Charities Update: Considerations for UK Charities Post-Brexit
05 April 2017
The UK’s planned withdrawal from the EU raises a question mark over the ability of UK charities and non-profits to meet certain requirements for accessing EU funding and grants. If you are involved in, or advise, a UK–established charity that relies on EU funding, using Ireland as a location for your charity should be amongst the options you might consider. We provide a high-level overview of the process of establishing in Ireland and explore the ways in which some of the challenges presented by Brexit might be mitigated.
Current EU funding streams principally emanate from the EU Commission and include funding for areas such as humanitarian aid, asylum, regional development, alleviation of poverty and developmental aid. Eligibility for grant funding of this type usually takes the form of a call for proposals, which will identify eligibility criteria. Currently, establishment in an EU state is a standard criterion for an applicant charity.
There is a significant risk that UK-established charities currently relying on EU funding might, following Brexit, become ineligible for the funding that they currently receive. Therefore, some charities are taking steps to consider making another EU member state their new home. As some of the funding requirements require a charity to be established in an EU member state for two or three years, this is a change that may need to be considered by charities very soon.
Using Ireland as a jurisdiction in which to establish should be amongst the options that UK-established charities consider post-Brexit. Like the UK, Ireland is a common law jurisdiction and the legal structures and concepts are very similar. A lot of our legislation mirrors that of the UK, including our Charities Act 2009. The criteria for establishing and existing as a charity in Ireland are therefore very similar to the criteria in the UK.
Process of establishing a charity in Ireland
The Irish charity sector is a regulated sector. We view this as a very positive thing for transparency and governance. Any charity carrying out, or intending to carry out, charitable activities in Ireland must register with the Charities Regulatory Authority (“CRA”).
Advantages of establishing a charity in Ireland
- Ireland’s international status - Ireland is a member of the EU and the OECD. For charities with an international reach, this is one of the most significant advantages of establishing a charity here.
- Tax exemption - A charitable tax exemption (CHY number) can be obtained by registered Irish charities upon application to the Revenue Commissioners. A CHY number grants an exemption from income tax, corporation tax, capital gains tax and Deposit Interest Retention Tax (DIRT) and, under certain circumstances, stamp duty.
- Common language, culture and values - Ireland shares a common language, culture and set of values with the UK. This may make the process of transferring volunteers, employees and operations to Ireland more straightforward.
High-level factors to consider
Irish charities must adhere to certain regulatory requirements in order to retain charitable status and their CHY number. UK charities will be very familiar with most of these, such as restrictions in relation to the distribution of income and property to members and prohibitions on providing remuneration to directors. It is also a requirement that any charity holding a CHY number must have at least three directors, a majority of whom must be resident in Ireland.
Potential structures to consider
For charities that know that they will require an EU presence, specific advice should be obtained on the various options available to them to retain eligibility for EU funding. Possibilities may include:
- Full relocation to Ireland;
- Establishment of a sister charity or a subsidiary in Ireland while retaining a UK presence;
- Merger of the existing UK charity with an Irish charity; or
- Management agreement between a new Irish charity and the existing UK charity, whereby the existing charity could be contracted to carry out the work that is the subject of an EU grant to the Irish charity.
Post Brexit, UK charities are likely to face several changes, including potential changes to EU funding received by them. For UK charities that are considering relocating or setting up a branch in another jurisdiction, there are many benefits to establishing a charity in Ireland. We would be happy to provide guidance on the process of choosing the appropriate structure for your charity and establishing and registering your charity in Ireland.
For more information, please contact a member of our Charities & Not-for-Profit team.