Independent Schools Tribunal decision

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16 December 2011

The Upper Tribunal has published its decision regarding the public benefit requirement for independent schools.

The main decision followed two sets of proceedings. The first was an application for judicial review by the Independent Schools Council ("ISC"), seeking an order quashing parts of the Charity Commission's guidance on public benefit. The second was a reference from the Attorney General asking certain specific questions about the operation of charity law in relation to a hypothetical independent school.

The case follows a period of much uncertainty in the independent schools sector following the introduction of the Charities Act 2006. The Act provides that there is no presumption that any particular charitable purpose (including education) meets the requirement that the charity must be for the public benefit. The guidance which the Charity Commission subsequently published left many trustees (governors) of private schools worrying about how and whether their school could meet this test.

The Tribunal's decision

The Tribunal concluded that the introduction of Charities Act 2006 did not in fact change the position on public benefit, at least in respect of independent schools, but rather it brought into focus what the pre-existing law required. It did conclude that some of the Charity Commission's guidance following the Act was erroneous, broadly because it set the benchmark too high.

The decision refers to two strands of the public benefit test. The first is whether the purpose of the charity is of benefit to the community. In this respect the Tribunal concluded that mainstream education of school children will nearly always meet this requirement.

The second is whether those who benefit are sufficiently numerous to constitute a section of the public. It is this limb of the test where private schools may fall down because a requirement to pay fees excludes those who cannot afford them.

However, the Tribunal concluded that satisfaction of this second limb does not mean that fee paying schools will necessarily fail the test. Provided they allow the 'poor' to benefit in a way which is more than 'de minimis' or 'tokenistic', the test can be satisfied. However, ultimately, it is for the trustees of a particular charity to decide how they will provide for the poor. This might be by way of providing bursaries to certain families who cannot afford the fees, but could also be in other ways such as making facilities available, or sharing teachers and/or teaching materials.  

In addition, the Tribunal stated that 'poor' needs to be taken in context and does not necessarily mean 'destitute' but can include those whose families cannot afford to pay the fees in question.

Implications for schools

The Charity Commission has abandoned its investigations into independent schools and will publish new guidance in due course (more on which is set out below). Private schools are really left in the same position as they have always been. Trustees have a responsibility to ensure that the school does provide benefits to the poor in more than a minimal way, but the 2006 Act did not make this requirement more onerous.

Of course this does not mean that trustees can be complacent; they must be careful to ensure that the constitution and activities of the school do not exclude the 'poor' from benefiting in a way or ways which are appropriate for the school in question.

Implications for other sectors?

The Tribunal's decision was confined to the private education sector, however, it is thought that the Commission is likely to have to revisit its guidance in relation to other sectors which often include fee paying charities such as in health care and the arts.

The Charity Commission's guidance

The ISC and the Charity Commission were invited by the Tribunal to agree an order in relation to the Commission's guidance. However, having failed to reach agreement, the matter was referred back to the Tribunal which ruled, at the beginning of December, that it would quash the parts of the guidance which were found to be erroneous if the Commission did not withdraw these parts within 7 days. The Commission has now withdrawn the relevant parts of its guidance and is aiming to produce revised guidance in Summer 2012. In the meantime its interim guidance can be found on the Charity Commission website.

For further advice please contact Nicola Manclark by email nicola.manclark@burges-salmon.com or Charles Wyld by email charles.wyld@burges-salmon.com.

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