Charity is seen in some places as privileged for taxation and therefore strictly to be defined.
In the Isle of Man, where the tax aspects are less imperative, the emphasis is on ensuring that (a) the charity is not mismanaged and (b) the public is protected from bogus fund-raising. The emphasis is thus driven not by attracting business to the United Kingdom but preventing tax leakage.
More widely, there is renewed interest in charitable giving, owing to:-
- Increased wealth
- A lack of trust of government
- A desire to see it achieve wider good
- A wish to control the public purposes to which wealth is put
Meaning of "charitable" under Manx law
There is no comprehensive statutory definition of "charity" under Manx law. English common law is persuasive but not binding under Manx law. In In the Estate of Costain [1961-71] MLR 1, Deemster Kneale accepted as substantially correct that Manx law "was more liberal in interpreting what is charitable and in any event not narrower, than the interpretation which English law has put on the Statute of Elizabeth."
Statute has intervened to an extent.
Of course, a charity established in the Isle of Man is unlikely to qualify for treatment as a charity under United Kingdom tax law.
What charitable vehicles are available under Manx Law?
- Unincorporated Associations.
- limited by shares;
- limited by guarantee;
- limited by guarantee and having a share capital;
Institutions holding themselves out as charitable in the Isle of Man must be registered with the court under the Charities Registration Act 1989 section 2, or will commit an offence. This enables the court to supervise charities (see below). It also enables the court to obtain information.
The charity must file a statement and prescribed documents (section 2). The Chief Registrar may refuse to accept any statement for filing if he is satisfied that:-
- The institution is not established for charitable purposes; or
- The institution does not have a substantial and genuine connection with the Isle of Man; or
- The name of the institution is misleading.
Charities must be familiar with the following legislation:
Charitable Collections (Regulation) Act 1939
Charities Act 1962
Charities Act 1986
Charities Registration Act 1989
Charity (General) Regulations 1990
The Religious Charities Regulations 1999
Charities Regulations 2007
The Charities (Exemption) Regulations 2008
THE NEW "LIGHT TOUCH" REGIME FOR "PRIVATE" CHARITIES
The Isle of Man is well geared to financial services, having:
- A well-regulated environment
- An abundant trained work force
- Sophisticated banking services
- Professional support (accountants, lawyers, fund managers, and so on)
There is thus the opportunity to set up a charitable institution where:
- The founder does not wish to raise external funds
- A measure of "privacy" is demanded
- Proper supervision is still required
- There is no particular need for charitable taxation exemption in the United Kingdom.
The Isle of Man has passed the Charities (Exemption) Regulations 2008. They provide for a measure of oversight but exempt appropriate charities from the need to register (and hence to file accounts and annual statements that will be made public).
To qualify for exemption, in broad terms:
(a) Initial funds must originate from a named donor or donors; and
(b) the donor(s) must be identified to the Attorney General.
The name must have been approved by the Attorney General.
(a) Prohibit solicitation or receipt of funds from anyone other than the donor, certain relatives of the donor, a trust settled by the donor or a group company of the donor.
(b) Require that a majority of the officers reside in the Isle of Man and that all meetings take place in the Isle of Man.
(c) Provide for a suitably qualified responsible person who will retain all books, records and documents and accept service
(d) Provide for the Attorney General to be notified of the appointment of officers
(e) Require audited annual accounts
(f) Require that within 6 months of the financial year end a copy of the accounts and auditor's report be sent to the Attorney General together with a certificate that no donations have been received except in compliance with the above requirements
(g) Provide that no amendment may be made to the governing instrument without prior written approval from the Attorney General
The institution must comply with its governing instrument.
SUMMARY OF THE ADVANTAGES
- Privacy – accounts are not open to the public at large
- Security – the charity will be administered by regulated persons under the scrutiny of the Attorney General
- Flexibility – a wide variety of vehicles is available for the establishment of a charity under Manx law
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.
Specific Questions relating to this article should be addressed directly to the author.