The Act Commentary on Sections Section 43: Power to spend capital
173.Section 75 of the 1993 Act gives to the trustees of very small unincorporated charities which have permanent endowment not consisting of any land the power to resolve, by a simple administrative procedure, to spend that endowment. Very small charities in this context are ones whose gross annual income is not more than £1,000. Permanent endowment is property which is subject to a restriction preventing its expenditure. Where permanent endowment is held as an investment the income from the investment must be spent but the capital may not be. The purpose of section 75 is to allow trustees of charities with slender resources to remove the restriction on expenditure of capital, so that the capital can be spent as well as the income. This is useful because the income is often so small that little if anything can be achieved by spending the income alone.
174.Section 43 substitutes for the existing section 75 a new section 75, which modifies and extends the current régime for expenditure of capital by small charities.
175.The principal changes brought about by the new section 75 are:
	one of the conditions of the existing section 75 is that, before making a resolution, trustees must be satisfied that the charity’s property is too small for “any useful purpose” to be achieved by spending the income alone. It is sometimes difficult for trustees to conclude that a sum of money is so small that there is not any useful purpose to be achieved by spending it. Subsection (4) of new section 75 substitutes a different test of whether the purposes for which the fund is established “could be carried out more effectively” by spending some or all of the capital;
	the requirement for the Charity Commission to go through a procedure of concurrence with the trustees’ resolution is removed.
176.Section 43 also inserts two new sections, 75A and 75B, into the 1993 Act.
177.Section 75A provides the same power in relation to larger funds with a single purpose, but subject to some safeguards because of the larger sums involved. Subsections (5) to (11) prescribe some safeguards which apply where the permanent endowment in question came to the charity by a lifetime gift from, or under the will of, a person, or as a grant or other form of donation from an institution, or by way of donations from several sources but with a common purpose (such as a disaster appeal). The safeguards are meant to ensure, by requiring the Charity Commission’s concurrence to be obtained and by requiring the Commission to take into account the wishes of the donor as well any changes in the charity’s circumstances since the gift was made, that the intentions of the donor or donors in making the gift are treated with due consideration.
178.Section 75B applies in cases where the Charity Commission has made a direction to a specific effect under section 96(5) of the 1993 Act. That provision allows the Commission to direct that an institution (typically a trust) which is established for some special purposes of, or in connection with, a charity shall be treated either as part of that charity or as a distinct charity by itself. Where the Commission has directed that a special trust is a distinct charity, section 75B allows that charity’s trustees to resolve to spend certain permanent endowment subject to conditions and controls which mirror those described above for subsections (5) to (11) of section 75A.