Scottish charity law: consultation analysis

Section 6

All charities in the Scottish Charity Register to have and retain a connection in Scotland

Context

To be a registered charity in Scotland a body must have wholly charitable purposes and provide public benefit, but there is no requirement for the body to have any connection to Scotland (with the exception of SCIOs).  This means that OSCR might be compelled to register a charity that meets the charity test but has no activities in Scotland and no trustee connection with Scotland.

The proposed option would be to require all charities in the Scottish Charity Register to have, and retain, a connection to Scotland.  This would not preclude the registration of cross-border charities, which could continue to register with both the Charity Commission for England and Wales and OSCR.  However, this option would mean that charities established under the law of a country or territory other than Scotland, which are managed or controlled wholly or mainly out with Scotland, do not occupy land or premises in Scotland and do not carry out activities in any shop or similar premises in Scotland, would no longer be able to be entered on the Register.

Table 21: Question 17

Should all charities registered in Scotland be required to have and retain a connection with Scotland?

	Yes	No	Not Answered	Total
Individuals	86%	10%	4%	127
Charity Sector	80%	10%	10%	164
Other	69%	13%	19%	16
Total	82%	10%	8%	307

The vast majority of respondents SUPPORTED the proposal that all charities registered in Scotland should be required to have and retain a connection with Scotland (82%).

The main feedback from respondents was that this was a reasonable proposition, and that it was appropriate that OSCR's remit should only extend to charities with a “genuine interest in Scotland”, and whose activities were carried out at least partly in Scotland.  It was viewed essential that all charities on the Scottish Charity Register should have and retain a connection to Scotland, and that it would be broadly consistent with the approach in England and Wales.

In this regard, many respondents questioned why a charity with no connection with Scotland would wish to register with OSCR.  Some concerns raised included that there was a “danger of unscrupulous people registering with OSCR because of perceived gaps in the regulatory framework by comparison with other jurisdictions”, and that it could lead to corruption or fraudulent activity.  

Further, some respondents suggested that the public would likely assume that a charity which appeared on the Scottish Charity Register would have a connection with Scotland (e.g. it was physically based in Scotland or it at least provided some public benefit in Scotland).  As such, the potential for charities with NO connection with Scotland to be registered with OSCR was considered potentially misleading.  Others felt that this risked damaging public trust and confidence in the charity sector in Scotland if it was known that OSCR found it more difficult to effectively regulate such charities.

Where support in principle for this proposition was reported, respondents typically emphasised the associated benefits that this change would bring.  The most commonly reported were identified as follows:

• Improved and more effective regulatory function and oversight by OSCR.
• Strengthened scrutiny, transparency, accountability and credibility of the charity sector in Scotland.
• That it would help build and maintain public trust and confidence in charities, and in charity regulation.
• It would lead to a closer relationship between the charity sector in Scotland and OSCR.
• It would close a loophole in the legislation that had the potential to be exploited – it would help “mitigate against the risk of charities jurisdiction shopping”.

Wider benefits reported by some respondents was that requiring charities registered in Scotland to have and retain a connection with Scotland would ensure better use of OSCR’s time and resources given the inherent difficulties in regulating or taking enforcement action against charities with no connection.  It would also reduce the administrative burden placed on OSCR.

While supportive of the proposal, respondents identified wider points that would need to be considered before any changes were made to the legislation.  A strong message was that OSCR would require to clearly and sufficiently define what is meant by “to have, and retain, a connection with Scotland”.

While some respondents went on to suggest that the connection needed to be “strong” or “substantial”, others called for more detail on what would be regarded as “enough connection”. 

There was strong support for a “sufficiently broad” rather than narrow definition of connection to be used.

Some concerns were raised by cross-border charities or organisations who support these charities (and others) around the potential risk that some cross-border charities would lose OSCR registration due to a lack of a physical presence in Scotland - “new criteria should be inclusive of UK-wide charities and are not so narrowly drawn as to exclude those without premises in Scotland”.  

Some mentioned that for larger cross-border charities such a test would be easy to meet, but that it could have “significant implications” for other types of cross-border and other charities (e.g. federated charities that operated on a UK or GB basis, charitable trusts which awarded grants throughout the UK, charities with a non-UK focus to their work but which carried out fundraising activity targeted at Scotland, etc.).  

Here, concerns were raised about the emphasis placed on charities requiring a physical base in Scotland, with some respondents highlighting a “connection” need not be where the charitable activities take place (e.g. international charities), but that it would be important that part of their governance and operations should be connected to activities in Scotland e.g. trustee meetings, Scotland-specific fundraising (needs to be clear where charitable funds is to be spent).

Ongoing discussions between the Scottish Government, OSCR and The Charity Commission for England and Wales were welcomed to ensure that any risks to charities established in England and Wales and operating in Scotland were identified and managed appropriately.

A range of related points were also raised in a few cases:

• That there should be a definitive set of criteria set out, with examples of what would trigger the need for a charity to register with OSCR.
• There would need to be greater clarity around what evidence would be required to be provided to OSCR by charities that wished to register with them.
• That detailed guidance would need to be developed and communicated widely to the charity sector.

Some 10% of respondents DID NOT SUPPORT the proposal that all charities registered in Scotland should be required to have and retain a connection with Scotland.

These respondents’ emphasised concerns related to the potential implications of the proposal for cross-border charities.  This included a point raised above, namely the emphasis placed on charities requiring a physical base in Scotland.  

It was reported that cross-border charities should be recognised as a charity in Scotland without having to establish a physical base in Scotland.  

Essentially, the view provided was that public benefit tests could be satisfied without occupying land or property.

Wider points raised, but not by many respondents, included:

• There was considered to be a lack of clarity regarding what was meant by “have and retain a connection with Scotland” – e.g. did it mean a requirement to have a physical base in Scotland, that all charitable activities need to take place in Scotland, etc. 

• Concerns were raised around the implication this proposal might have for charities with a registered base in Scotland but where the area of benefit is overseas.

• In terms of “connection with Scotland”, it was reported that this connection should be at the time of the charity’s formation, with some questions raised around the need to maintain such a connection (subject to meeting OSCR obligations, etc.).