In Commissioners of Income Tax – V – Pemsel (1891) (A.C. 531), Lord McNaughten stated “a 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.
- trusts for other purposes beneficial to the community, not falling under any of the preceding headings. The trusts last referred to are not less charitable in the eye of the law, because incidently they benefit the rich as well as the poor, as indeed every charity that deserves the name must do either directly or indirectly.
The whole historical area of law of charities in Ireland was reviewed by Mr Justice Keane (as the then was) in the High Court “In the matter of The Trust of the Worth Library” (1995), 2 .I .R., Pg 301). The facts were that Dr Steevens Hospital in Dublin which was incorporated by a private Act of the Old Irish Parliament of 1729 containing the Worth Library collection (4,5000 books) closed in 1988. The question here was the Worth bequest of various valuable books, a charitable bequest.
Judge Keane outlined that in England the first three classifications are charitable where there is a public benefit. He accepted that this was also the law in Ireland with one important rider (page 335): in the case of gifts for the advancement of religion, the presumption that they are charitable is conclusive by virtue of Section 45 of the Charities Act, 1961.
Judge Keane pointed out (at page 336) that there is one principle of general application in that “the court leans in favour of charities and, consequently will prefer a construction which gives effect to the testator’s desire to benefit a stated object rather than one which leads to a failure of the bequest”. He reviewed the various authorities in relation to education including Re: McEnery (1941) IR which held that a bequest for a trust fund enabling the nephews and nieces of the testator and their descendants to obtain a profession was not charitable and the English case of Oppenheim – V – Tobacco Securities Trust Company Limited (1951) (A.C.) which held that a trust for education of children and employees was not charitable although the number of employees exceeded 110,000. Therefore Judge Keane held that this gift of books was not a gift for the advancement of education as it lacked the necessary element of public benefit. It was a book collection having been bequeathed “for the use benefit and behoof of the physician, chaplin and surgeon for the time being”.
On review of the Will Judge Keane pointed out that there was no indication in the Will that the intended library was for the benefit of any persons other than the named office holders. Notwithstanding same he held that it was a valuable charitable gift to the Hospital and therefore being of public benefit within category 4 for the welfare of it’s office holders notwithstanding that the number did not exceed 3. He further concluded that the cy-pres scheme to be framed by the court must provide for the retention of the books (which were extremely valuable) in their original setting in Dr Steevens Hospital.
It is interesting to note that Judge Keane in his book “Equity and the Law of Trusts in the Republic of Ireland” states that there can be no charity without a public benefit; and that:
- the section of the public must not be numerically small.
- the benefits must not depend on the members benefiting being related to the donor.
However in the Worth Library Case Judge Keane held that Dr Steevens Hospital was a charitable institution and that a perpetual gift of the library to Dr Steevens Hospital was charitable.
From a Capital Acquisitions Tax point of view, Section 54(2) provides that an exemption from Capital Acquisitions Tax will apply in respect of benefits taken for charitable purposes in Ireland (which includes the 32 counties).
Under Section 50 of the Finance Act, 1987 with effect from the 9th of July 1987 the requirements of the gift or inheritance be expended in the State or Northern Ireland has been dispensed with and a total exemption is given provided the benefit could be regarded as charitable within the general law of the State. [ I would also refer practitioners to Capital Acquisitions Tax, by Brian Bohan, Pg 257].
In order to obtain exemption from filing returns for income tax or corporation tax in respect of charitable trusts, you should write to The Office of the Revenue Commissioners, Charities Section, Government Buildings, Nenagh, County Tipperary.
Under the 1984 Finance Act (as amended by the Taxes Consolidation Act) you can gain exemption from income tax to the extent that income is applied solely for the purposes of promoting athletic games or sports.
Finally it is important to point out that the main objects of the trust or the Memorandum of Association must be charitable. It is not sufficient that one of its objects is to assist a charitable institution to gain exemption from income tax.
The Charities Acts 1961 and 1973 The administration of charities are the responsibility of a board entitled ” the Commissioners of Charitable Donations and Bequests” which was first established by the Charitable Donations and Bequests (IR.) Act 1844 and there were amending Acts passed in 1867, 1871 and 1955. Its jurisdiction is now provided for in Part II of the Charities Act 1961 as amended by the Charities Act 1973. The Board has extensive functions. The Charity Commissioners are located at 12 Clare Street, Dublin 2, telephone 6766095.
The overall responsibility for enforcing charitable trusts rest with the Attorney General. The Attorney General appoints a practising solicitor to advise him.
Section 49 of the Charities Act, 1961 provides that where there is provision that a benefit taken by an office holder having dual functions; charitable and non-charitable, the gift must be regarded as for charitable purposes unless the donor apportions the gift.
Section 50 of the Charities Act, 1961 states that every gift made for the provision, maintenance and improvement of a tomb, vault or grave or tombstone or any other memorial to a deceased person which would not otherwise be charitable shall be regarded as a charitable gift provided:
- in the case of a gift of income only – £60.00 a year.
- in any other case = £1,000.00 in amount or value.