection afforded to the officers should the association not be able to meet its debts.
Once you have decided on the type of charitable organisation you wish to set up, you will need to plan and draw up a governing document. This will not only be the terms of reference for your organisation and its members, it will be required to establish and verify your aims and objects to third parties.
Most charities (irrespective of type) will have the need of a bank account. It is reasonably common to have more than one account in order to keep fund-raising monies (for a particular project, or research, etc.) separate from money reserved for the day-to-day expenses of the organisation.
Many banks offer charitable organisations preferential accounts that are not charged the usual business banking fees. They may also offer an interest-bearing account (which may be of particular interest if you envisage raising reasonable sums of money).
It is usual for charitable accounts to require two signatories for issuing cheques, etc. A mandate should be prepared containing the details of all designated signatories on the account (this will obviously need to be revised as changes to the officers or key staff occur and it is vital that people no longer eligible to be signatories are promptly removed from the mandate).
With the setting up of bank accounts, it is desirable to designate one person to manage the organisation’s finances. The Treasurer is normally responsible for constantly maintaining accurate records, reporting details of the organisations finances to its members, and the preparation of annual accounts.
The Charities and Non Profit Organisation (Registration) (Guernsey) Law, 2008 requires all Non Profit organisations based in the Islands of Guernsey, Alderney, Herm and Jethou to register with the Office of the Registrar. A failure to do so is an offence. However there is an exemption from this requirement which applies to organisations with gross assets and funds of less than £10,000, or gross annual income of less than £5,000.
Charities and NPO's need to re-register on an annual basis in January. Failure to register before the end of January is an offence.
Registration is administered by the Guernsey Registry. Application forms together with further information for charities, can be found on their website: www.guernseyregistry.com/charities
Any income received by a Guernsey Registered Charity, registered in accordance with The Charities and Non-Profit Organisations (Registration)(Guernsey) Law, 2008 (and this includes a charity not required to register with that Law) is exempt from Income Tax under Section 40(k) of The Income Tax (Guernsey) Law, 1975 if and so far as the income is applied to charitable purposes only. It is not therefore necessary to ask the Director of Income Tax for separate confirmation that the income of a Guernsey Registered Charity is exempt nor that it holds charitable status, as that can be checked by referring to the public version of the register maintained by Guernsey Registry (http://www.guernseyregistry.com) .
A Non-Profit Organisation which is not a Guernsey Registered Charity is not taxed on income (e.g. subscriptions and the like) received from its members but is taxable on any income received from non-members (at 0%), property income (including “Terre a L’Amende”) at 20% and other investment income such as bank interest also at 0%. It is therefore necessary for Non-Profit Organisations to submit a tax return on an annual basis supported by accounts, in a similar way to other clubs and associations.
The Association of Guernsey Charities
At this stage, you may wish to apply for membership of The Association of Guernsey Charities. The Association has over 270 members, and there are many benefits to membership. Details can be found on its website (www.charity.org.gg) which also contains information on how to join. Members’ details will also be loaded on to the website in order that members of the public can find and make contact with each charity.
The Association of Guernsey Charities (which itself has charitable status) has produced a variety of information sheets to assist charities in attaining certain standards of practice. These include a form for self-assessment to enable charitable organisations to examine their procedures and, where appropriate, make adjustments to operate in a more appropriate fashion.
This information is offered to assist anyone considering forming a new charity. It should not be regarded as comprehensive and charities should take appropriate advice to ensure they comply with their obligations. The Association of Guernsey Charities accepts no responsibility for any person or organisation using these guidelines.