Changes in Scotland’s charity sector

Changes in Scotland’s charity sector: what does it mean for English-based organisations? Our guest contributor, Helen Kidd who is an Associate at Brodies LLP, considers the regulatory and legislative changes for charities in Scotland during 2019.

2019 has been a busy year of regulatory and legislative change for the charities and third sector in Scotland. There has been new legislation introduced, potential wider reform put in motion and cases that will impact on how any organisation – English or Scottish-based - operates north of the border. Here are some of the headline current Scottish developments.

Political campaigning rules

With the general election fresh in our minds it highlights the rules and expectations for charities that engage in campaigning and influencing in the political sphere. There are specific Scottish rules to consider stemming from the Scottish Lobbying Register (different to and separate from UK-wide lobbying legislation) and Office of Scottish Charity Regulator (“OSCR”) guidance about campaigning on political issues. In the General Election context, electoral law has differences in Scotland around spending levels if Electoral Commission registration is triggered for a charity. As ever, charities should carefully consider engaging in political campaigning and ensure it is based on furthering their charitable purposes.

Non-Domestic Rates (Scotland) Bill – impact on charities and third sector organisations

In Scotland relief from non-domestic rates is available for land occupied by a charity (that means one registered with OSCR) and used wholly or mainly for charitable purposes. The new Bill was introduced to the Scottish Parliament on 25 March 2019 has now passed its first stage of the parliamentary process. For charities and third sector bodies the Bill:

  • removes the charities rates relief exemption for independent schools (subject to a small number of exceptions); and
  • introduces a power for the Scottish Ministers to issue guidance to local authorities, to which local authority must have regard, about the exercise of their discretion to grant rates relief to not for profit clubs, societies and organisations. Third sector organisations (perhaps with sports organisations being a focal point) will need to consider any potential impact on them and their activities once the guidance has been produced.

The background to the Bill (the Barclay Review of Non-Domestic Rates) also highlights that charities rates relief should be given to charities and should not be erroneously given to e.g. trading subsidiaries of charities. This background may lead to an overall tightening of charities rates relief including when the discretionary element is afforded to charities.

Freedom of Information and social landlords

As of 11 November 2019, The Freedom of Information (Scotland) Act 2002 (“FOISA”) has now been extended to registered social landlords (“RSLs”). This means that tenants and other individuals will be able to request information from RSLs that, until 11 November, would not have been available. Charites are generally not subject to FOISA. Scotland’s RSLs are not complete strangers to information law, as they are already subject to the right of access to environmental information set out in the Environmental Information (Scotland) Regulations 2004. That said, the application of FOISA will place significant new obligations and resourcing requirements on RSLs and will mean implementation of new policies and procedures to ensure they are able to comply with the new regime.

A new disclosure regime – the Disclosure (Scotland) Bill

Charities working with children, young people and vulnerable beneficiaries will need to know about changes to the disclosure regime. It will affect policies and procedures and ultimately changes the Protection of Vulnerable Groups (“PVG”) scheme. The Bill modifies disclosable previous convictions and information (partly due to court challenges). An aim of the Bill is also to simplify the PVG scheme, which currently has its complexities. The Bill proposes to reduce the number of disclosure ‘products’ to help organisations and the public understand and use the scheme. The aim is a simpler scheme, but charities and third sector bodies will need to get to grips with the Bill and the changes it will bring.

Scottish charity law consultation – where are we now?

On 1 April 2019 the long-anticipated consultation on the Charities and Trustee Indemnity (Scotland) Act 2005 closed. The consultation focussed on 10 largely technical proposals for reform, covering topics such as (i) the publication of unredacted annual accounts, (ii) a charity trustee database, (iii) introducing a power for OSCR to issue positive directions to charities, and (iv) the registration of cross-border charities, amongst others. In July 2019, Scottish Government (“SG”) reported that 309 responses were received which were largely in favour of the adoption of these technical proposals. SG’s 2019 ‘Programme for Government’ said work will continue work on the reform project and we await to see if and when legislation might appear.

As noted, the consultation topics were tightly focussed. Many responses to the consultation are encouraging a wider look at Scottish charity law. Respondents thought that a wider review could look at topics such as:

  • the Scottish charity test itself;
  • the definition of public benefit;
  • the place of social enterprise in today's charity landscape;
  • the nature of Scottish Charitable Incorporated Organisation (“SCIO”) members’ duties and responsibilities and the rules governing the wind-up, insolvency and dissolution of SCIOs (with respect of the latter there is currently a working party looking at recommendations to streamline the dissolution/insolvency of SCIOs); and
  • whether Notifiable Events (similar but different to Serious Incident Reporting) should have a statutory basis.
What's on the horizon?

These are a number of the main regulatory changes happening in Scotland. There have also been important cases affecting charities in areas as diverse as charities and trading, contentious estate matters and health & safety. 2019 has seen changes. The 2020 horizon shows no let-up in specifically Scottish legal and regulatory issues that charities and third sector organisations wherever based will need to be alive to when working in Scotland.

Helen Kidd, Associate, Brodies LLP

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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