All colleges are charities and are subject to the regulations and common law duties that apply to charities. Colleges must act in accordance with the standards set out by the Charities Commission in the exercise of their principal and supplementary powers. The decisions and actions of the governing body will be judged against both areas of legislation and regulation.
A college may be either a registered charity or an exempt charity; however, under the FHEA1992 most colleges became exempt charities. The difference is:
- a registered charity is registered with the Charities Commission and subject to the provisions of the Charities Act 1993. The Charity Commission provides supervision over registered charities and has powers to act to protect the charity
- an exempt charity is not directly supervised by the Charities Commission. Exempt charities are deemed to be adequately supervised by their funding body, the Inland Revenue and the National Audit Office.
Whether the college is a registered or exempt charity, governors are required to:
- act in accordance with the charity's powers and its charitable objects (to act as an educational charity)
- promote the interests of the charity
- ensure that its assets are applied only for its charitable purpose (to provide education)
- safeguard the assets of the charity.
These regulations must be taken into consideration in all aspects of college activity. For example:
- where colleges undertake trading activities they must be directly related to the provision of education. Trading activities that do fall within the charitable objects are activities such as a college restaurant run by students, or a shop selling goods produced by students such as a farm shop in an agricultural or horticultural college
- a gift, sponsorship or payment made by the college must be to provide education or further the college's educational objects.
Tax implications
Under the FHEA1992 all colleges were given charitable status in order to reduce the burden of taxation:
- colleges are exempt from capital gains, income and corporation taxes on income arising from carrying out the college's primary purpose - the provision of education. Income generated from trading activities will be exempt provided that the work is mainly carried out by students in the course of their education and training
- colleges are exempt from stamp duty where a property is transferred from one charitable body to another.
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