The Finance Act 2010 introduced a new definition for tax purposes of charities and other organisations entitled to UK charity tax reliefs. The definition includes a requirement that to be a charity an organisation must satisfy the 'management condition'.

This new definition applies to Gift Aid with effect from 1 April 2010 and is due to be extended to other charity tax reliefs later in 2010. 

HMRC have issued detailed guidance in the fit and proper persons test. HMRC state that 'For a charity to satisfy the management condition its managers must be fit and proper persons. There is no definition in the legislation of a 'fit and proper person'. This guidance explains how HM Revenue & Customs (HMRC) applies this test to those who have the general control and management of the administration of the charity.'

It goes on to say that 'HMRC assumes that all people appointed by charities are fit and proper persons unless they hold information to show otherwise. Provided charities take appropriate steps on appointing personnel then they may assume that they meet the management condition.'

The guidance suggests charities when appointing a new manager use the model declaration in the guidance and it suggests the following procedure:

  • Charities should ask all newly appointed managers to read the basic guide and sign the model declaration.
  • Assuming the manager signs the model declaration the charity should keep that declaration in case HMRC asks to see it. The declaration should be kept for the duration of the manager’s engagement with the charity, and for four years after the manager has departed.
  • If the new manager is to be one of the 'responsible persons' or the 'authorised official' as described below the charity will need to notify HMRC of their appointment on form ChV1.
  • The charity can then assume they meet the management condition unless HMRC contacts them.
  • If the manager refuses to sign the declaration (and refuses to comply with any other attempts by the charity to verify their suitability as a fit and proper person) then the charity should decide for themselves whether that person should be appointed as a manager of the charity and what financial responsibilities they should be given.
  • If the person signs the model declaration but adds information in the box the charity will need to consider that information and decide whether to seek advice from HMRC on what to do.

The guidance also states that 'Charities only need to inform HMRC', on form ChV1, 'when the following people change:

  • the authorised official
  • nominees
  • agents
  • responsible persons.'