Private Charities

30 March, 2009
by: Cripps Pemberton Greenish

The expression “private charity” is a contradiction in terms. How can a charity, by law established for public benefit, ever be “private”? 

Most commonly the description is applied to a charity, usually grant making, established by and funded by an individual who retains substantial control of or at least influence over the activities of the charity. Generally, though not inevitably,  such charities are established as a trust rather than as a corporate body (hence the alternative title of “private charitable trusts”).

Such charities are usually administered by a professional administrator and don’t have staff. Grant making decisions are taken from time to time according to the size of fund, and typically the fund will be held as a share portfolio and cash. Generally the charity will have the minimum number of trustees. They are often cost efficient, because the original donor makes it his/her personal interest to minimise cost.

The motives for creating a private charity vary; tax incentives make a difference to the decision, and the idea of obtaining tax relief but deferring a decision as to the application of benefit appeals especially to wealthy individuals because they can retain a more personal and active involvement in the decision making processes of “their” charity and an interest in outcomes in a more complete way than by making donations to charitable collective funds such as those run by CAF.

These charities usually hold their funds in the form of a share portfolio or cash, although alternative forms of investment are entirely permissible.

Private charities are not so categorised in law, so they are subject to the same governance principles and rules as those affecting public donation charities.  Many charities have started life this way and have grown into public donation charities, as a natural development. However others exhaust their charitable funds and having served their purpose are wound up.

The set up cost of a charitable fund of this sort is in the range £2000-£3000 depending on how specific the objects are designed to be; very often it is sufficient simply to establish a charitable trust with general charitable objects, leaving the donor/trustee to identify good causes.

Reviewed in 2015