3. While no longer exempt from the public benefit requirement, the three Pemsel
charitable heads continue to enjoy privileged status compared to other charitable
purposes listed in s.3(1) of the Charities Act 2011.
Discuss.
Income Tax Commissioners v Pemsel5 Lord Macnaghten adopted the following four-part
classification of charitable purposes: “’Charity’ in its legal sense comprises four principal divisions:
trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement
of religion; and trusts for other purposes beneficial to the community, not falling under any of the
preceding heads.”
This classification was used as the basis for the subsequent development of the law
Advantages of charitable trusts:
Tax advantages: charitable trusts are exempt from a number of taxes, including income tax,
corporation tax, and capital gains tax. This enables charities to retain more of their assets and
further their charitable work.
The rule against perpetuities: in contrast to other trusts, property can be dedicated indefinitely to a
charitable purpose (contrast this with the rule against inalienability in relation to private purpose
trusts in chapter 7). By allowing charitable trusts to exist indefinitely, they can develop greater
expertise and resources.
The role of charity commission:
It is down to the Charity Commission to assess whether a trust fulfils these
requirements in order to be a charitable trust. The Commission also has another function; to police
the charities. They are to make sure that charitable organisations are submitting annual returns, that
the trust is still for public benefit and that the charities property is being administered correctly for
public benefit
The Pemsel Heads:
Commissioners for Special Purposes of Income Tax v Pemsel [1891], four general heads of charity
were identified: (i) the relief of poverty; (ii) the advancement of education; (iii) the advancement
of religion; and (iv) other purposes beneficial to the community.
The Charities Act 2006 updated the Pemsel categories by creating 12 new statutory charitable
purposes and one miscellaneous category, which reflect both advances in the law and current
Charity Commission practice. Legislation relating to charities and their administration was
consolidated by the Charities Act 2011 and the new heads of charity can now be found in s 3
Charities Act 2011.- revision guide
Advantages= certainty of object, perpetuity rule, cy-pres rule (nearest alternative gift), fiscal
privileges
1. Are they exempt from the Public Benefit requirement?
Before the introduction of the Charities Act 2011 (or the Charities Act 2006, which was
consolidated in the 2011 Act) the courts adhered to the view that trusts for the relief of
poverty were exempt from the public benefit test. Trusts for the relief of poverty are
charitable even though the beneficiaries are linked inter se or with an individual or small
, group of individuals. In short, it is arguable that trusts for the relief of poverty are not subject
to the strict public benefit test. The practice of the courts has always been to exclude such
trusts from the public benefit test. The justification for this exception or exemption is that
the creation of such trusts is prompted by motives of altruism with inherently public benefit
characteristics, see Lord Greene’s judgment in Re Compton [1945] Ch 123:
The first requirement involves the usefulness of the activity to society (‘the benefit or
merit aspect’). Prior to the Charities Act 2011 a practical approach was adopted
that prima facie assumed that public benefit to the community existed if the purpose was
within the first three heads of the Pemsel classification (trusts for the relief of poverty and
advancement of education and religion). This prima facie approach was assumed
(incorrectly) to create a presumption which had, in any event, been abolished by s 4(2) of
the Charities Act 2011. The effect is that all charitable purposes are put on an equal
footing with the trustees being required to prove that the activity satisfies the test of
usefulness to society within one or more of the stated purposes listed in the statute.
In Independent Schools Council v Charity Commission [2011] UHUT 421, in judicial
review proceedings, the Upper Tribunal decided that on a review of the cases there was
no evidence that the courts had adopted a legal presumption with regard to public benefit.
Instead, the approach of the courts, on a practical level, was to have regard to the purpose
of the organisation in order to determine whether there was a correlation between the
alleged charitable purpose and the public benefit aspect. The public benefit test would be
satisfied if there was no cause for concern. But if there was any credible argument that
this was not the case the court would require evidence to establish the public benefit test.
In deciding whether the ‘benefit aspect’ is satisfied, the approach of the courts is to weigh up
the benefits to society as against the adverse consequences to the public and determine
whether the net balance of benefits is in favour of the public. In Independent Schools Council
v Charity Commission (2011), Warren J expressed the point in the following manner:
This principle may be illustrated by the House of Lords decision in National Anti-vivisection
Society v IRC [1948] AC 31. The court decided that a society whose main object was the
abolition of vivisection was not charitable for its purpose was detrimental to medical science
and was political in the sense that it involved a change in the law.
The second requirement concerns the identification of the class of beneficiaries to be
regarded as the public (the community) or an appreciable section of society. The satisfaction
of the test is a question of law for the judge to decide on the evidence submitted to him.
Further, the courts have decided this question in a flexible manner by reference to the
description of the purposes of the entity within s 3(1) of the Charities Act 2011. In short, the
public benefit test may be approached differently where the trust promotes education, relieves
poverty or advances religion. In Gilmour v Coats [1949] AC 426, Lord Simonds expressed
the point in the following manner:
IRC v Baddeley [1955] AC 572 (see below), a gift to promote recreation for a group of
persons forming a class within a class did not satisfy the public benefit test. Lord Somervell
expressed the flexible approach to the public benefit test, thus:
charitable heads continue to enjoy privileged status compared to other charitable
purposes listed in s.3(1) of the Charities Act 2011.
Discuss.
Income Tax Commissioners v Pemsel5 Lord Macnaghten adopted the following four-part
classification of charitable purposes: “’Charity’ in its legal sense comprises four principal divisions:
trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement
of religion; and trusts for other purposes beneficial to the community, not falling under any of the
preceding heads.”
This classification was used as the basis for the subsequent development of the law
Advantages of charitable trusts:
Tax advantages: charitable trusts are exempt from a number of taxes, including income tax,
corporation tax, and capital gains tax. This enables charities to retain more of their assets and
further their charitable work.
The rule against perpetuities: in contrast to other trusts, property can be dedicated indefinitely to a
charitable purpose (contrast this with the rule against inalienability in relation to private purpose
trusts in chapter 7). By allowing charitable trusts to exist indefinitely, they can develop greater
expertise and resources.
The role of charity commission:
It is down to the Charity Commission to assess whether a trust fulfils these
requirements in order to be a charitable trust. The Commission also has another function; to police
the charities. They are to make sure that charitable organisations are submitting annual returns, that
the trust is still for public benefit and that the charities property is being administered correctly for
public benefit
The Pemsel Heads:
Commissioners for Special Purposes of Income Tax v Pemsel [1891], four general heads of charity
were identified: (i) the relief of poverty; (ii) the advancement of education; (iii) the advancement
of religion; and (iv) other purposes beneficial to the community.
The Charities Act 2006 updated the Pemsel categories by creating 12 new statutory charitable
purposes and one miscellaneous category, which reflect both advances in the law and current
Charity Commission practice. Legislation relating to charities and their administration was
consolidated by the Charities Act 2011 and the new heads of charity can now be found in s 3
Charities Act 2011.- revision guide
Advantages= certainty of object, perpetuity rule, cy-pres rule (nearest alternative gift), fiscal
privileges
1. Are they exempt from the Public Benefit requirement?
Before the introduction of the Charities Act 2011 (or the Charities Act 2006, which was
consolidated in the 2011 Act) the courts adhered to the view that trusts for the relief of
poverty were exempt from the public benefit test. Trusts for the relief of poverty are
charitable even though the beneficiaries are linked inter se or with an individual or small
, group of individuals. In short, it is arguable that trusts for the relief of poverty are not subject
to the strict public benefit test. The practice of the courts has always been to exclude such
trusts from the public benefit test. The justification for this exception or exemption is that
the creation of such trusts is prompted by motives of altruism with inherently public benefit
characteristics, see Lord Greene’s judgment in Re Compton [1945] Ch 123:
The first requirement involves the usefulness of the activity to society (‘the benefit or
merit aspect’). Prior to the Charities Act 2011 a practical approach was adopted
that prima facie assumed that public benefit to the community existed if the purpose was
within the first three heads of the Pemsel classification (trusts for the relief of poverty and
advancement of education and religion). This prima facie approach was assumed
(incorrectly) to create a presumption which had, in any event, been abolished by s 4(2) of
the Charities Act 2011. The effect is that all charitable purposes are put on an equal
footing with the trustees being required to prove that the activity satisfies the test of
usefulness to society within one or more of the stated purposes listed in the statute.
In Independent Schools Council v Charity Commission [2011] UHUT 421, in judicial
review proceedings, the Upper Tribunal decided that on a review of the cases there was
no evidence that the courts had adopted a legal presumption with regard to public benefit.
Instead, the approach of the courts, on a practical level, was to have regard to the purpose
of the organisation in order to determine whether there was a correlation between the
alleged charitable purpose and the public benefit aspect. The public benefit test would be
satisfied if there was no cause for concern. But if there was any credible argument that
this was not the case the court would require evidence to establish the public benefit test.
In deciding whether the ‘benefit aspect’ is satisfied, the approach of the courts is to weigh up
the benefits to society as against the adverse consequences to the public and determine
whether the net balance of benefits is in favour of the public. In Independent Schools Council
v Charity Commission (2011), Warren J expressed the point in the following manner:
This principle may be illustrated by the House of Lords decision in National Anti-vivisection
Society v IRC [1948] AC 31. The court decided that a society whose main object was the
abolition of vivisection was not charitable for its purpose was detrimental to medical science
and was political in the sense that it involved a change in the law.
The second requirement concerns the identification of the class of beneficiaries to be
regarded as the public (the community) or an appreciable section of society. The satisfaction
of the test is a question of law for the judge to decide on the evidence submitted to him.
Further, the courts have decided this question in a flexible manner by reference to the
description of the purposes of the entity within s 3(1) of the Charities Act 2011. In short, the
public benefit test may be approached differently where the trust promotes education, relieves
poverty or advances religion. In Gilmour v Coats [1949] AC 426, Lord Simonds expressed
the point in the following manner:
IRC v Baddeley [1955] AC 572 (see below), a gift to promote recreation for a group of
persons forming a class within a class did not satisfy the public benefit test. Lord Somervell
expressed the flexible approach to the public benefit test, thus:
