The decision of the Upper Tax Tribunal and Chancery Chamber in the case of The Independent Schools Council v The Charity Commission for England & Wales was published on 13 October.
The case concerned two related (but separate) sets of proceedings.
The first was an application for judicial review brought by the claimant, the Independent Schools Council (ISC) seeking an order to quash certain parts of guidance issued by the Charity Commission (CC). The guidance concerned comprised of the "Charities and Public Benefit - the Charity Commission's General Guidance on Public Benefit" (issued January 2008) and "Public Benefit and Fee Charging" and "The Advancement of Education for the Public Benefit" (both issued in December 2008). The claim form alleged that the guidance included errors of law in respect of the public benefit requirement as applied to charities which charged fees for their charitable activities, and in particular as applied to independent schools. The defendant was the Charity Commission. The National Council for Voluntary Organisations (NCVO) and the Education Review Group (ERG) were later joined as interveners.
The second was a reference by the Attorney General under the Charities Act 1993 of several questions of charity law to the Tribunal for a decision, concerning a hypothetical independent school. There were no parties to the reference when it was made. The CC and ISC were later joined as parties.
The two proceedings were dealt with in the course of a single hearing. The central issues of both proceedings concerned the public benefit requirement as it applies to independent schools, and in particular (1) what the governing instrument of a school needs to provide in order for the school to be capable of being a charity, and (2) what a school actually needs to do to be seen as operating for the public benefit.
The key points of the decision are as follows:
- Independent schools do have purposes which are for the public benefit, because the nature of the education they provide is for the public benefit.
- A hypothetical independent school whose sole object is the advancement of the education of children whose families can afford to pay fees representing the cost of the provision of their education does not have purposes which provide that element of public benefit necessary to qualify as a charity. This conclusion would be "all the stronger" if the hypothetical school were to charge fees which were significantly in excess of the cost of education in order to build resources for further development of the school's facilities.
- Where a school is, by its constitution, open to all, it is established for charitable purposes only. Where a school does not have a written constitution, or only has an incomplete one, its purposes are established by looking at the evidence.
- When considering whether a school which is a charity is operating for the public benefit in accordance with its charitable purposes, the primary focus must be on the direct benefits it provides, such as scholarships, bursaries, the sharing of teachers or teaching facilities, and making teaching materials or other facilities such as sports facilities available to state schools. However, less weight should be given to benefits which are provided at little cost to the school. The making available of facilities to the community as a whole cannot be taken into account in this context.
- Independent schools must be seen to be doing enough for those who cannot afford fees if they are to operate for the public benefit.
- The public benefit requirement is satisfied if the school provides some benefit for those not able to afford fees which is more than de minimis or token. However, each case must turn on its own facts and the school trustees must decide how this is to be best achieved in the context of the school's own circumstances.
- The CC's guidance referred to above was too prescriptive and wrong in a number of respects, and should be amended.
The decision itself only applies to educational charities, but may have wider implications for other fee charging charities as guidance in other areas may need to be amended. The CC has welcomed the decision and has said that it will update its guidance in light of it (link below).
Other commentators have noted that the wider question as to whether independent schools should retain their charitable status is a matter for Parliament, but that it seems likely that the status quo will remain for the foreseeable future.