1. Do you need to be a charity?
Summary
An organisation can only call itself a charity in Scotland after it has been registered by OSCR and put on the Scottish Charity Register.
Having charitable status tells the public, your supporters, funding organisations and people who benefit from your charity, that:
- your charity meets the charity test
- it is regulated by the Scottish Charity Regulator (OSCR)
- its charity trustees (the people who control and manage it) must meet certain duties and provide certain information to OSCR and to the public.
There are benefits that come with being a charity (like some tax reliefs), however it is not the right option for everyone, and you need to balance these against the legal obligations that come with being a charity.
It’s not uncommon for people to think they need to set up a charity to do certain things, when that’s not always the case.
The sections below detail the research you must do and the advice you must seek before deciding to become a charity and proceeding with an application to OSCR.
Do you want to start a charity, or do you want to raise money?
If all you want to do is raise money for a good cause or an existing charity you don’t need to set up your own charity.
If you do plan to fundraise you will need to follow the rules in the Code of Fundraising Practice and its associated Rulebooks for Street, Door and Private Site fundraising. The Institute of Fundraising Scotland can give advice on fundraising.
Remember: it is against the law to describe yourself as a charity unless you are on the Scottish Charity Register.
Is there a need for what you want to do?
There are lots of charities carrying out very similar activities. What makes your idea for a charity different?
Before applying to become a charity you should look through the Scottish Charity Register to see if there is already an organisation carrying out your activities that you might partner with.
Is there an existing charity you could get involved with?
There are over 25,000 charities registered in Scotland, doing a huge range of activities. Why not work with one of them, volunteer or apply to become a charity trustee? These organisations can help with volunteering opportunities:
Will you have enough future funding?
Raising money through grants, fundraising or trading might start well, but we see charities struggling after a few years because their funding is not sustainable. Think about what you might need in the longer term as well as start-up costs.
Have you thought about the non-profit alternatives to being a charity?
The third sector in Scotland is made up of many different types of organisations, not just charities. Around half of the voluntary organisations in Scotland are not charities.
Some of these organisations can also be charities, but they don’t have to be, and some cannot. For example:
- Social enterprises
- Voluntary organisations
- Community benefit societies (Ben com)
- Community interest companies (CICs)- please note that a community interest company cannot be a charity.
Advantages and disadvantages to being a charity
Advantages:
- Gives confidence to the public and funders that you are regulated.
- Can have financial benefits, some funders will only work with charities.
- Some tax benefits and rates relief from being a charity.
- Can open up new opportunities for funding and collaboration.
- Charity trustees have collective responsibility. Running a charity is a team effort and everyone is equally responsible.
Disadvantages:
- Being regulated brings with it legal responsibilities to act in specific ways:
- it puts limits on activities or purposes
- charities must provide certain information to OSCR and the public
- there are annual reporting requirements
- you need OSCR’s permission before making a number of changes
- collective responsibility means that charity trustees need to work together even when they don't all agree.
- Not just charity law to consider.
- Charitable status does not equal funding.