Introduction

What is charitable status?

To be a Scottish charity or a charity registered in Scotland your organisation must pass the charity test and be entered in the Scottish Charity Register.

This registration tells the public (and the tax authorities and funding organisations) that:

• your organisation meets the charity test
• your organisation is regulated by the Scottish Charity Regulator
• the charity trustees (the people who control and manage it) must act in certain ways and provide certain information to us and to the public.

What is the charity test?

The charity test is set out in the 2005 Act. Your organisation can only be entered in the Scottish Charity Register and be a charity in Scotland if it passes this test. 

To pass the charity test your organisation will have to meet the following requirements:

• it must have only charitable purposes and
• its activities must provide public benefit in Scotland or elsewhere.

In addition, your organisation will fail the charity test if: 

• its governing document allows its assets to be distributed or applied for non-charitable purposes
• its governing document expressly permits government Ministers to direct or control its activities
• it is a political party or one of its purposes is to advance a political party.

When we look at whether or not your organisation provides public benefit, we need to consider if:

• there is any private benefit from your organisation’s activities
• there is any disbenefit to the public from its activities
• you put any unduly restrictive conditions on accessing the benefit your organisation provides.

In this Guidance we explain how we make our decisions on becoming a charity.

What is a governing document?

A governing document is the document that sets up an organisation and says what its purposes are. It will usually deal with other matters such as:

• who manages and controls the organisation
• what their powers are
• what they can do with the organisation's money and other assets
• how decisions are made
• any rules about membership of the organisation.

An organisation’s governing document will usually depend on its legal form and provides evidence for assessing some key parts of the charity test:

• charitable purposes
• use of assets
• Ministerial control
• party political purposes.

The most common legal forms for charities are:

The charity test and case law

Charity law is devolved in Scotland, and the 2005 Act is the main authority governing charity law in Scotland. In applying the charity test we follow standard principles of legal interpretation. This includes looking at:

• the 2005 Act
• case law in Scotland

other relevant material, including case law in other jurisdictions (for example in England and Wales) which will be persuasive rather than binding.

Tax relief

In UK tax law ‘charitable purposes’ are defined following the law of England and Wales, which differs in a number of respects from Scots law.

We are aware that, while charities and bodies applying for charitable status must pass the charity test, they will also generally wish to qualify for recognition as charities for tax purposes. To achieve this, definitions of ‘charitable’ or ‘charitable purposes’ will need to ensure that the body’s assets can only be used for purposes which are charitable in terms both of the 2005 Act and tax law. OSCR and HMRC will work with applicants and charities to help them achieve this.

More information on these definitions can be found in our Briefing note with HMRC. Further information on Charities and tax can be found on the gov.uk website. 

How we assess the charity test

We look at your organisation’s governing document, the whole picture of what you do (or plan to do), and the benefit your activities provide. We also look at any private benefit, disbenefit or undue restriction. Depending on what your organisation does, these factors may not be issues, but some could have a big impact on your ability to pass the charity test.

We must follow good regulatory principles such as proportionality and consistency, and we apply these when looking at the charity test.

How we make our decisions and what to do if you don’t agree

How we make our decision:

We will use your governing document (or draft version) to decide whether or not your organisation has only charitable purposes (the first requirement of the charity test). 

We will also look at your governing document to see if any of these exceptions apply:

• the use of assets for non-charitable purposes
• ministerial direction or control
• party political purposes. 

To decide on public benefit (the second requirement of the charity test) we look at what your organisation does or plans to do. We look at your application form and any other information you send to support it (for example business plans, grant applications or leaflets). If we need more information, we will let you know.

If your organisation passes the charity test, we will enter it in the Scottish Charity Register and let you know its charity number.

If there is an issue with your organisation passing the charity test, we will usually contact you to explain the problem.  If you cannot resolve the issue and your organisation fails the charity test, we cannot enter it in the Scottish Charity Register and will send you a refusal notice.

What to do if you don’t agree:

If you disagree with our decision to refuse your application to become a charity, you can ask us to review the decision. You must do this within 21 days of our sending you the refusal notice. Our review decision may be to confirm, vary, revoke or reverse the original decision, and we will let you know the outcome within 21 days of receiving your review request.

If you are dissatisfied with the review decision, you can appeal to the General Regulatory Chamber of the First-tier Tribunal for Scotland, then to the Upper Tribunal for Scotland and ultimately to the Court of Session. You must appeal to the General Regulatory Chamber of the First-tier Tribunal for Scotland within 28 days of our review decision. This Tribunal may decide to confirm our decision, to overturn it, or ask us to reconsider our decision.