Unincorporated Charitable Association - What One Is And How To Set It Up

This guide to unincorporated associations, explains what an unincorporated charitable association is,

What Is An Unincorporated Charitable Association, Unregistered Charity?

What is an unincorporated charitable association?  It's an unregistered or non registered charity, club, or community group.  Essentially, a small UK charity that has not been registered (incorporated) with the Charity Commission, or other regulator.  It has limitations, but it's not illegal to run an unregistered charity, is extremely quick and simple to set up, you can have an association bank account and also carry out fundraising and apply for grant funding.  For many it may well be a good alternative to registering your charity.  There are an estimated 100,000 in the UK - that's about a quarter of the entire UK charity sector.

Setting Up An Unincorporated Charitable Association

Setting up an unincorporated association takes about half an hour and costs absolutely nothing. All you need is a constitution and people to act as your trustees (ideally at least 3). Use the guidance below to create your constitution.

Can an Unincorporated Association Have a Bank Account?

Once your unincorporated association is set up, you can have bank account.  This can be pretty time consuming, and some banks will now only accept registered charities.  To help, I've created a guide to opening a bank account with links to the most well-known banks.  The reason that's important is you need to have a bank account in your association’s name to receive grants.

Can You Fundraise Without Being a UK Charity?

People fundraise for all sorts of things, like personal medical expenses, but unincorporated associations (like any other charity) must be open to everyone who is eligible.  You cannot claim to be a charity, if the fundraising is for yourself or family.

You won't usually find the term unincorporated association on grant makers' websites.  The terminology varies, so look for community group, constituted group, micro charity, grass roots group, or similar.

Some funders will only fund registered charities, but you can use the Small Charities & Community Groups search category in the free Funding Finder to find those most suitable for you.  The National Lottery Awards for All fund is a good one to start with.

You can also register with HMRC to claim Gift Aid.

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Limitations In Setting Up An Unincorporated Association

Charitable companies and CIOs are incorporated (Charitable Trusts aren't). That's important, because if something goes wrong they have limited liability. For an unincorporated association, when you enter into a contract or agreement, it is with you, not your unincorporated association. If you were to be sued, it would be you, not the community group.

The risk of that may be very low, so not an issue. However, you should consider any risks that, whilst extremely unlikely, could have major implications. For example, a lease on premises, employing staff or involvement in risky activities, such as a bungee jumping fundraiser. You should consider taking out charity insurance, or maybe reviewing your personal insurance, so that you have adequate cover, just in case.

If your annual income exceeds £5000 a year, you are required to register with the Charity Commission.

When Setting Up An Unincorporated Association May Be The Best Choice

In my experience, almost everyone wants to set up a registered charity.  It has major advantages - it provides limited liability and there's no question that it's the best in terms of fundraising.  However, you probably want to get started as soon as possible on your charitable work, so do you really need all the time and cost of registering a charity?  And having done so, possibly finding out that an unincorporated association or CIC might have been a better choice?

Unincorporated associations can be a great choice. Here are some things to think about to help you decide. We:

• Want to set ourselves up very quickly, with the minimum of administrative work.
• Don't have the funding/capacity to set up a registered charity or CIC.
• Are likely to remain small, with income under £5000 a year.
• Are just setting out and aren't sure where this will end up.
• Won't be entering into contracts or agreements or undertaking activities that would pose an unacceptable level of risk to ourselves personally.

If risk is an issue for you, you could consider setting up a private company limited by guarantee with Companies House.

How To Set Up An Unincorporated Charitable Association

Setting up your unincorporated association or unregistered charity is really quick and easy.  All you need is:

• A name - I think that something short that perhaps relates to your work and appeals to people works best.
  • Google you name to make sure there aren't similarly names organisation locally, as you don't want to be confused with someone else.
  • If you may wish to register, pick a name that isn't the same as an existing registered charity.
• A constitution with charitable objects - this includes your name, what you will do (objects - see below) and how you will run your charity.
  • The Charity Commission has a template you can simply fill in.
  • Click here and scroll down to the Charity Commission Model Constitution for a Small Charity (Word Version) - 2nd from bottom
• Three trustees - you must be at least 16 years old and there are a few other limitations, but almost anyone can be a trustee.
  • If 2 of your trustees are closely related, or business associates, you will need at least 4, as there must be a minimum of 2 independent trustees.

Setting Up - Charitable Purposes And Objects

The Charities Act has 13 charitable purposes.  Your objects are the work your charity does and must fall within one or more of these.  A good way to approach this is to imagine a year or 2 in the future when you will be achieving everything you realistically hope to do.  What difference will you have made? That is your charitable purpose.

Next, ask yourself:

• Who are our beneficiaries?
  • People living in poverty, or young people aged 15 to 25.
• Where will we be doing this?
  • Aston Clinton Village (where I live) or Africa.
• How will we be doing this?
  • By making grants, providing goods or services, advocacy, raising public awareness or something else.

I'm not being strictly correct, but a charitable object basically = our purpose + how we do that + who we do that for + where we do that.  Fundraising is very important, but is not in itself a charitable purpose.  Here's what one might look like:

The prevention or relief of poverty in Aston Clinton by providing grants, items and services to individuals in need and/or charities, or other organisations working to prevent or relieve poverty.

You can have more than one object, but I try to limit the number and keep these short and clear.   The Charity Commission provides a range of example charitable objects that you could use or modify to suit your needs.  Alternatively, search for a similar charity to yours on the Charity Commission register and use or amend theirs.

A Free One Stop Shop for Everything Your Unincorporated Association Needs

• Funding Finder - click through to more funders than any other grants directory, with a category for Small Charities & Community Groups and 50+ downloadable grant lists.
• Help Finder – find advice and pro bono support, including companies that make donations.
• Data Finder - finds data for funding bids, impact reporting, planning and campaigning.

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To access help and resources on anything to do with running a charity, including funding, click the AI Bunny icon in the bottom right of your screen and ask it short questions, including key words.  Register, then login and the in-system AI Bunny is able to write funding bids and download 40+ charity policy templates as well.

Unincorporated Associations FAQs

• What is an unregistered charity? An unregistered charity, known as an unincorporated association, is a non profit with charitable objectives that meets the public benefit test but is not registered with a regulator. It is usually not incorporated, so its trustees do not have limited liability protection.
• What is an unincorporated association? An unincorporated association is an agreement between a group of people who come together for a reason other than to make a profit (for example, a voluntary group or a sports club). You do not need to register an unincorporated association, and it does not cost anything to set one up. Individual members are personally responsible for any debts and contractual obligations.
• Is it illegal to run an unregistered charity? Not all charities are necessarily required to register with a charity regulator but must comply with charity law and follow their charity regulator's guidance. You should have a constitution (rules), purposes that are exclusively charitable, be open to a reasonable section of the public and any private benefit should be no more than incidental.
• How do you know if a charity is incorporated or unincorporated?  To be incorporated, a charity must be registered with a regulator but not all registered charities are incorporated. CIOs, or SCIOs in Scotland, charitable companies registered with Companies House and some other non profits, such as CICs, are incorporated. However, charitable trusts and unincorporated associations, such as many community groups and clubs, are not.
• Which charities are incorporated?  Charitable companies and Foundation and Association CIOs and, in Scotland SCIOs are incorporated.
• Which charities are not incorporated?  Unincorporated associations are not incorporated and, even though they are registered with the Charity Commission, charitable trusts are not incorporated.
• Can an unincorporated association have a bank account? An unincorporated association (unregistered charity or non profit club) can open a bank account but not all banks now offer such accounts and those that do will require you to submit at least your constitution (club rules) and details of your trustees.
• Can an unincorporated association get funding?  Some funders will only fund registered charities but many will make grants to unincorporated associations, often referred to by grant makers as 'constituted groups'.
• Do unincorporated charities pay tax?  Charities do not pay tax on most types of income as long as they use the money for charitable purposes. You can claim back tax that's been deducted, for example on bank interest and donations (this is known as Gift Aid).
• Who owns the assets of an unincorporated association?  Unincorporated associations do not have legal personality and, therefore, cannot own assets in their own right.  Ownership of assets is likely to lie with the individuals acting on its behalf, or the Official Custodian for Charities.
• Does a charity have to be registered?  In England and Wales charities must register with the Charity Commission, if their income reaches £5000 pa.  There are slight different rules in Scotland and Northern Ireland.

This Resource Doesn't Constitute Professional Opinion

I am not an accountant, nor a lawyer and no advice can be applicable to all organisations, in all circumstances, so this resource is no more than a guide to understanding.  I've summarised the regulatory guidance and augmented this with my own experience and Internet research, but I am not competent to provide professional advice.  I have included links to the source guidance to enable you to check this yourself and, if you think you might need professional advice, use Help Finder to find pro bono support.