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Private Schools win battle with Charity Commission over their charitable status

The Charity Commission will have to amend its guidance on charitable status for independent schools as a result of a judicial review.18 Oct 2011

The number of bursaries and the level of bursary available to pupils who could not otherwise afford the fees is not the only test of whether an independent school is acting in the public benefit and therefore qualifies for charitable status, according to a decision of the Upper Tribunal.

Provided that some bursaries are provided, other factors can also be taken into account such as arrangements under which students from local state schools can attend classes in subjects not otherwise readily available to them, and the sharing of teachers, teaching facilities and sports facilities with local state schools. 

Since the Charities Act 2006 came into force independent schools have been subject to a changed assumption as to whether they are charitable and must show that they operate for the public benefit.

The Charity Commission issued guidance on how the law should be interpreted in relation to private schools. The Independent Schools Council claimed this guidance was "prescriptive and interventionist." The guidance stressed in particular the need to provide bursaries for poorer pupils.

"Although it is necessary that there must be more than a de minimis or token benefit for the poor, once that low threshold is reached, what the trustees decide to do in the running of the school is a matter for them, subject to acting within the range within which trustees can properly act.  That is something entirely different from imposing on the trustees the view of anyone else about what is “reasonable,” the Tribunal said

The case involved both a judicial review brought by the Independent Schools Council challenging the Charity Commission's guidance on charitable status for independent schools and a request by the Attorney General for interpretation of fundamental points of charity law including whether an independent school charging fees can ever be a charity.

"This was a complex case, and unusual in that it involved both a question of interpretation of the law and judicial review," said Janet Hoskin, a charity law expert at Pinsent Masons, the law firm behind Out-Law.com. "On the point of law the outcome is broadly that fee charging schools need to ensure provision is made to assist those who cannot afford the fees - on this point the Charity Commission is claiming victory.  However the judicial review disagreed with many sections of the Charity Commission guidance which it ordered be amended."

Matthew Burgess, ISC’s General Counsel, said: “The ruling liberates schools to innovate and be creative in their charitable provision.  The Commission’s former approach, now discredited by the Tribunal, had the effect of reducing the public benefit of independent schools to a crude calculation of fees and bursaries.  The Tribunal has recognised the crucial independence of schools to pursue a panoply of public benefit strategies, free from the apprehension of failing to measure up to an artificial arithmetic benchmark.”

"We welcome the Upper Tribunal's decision, and we are pleased that in its judgment the Tribunal agrees with our interpretation of the law on the key issues," the Charity Commission said in a statement. "The Tribunal's decision has been widely anticipated and is an important clarification of what charitable independent schools must do for the poor."

Fiscal befits of charitable status include, rates relief, exemption from tax on investment income and tax relief for donors.

In 2009 the Charity Commission decided that two private schools, St Anselm's preparatory school in Derbyshire and Highfield Priory in Lancashire, had failed the public benefit test. The schools were criticised for failing to give any full bursaries.