THINKING ABOUT BECOMING A CHARITY? A guide to charity structures for Parent Councils/PTAs
Before you decide on a charitable structure, you should carefully consider your reasons for applying for charitable status. Here are some of the most common reasons:
To limit liability: Under the Parental Involvement Act, members of the Parent Council are not personally liable for anything done in good faith. PTAs incorporated into Parent Councils are covered by the Act. SCIOs (see Scottish Charitable Incorporated Organisation (SCIO) section) have the same limited liability. To be able to claim Gift Aid from donations: Remember this requires careful record keeping. To be able to apply for matched funding and/or grants: Matched funding is usually granted by a charitable trust which will match any money you raise. This can be a significant income, particularly for one-off special projects. Being able to get gross rather than net interest on bank accounts: With the amounts Parent Councils and PTAs normally keep in banks, and the current low interest rates, this amounts to very little. Unfortunately, Charities are not exempt from VAT
Remember, charitable status brings extra responsibilities and duties, for you and future committees, and you will need to register with and follow the regulations of OSCR (the Scottish Charity Regulator). See Connect’s leaflet Thinking about becoming a charity? A simple guide to getting charitable status for Parent Councils/PTAs and OSCR’s website www.oscr.org.uk.
Types of charity structures
Unincorporated or voluntary association This type of charity is the simplest form of legal structure and is often appropriate for small scale activities. It is governed by its own rules, but to register as a charity, its constitution must be approved by OSCR.
Advantages Low/no set up costs.
Connect is a trading name of Scottish Parent Teacher Council Company No SC151086 Scottish Charity SC019168
No detailed statutory procedures to follow in relation to members’ meetings etc, however you would need to follow the rules set out in your constitution. You can amend the model constitution provided by Connect.
Disadvantages The organisation is not a legal entity, so liability lies with individuals. Can only enter into contracts/leases in name of office bearers, and not in the name of the organisation.
Scottish Charitable Incorporated Organisation (SCIO) This charity structure has been purpose built for the Scottish charity sector. There are two structures available, two tier and single tier.
The two-tier structure is similar to that of a voluntary association and a company limited by guarantee, where it is the membership of the organisation that appoint trustees and have decision-making powers.
The single tier structure is similar to a trust in that the trustees appoint new trustees and don’t have to answer to a wider body.
Both structures require at least two members (in the single tier SCIO the members and the Trustees are the same people) and must have at least three trustees. Advantages The organisation is a defined legal entity, so liability is limited. The organisation can hold property, enter into leases, and employ people in its own name. Disadvantages The organisation’s existence is dependent on its charitable status: loss of this status means the organisation must cease to exist. Members are subject to some of the same duties as trustees. The organisation has a duty to keep and supply a register of charity trustees and members: SCIOs are not appropriate for organisations with high membership turnover. The organisation cannot convert or amalgamate with a non-SCIO, though it can transfer assets. It requires a much more detailed constitution than an unincorporated association. Connect’s model constitution is not suitable for this type of charity, however SCVO (the Scottish Council for Voluntary Organisations) has guidance on writing a SCIO constitution on its website: https://scvo.org.uk/setting-up- a-charity/decide-on-structure/scio/write-your-scio-constitution.
Trust A Trust is for small groups of people who want to manage money or property on behalf of a third party and is governed by a trust deed. This structure is not suitable for the duties of a Parent Council, and so would need to be a separate organisation.
Connect is a trading name of Scottish Parent Teacher Council Company No SC151086 Scottish Charity SC019168
Advantages Less administration than a voluntary association or SCIO
Disadvantages While a Trust has more of a legal identity than a voluntary organisation, it is still not a full legal ‘entity’ and so individuals are liable. Can only enter into contracts/leases in name of office bearers, and not in the name of the organisation. There is no concept of accountability to a wider membership and so could not hold Annual General Meetings as only the trustees have voting rights. This means it is not suitable for a Parent Council or PTA. As it requires a trust deed, you cannot use Connect’s model constitution. SCVO has guidance on writing one on its website: https://scvo.org.uk/setting-up-a- charity/decide-on-structure/trust.
A Company Limited by Guarantee We do not recommend this structure, as this must also be registered with Companies House and comply with UK Company Law.
This guidance has been reviewed by OSCR February 2019.
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Connect is a trading name of Scottish Parent Teacher Council Company No SC151086 Scottish Charity SC019168