Charities and tax exemptions

How does one define a charity? Generations of law students have pondered that deceptively simple question. Though parliament offered its thoughts on the subject as long ago as 1601, it did not come up with a definition until more than 400 years later.

And now that definition is being picked apart by the courts. A test case has just been argued before the First-tier Tribunal (Charity) and I don’t suppose it will stop there. At issue is whether the activities of a particular human rights group are ‘political’. If they are, then those activities cannot be charitable. And if they are not charitable, the group will not be entitled to the valuable tax advantages that charities enjoy.

The case was brought before the tribunal by the Human Dignity Trust (HDT), which was incorporated in 2010 as a company limited by guarantee. Its declared objects are to protect human rights and, in particular, human dignity. But its main purpose is ‘to ensure that international human rights laws which prohibit the criminalisation of private consensual same-sex sexual conduct are respected and applied across the world’. It does this by bringing test cases in foreign courts and international tribunals.

Nobody doubts that this is a desirable aim. More than 80 countries have laws that criminalise private consensual homosexual acts between adults. Individuals face imprisonment and even the death penalty for behaviour that has been lawful in England and Wales for nearly half a century. What better way can there be for lawyers to bring about reform than by testing a country’s laws against its own written constitution or a human rights convention to which it subscribes?

The moral value of that work is not questioned by the Charity Commission, which regulates charities in England and Wales. The commission ‘recognises the aspirational and valuable philanthropic work of the HDT in seeking to remedy what it considers to be instances of injustice’. However, not everything that people regard as beneficial is charitable. It was the commission’s refusal to register the organisation as a charity that the HDT challenged before the tribunal.

A three-woman panel had been selected but one of the lay members was unable to sit and Judge Alison McKenna, the principal judge, went ahead without her. McKenna started briskly, explaining that this was a rehearing of HDT’s application for charitable status rather than a review of the commission’s decision.

She also pointed out that the tribunal’s decision would not amount to a binding precedent – although Tim Otty QC, who chairs HDT’s trustees, fears that if the commission’s decision is upheld it could threaten the status of charities that work for other human rights, such as freedom of speech and protection from torture.

McKenna then heard two days of oral argument, with the HDT represented by solicitors and three counsel (led by Michael Beloff QC at ‘minimal cost’) and the commission represented by its head of legal services Kenneth Dibble.

Those whose understanding of charity law has not moved on much since 1601 may be surprised to know that charitable purposes can now include the advancement of human rights. But that’s not enough by itself: there has to be what charity law regards as a ‘public benefit’. The would-be charity must also be established for charitable purposes only and must be subject to the jurisdiction of the High Court in England and Wales.

The problem for McKenna and her colleague is working out what parliament meant when it referred to human rights. Does the term extend to concepts such as ‘human dignity’, as set out in the Universal Declaration of Human Rights and subsequent UN declarations? If not, it’s difficult to see how the HDT’s purposes can be exclusively charitable.

The tribunal must also decide whether the HDT’s purposes meet the ‘public benefit’ test. Is it enough to show that they benefit a section of the public abroad? Or must they also benefit the public in England and Wales?

Above all, are the purposes ‘political’? The HDT argues that it is merely seeking to uphold constitutional rights. It makes the comparison with Reprieve, a registered charity that provides legal representation for prisoners detained at Guantánamo Bay and others facing the death penalty.

The commission disagrees, arguing that a body seeking to change the law in a foreign state cannot be acting for the public benefit. ‘Political purposes are widely defined,’ says Dibble. They include ‘trying to change the views of governmental authorities in foreign states who may well seek to uphold their laws even if they are said to be against their own constitutions’.

As taxpayers, we have our own views on which bodies deserve tax exemption. McKenna has only the law to guide her. In reality, though, it is McKenna who will be guiding the law.