Jersey's innovative system of charity registration opened on 1 May 2018 and:
- offers two alternative categories of registration, with the choice impacting on the accessibility of information on the public register;
- provides for registration to be voluntary, albeit relevant in determining entitlement to certain charitable tax reliefs and to the use of the term "charity".
Jersey is an attractive choice of jurisdiction in which to establish philanthropic structures for a variety of reasons. Chief among these are that the Island offers:
- stability (politically, economically and geographically);
- a robust and highly regarded regulatory regime;
- a well-respected judicial system with adherence to the rule of law;
- a depth and breadth of experience amongst its professional advisers;
- a central time zone, making the Island readily accessible around the globe;
- proximity to the UK and frequent daily flight connections between Jersey and the UK, so that choosing the Island makes practical and logistical sense for those with family connections or business interests in London or elsewhere in the UK.
Trusts and foundations are the two key structures used for philanthropy in Jersey, with the Trusts (Jersey) Law 1984 and the Foundations (Jersey) Law 2009 both placing a strong emphasis on the importance of flexibility, allowing for the creation of structures tailored to meet individual family requirements. The Charities (Jersey) Law 2014 (the "Charities Law") complements these two pieces of legislation by offering a system of registration in the Island, for those wishing to register structures as charities.
Key elements of the Charities Law are that it:
- provides for a Jersey Charity Commissioner (the "Commissioner"), whose functions include the issuance of guidance on the operation of the Charities Law, the operation of the charity register, the administration of the charity test to be satisfied by registered charities, and the supervision of compliance by charity governors with their duties under the Charities Law;
- establishes a register of charities, with general, restricted and historic sections, providing for differing levels of public access to information;
- defines the charity test to be satisfied by structures which are registered under the Charities Law.
In due course, it is proposed that the Charities Law should be extended in its scope, to introduce regulatory standards in relation to registered charities.
Who can apply for registration?
The Charities Law provides for "entities" to apply for registration. The definition of "entity" includes, for example, the trustees of a Jersey trust, Jersey foundations and Jersey companies. As noted above, trusts and foundations are the two key structures used for philanthropy in the Island, and this briefing therefore focuses on Jersey trusts and Jersey foundations: references to trustees of trusts and foundations should be construed accordingly.
The charity test
An entity meets the charity test if:
- all of its purposes (as defined) are charitable purposes or purposes that are purely ancillary or incidental to any of its charitable purposes; and
- in giving effect to those purposes, it provides (or, in the case of an applicant, provides or intends to provide) public benefit in Jersey or elsewhere to a reasonable degree.
However, an entity will not satisfy the charity test if its constitution expressly permits its activities to be directed or otherwise controlled by (or any of its governors - i.e. its trustees if a trust, or its council members if a foundation - to be) Jersey's Chief Minister, a member of the Island's States Assembly (Jersey's government), or someone holding an equivalent position in another jurisdiction, acting in his or her capacity as such.
Charitable purposes: part 1 of the charity test
The Charities Law contains an extensive list of charitable purposes including, for example, advancement of the arts, heritage, culture or science, and the advancement of environmental protection or improvement. It also provides for other purposes to be treated as charitable if they can reasonably be regarded as analogous to those which are listed, and allows for the list of charitable purposes to be added to in due course.
Public benefit: part 2 of the charity test
There is no presumption that any particular charitable purpose is for the public benefit. A named individual or group of identified individuals will not be treated as a section of the public, so that an entity that benefits only such an individual or group of individuals will not be regarded as providing public benefit.
To determine whether the public benefit element of the charity test is satisfied, the Commissioner will:
- compare the benefit to be gained by the public with the benefit to be gained by members of the entity itself or any other people (other than as members of the public) and any disbenefit (harm) likely to be incurred by the public;
- consider whether any condition (such as a charge or fee) on obtaining a benefit which is only provided to a section of the public is unduly restrictive.
Registration and name
When an entity has been registered, it will be given a certificate of registration, confirming its registered name and number and the date of its registration. A registered charity can apply for permission to change its name or to add an alternative registered name and further certificates will be issued once the changes or additions have been registered.
The register is divided into general, restricted and historic sections. An entity can choose to register on either the general or the restricted section, whilst the historic section is for those entities which cease to be registered charities.
Registration on the general section of the register is intended for those entities wishing to register as a charity, to be able to call themselves "charities", to raise funds from the public, and to have full access to Jersey's charitable tax reliefs.
The general section of the register contains prescribed information, including:
- the entity's registered name (and any previous registered names),registration number and registration date;
- details of the entity's status (for example, the trustees of a trust, or a foundation);
- the names of the entity's governors;
- the entity's principal address;
- the address of any other premises in Jersey, other than a private dwelling house, at or from which the entity undertakes any activity;
- the entity's registered charitable purposes and its registered public benefit statement;
- confirmation as to whether or not the entity has submitted its annual return for the most recent year;
- reference to any required steps notice that has been served on the entity or on any of its governors;
- details of financial information (including payments to governors and connected persons) submitted with the entity's application for registration or with its annual returns.
For those not wishing to seek donations from the public, an application can be made to register on the restricted section of the register. The same information will be entered on the register as for registrations on the general section, but only a limited amount of that information will be publicly available. This form of registration is likely to be of interest to those who would like a formal registration (or "label") as a charity, but who will fund the charity with their own money, and would prefer to maintain a lower public profile in relation to their philanthropy.
The historic section of the register will contain prescribed information, including:
- the entity's former registered number;
- if the entity was entered in the general section, its registered names;
- a summary explaining why it was deregistered including, in the case of contravention of a required steps notice, the reason for service of that notice;
- the dates on which the entity was registered and deregistered.
Public access to information on the register
The general rule is that all of the information on the general and historic sections of the register will be publicly available. For entities listed on the restricted section of the register, only limited information will be publicly available, including:
- the entity's registered number, but not its name;
- details of the entity's status (for example, trustees of a trust, or a foundation);
- the entity's registered charitable purposes and registered public benefit statement;
- whether or not the entity has submitted its annual return for the most recent year;
- reference to any required steps notice that has been served on the entity or on any of its governors;
- a summary of the reasons for registration in the restricted section.
In addition, the Commissioner has the power to designate a specified matter - on any section of the register - as not being a public part of the register for that particular entity. This power is available if the Commissioner considers that the safety or security of any person, property or premises would be significantly put at risk by public access to the specified matter.
Effects of registration
The Charities Law details the effects of registration, which include a requirement that the entity must provide public benefit in accordance with its registered public benefit statement and, if it would like to amend that statement, must provide evidence of a reason justifying that request.
The Charities Law requires various matters to be reported to the Commissioner (such as changes to the information recorded on the register, and reportable matters), and provides for the submission of annual returns.
Governors of registered charities
The Charities Law refers to "governors". The governors of a trust will be its trustees, and the governors of a foundation will be its council members. In addition to such governors' duties as trustees or as council members, the Charities Law imposes a duty on governors of a registered charity to seek, in good faith, to ensure that the charity:
- acts in a manner that is consistent with its registered charitable purposes and with its registered public benefit statement; and
- complies with any direction, requirement, notice or duty imposed on it by or under the Charities Law.
The Charities Law details the circumstances in which a governor will be considered to have engaged in misconduct, lists reportable matters (including misconduct), requires a governor of a registered charity to report reportable matters promptly to the charity and to the Commissioner, and contains prohibitions against acting as a governor of a registered charity after a reportable matter has been reported, unless permitted to do so by the Commissioner or by the Royal Court. Contravention of these prohibitions can constitute an offence, liable to imprisonment for one year and to a fine. The Charities Law also empowers the court to issue a disqualification order, preventing a person from acting as a governor of, or from being otherwise involved in the management of, a registered charity. A disqualification order can be for a maximum of 15 years and contravention of such an order constitutes an offence, liable to imprisonment for 2 years and to a fine.
Required steps notice
A required steps notice can be served by the Commissioner on a registered charity and/or any of its governors, requiring steps to be taken to remedy an identified issue.
The Commissioner can call for the provision of information (from a registered charity or an entity that was formerly a registered charity and (in each case) its governors or former governors) that the Commissioner reasonably requires in order to decide whether or not to serve a required steps notice.
The Charities Law specifies circumstances in which the Commissioner can serve a required steps notice, including where the Commissioner believes that:
- there has been misconduct by a registered charity;
- a registered charity does not pass the charity test;
- a governor of a registered charity has engaged in misconduct; or
- a governor of a registered charity is unfit to act as such, because of a reportable matter.
An entity can cease to be registered as a charity - and be "deregistered" - on its own application or, in certain circumstances (such as where an entity no longer meets the charity test), by action on the part of the Commissioner.
The Charities Law prescribes the effects of deregistration, one of which is a requirement that the entity must continue to apply its remaining property in accordance with its registered charitable purposes and registered public benefit statement, as in place immediately before deregistration, unless a court order is obtained to amend this requirement.
Powers of the Royal Court
The Charities Law empowers the Royal Court to make orders, as it sees fit, to remedy misconduct in the administration of a registered charity, to protect its property or ensure that it is applied properly in accordance with the charity's registered charitable purposes and registered public benefit statement.
The court's powers are separate from the Commissioner's powers to take action under the Charities Law in respect of any misconduct.
Appeals to Charity Tribunal
The Charities Law provides for the establishment of the Charity Tribunal, and allows for appeals to be made against decisions of the Commissioner in certain circumstances. For example:
- applicants for registration can appeal against the Commissioner's refusal to register an entity as a charity;
- a registered charity can appeal against the Commissioner's decision to deregister the charity;
- third parties can appeal against the Commissioner's decision to register an entity as a charity, on the ground that, at both the time of the application to register and the time of the appeal, the applicant did not meet the charity test.
The Charities Law also allows for appeals to be made from the Charity Tribunal to the Royal Court.
Registered charities are eligible for the full range of Jersey's charitable tax reliefs, which are as follows:
- exemption from income tax;
- entitlement to recover income tax on certain donations received by way of a lump sum payment or pursuant to a deed of covenant;
- entitlement to reclaim any goods and services tax ("GST") paid and exemption from the requirement to register for GST;
- entitlement to reduced rates of stamp duty and land transaction tax.
Whilst the system for registration of charities opened on 1 May 2018, the provisions in the Charities Law relating to taxation and the use of the word "charity" were not brought into force until 1 January 2019.
Transitional arrangements were put in place in relation to taxation: if an entity was entitled to exemption from income tax under Article 115(a) of the Income Tax (Jersey) Law 1961 immediately before 1 January 2019, and had submitted its application for registration as a charity (and that application had not been finally determined) before 1 January 2019, the entity would retain its tax-exempt status until the end of the following tax year (31 December 2019). Those transitional arrangements have been extended so that, if the entity's application has not been finally determined by the end of 2019, it will continue to retain its tax-exempt status until the end of 2020.
A point to note is that, for trustees or foundations not wishing to register as charities under the Charities Law, exemption from Jersey income tax is available on satisfaction of certain conditions. In addition, tax neutrality is preserved for structures with no beneficiaries in Jersey and no income deriving from land and buildings in Jersey.
Use of the term "charity"
With effect from 1 January 2019, the general rule is that only registered charities (and certain overseas charities) can refer to themselves as a "charity". For those entities choosing not to register, it is still possible to use the term "charitable".
With an innovative registration system for charities, Jersey is well-positioned as a centre of choice for philanthropic wealth structuring:
- The Island's trusts and foundations legislation places a strong emphasis on the importance of flexibility, so that structures can be tailored to each philanthropist's own requirements.
- There is a choice in relation to publicity. For those not wishing to have a public profile in relation to their philanthropy, trusts can be an attractive choice as there is no public registration of trusts in Jersey. For those who are keen to have a public profile, there is a range of registration options to choose from. For some families, registration as a foundation will be appropriate; for others, registration (of a trust or foundation) as a charity under the Charities Law, either on the general section or on the restricted section, will be preferred.
- Jersey is a tax neutral environment in which to establish structures, with Jersey tax exemptions also available subject to compliance with relevant conditions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.