Clubs and charity

Charitable giving is a broad-ranging subject, and one that has a complicated history with clubs. It runs the full range from clubs that have been founded with charitable giving at their inception, to clubs for whom charity is an irrelevance. This piece primarily looks at the experience of clubs in England and Wales. As ever, a standard disclaimer that I am not a lawyer, and this piece does not constitute any kind of legal advice, but is the perspective of a historian of clubs, who keeps an eye on how different clubs manage their affairs. If you want legal advice on charities, go to a charity lawyer.

Clubs and charities are separate things

Firstly, it is worth stressing that private members’ clubs are not charities, and cannot be charities. There is some confusion about this, because clubs can be involved in charitable giving, and charitable giving is inherently popular (as a universally-regarded “good thing”), which clubs and club members understandably like to emphasise.

Charitable objects - with which a club can have much sympathy - can involve things like advancing education, and the relief of poverty, which have a public interest. (The Charity Commission for England & Wales publishes a list of 15 valid charitable purposes, which could be recognised as valid charitable objects. It can be slightly ambiguous, since one of them is, “Any other charitable purpose,” but it’s worth bearing in mind the regulator is there to see that these are properly observed.) And a charity is a non-profit organisation dedicated wholly to achieving those charitable objectives.

A private members’ club is - as the name implies - inherently a private organisation, making it difficult to square with public benefit. It is also typically a profit-making organisation (even if any profits are ultimately ploughed back into the club). And so while a club can share charitable objects (and do much to promote them), I would argue that it cannot be a charity.

(Some clubs have tried to blur the line in the past, most notably the much-missed House of St. Barnabas on the corner of Greek Street and Soho Square, which operated as a club from 2013 to 2024, acting in tandem with a charity. This had a number of setbacks, many of them due to factors outside their control, ranging from a fire in 2019, through to Covid in 2020-1, to the collapse of their ceiling in 2023; but the sharply competing objects of running both a registered charity and a robustly-financed club ultimately proved incompatible.)

Why a charity?

Just because a club cannot be a charity, that does not mean that it cannot do charitable work - there is a centuries-old tradition of this - or that part of its functions may not best be spun off to an independent charity. And there are several obvious advantages to this: registered charities become eligible for public grants, donations and fundraising; but there are also public obligations around transparency and accountability.

Many private members’ clubs are resistant to the idea of farming out any of their functions to a charity. They can often value their privacy and anonymity; and are particularly wary of incurring any need to file public documents such as annual accounts; this is not limited to the charitable sphere, but also in areas like a reluctance to incorporate as limited company. (Many traditional members’ clubs in the UK remain Unincorporated Associations, which do not have to file publicly-available accounts; but which also have joint liability ultimately shared among the members. These things are a trade-off.) The reasons for this reluctance are not necessarily nefarious: for instance, a club sitting atop prime real estate in central London may jealously guard its independence, with no desire to advertise the specifics of its financial situation to all manner of property speculators, and to people who do not have the Club’s best interests at heart.

Against that, many of the activities that clubs already routinely perform will fit into the sphere of charitable objects. These include conservation care of buildings and art collections, sponsoring charitable causes, and benevolent care of current and former staff. Where those circumstances apply, it can make a great deal of sense for a club to look at farming out part of its activities to a charity.

This is not necessarily an easy course to pursue. In order to fulfil charitable objects, a charity must be independent. That means it can no longer be viewed as a “wing” of a club, but is technically a separate body - even if the objects and composition of the charity mean a likely synergy between the charity’s overall goals and those of the Club. It is worth looking at how clubs successfully navigate this - and to be informed by the common pitfalls of those that do not.

Charities around club staff

This is by far the most common kind of charity found in a club - typically structured as a staff benevolent fund. It may (or may not) be a registered charity. In line with a registered charity, it is wholly dedicated to using its assets and revenue for achieving its charitable objects. It typically deals with awards made to current and former staff, particularly those experiencing hardship. Some clubs run their annual Christmas staff fund through such a charity fund; but I will have more to say on the subject of Christmas funds, in a separate post closer to Christmas.

A quick browse of the Charity Commission website will show that the sums involved can be quite small, explaining why many clubs do not bother with the extra administrative burden of setting up a separate charity to run such activities.

Charities around club assets

This has been an emerging area for London clubs in the 21st century. Traditionally, there was no charitable dimension to the assets of a club, which were typically held on the Club’s behalf by four or more Trustees. (This is a legal necessity when a club has been structured as an Unincorporated Association, since UAs cannot hold property - but named individuals can hold property on behalf of the UA. Of course, not all clubs are UAs, so this has not always been a universal model; but the UA model has certainly been a common one.)

By contrast, legal changes in the United States since the 1980s have meant that for the last few decades, it has long been increasingly common for some of the larger clubs in the major cities of the USA to have a charitable foundation to look after certain assets: typically, the historical preservation of the building, the art collection, and/or the archives.

Since the early 2000s, a number of London clubs have come to embrace this model as well. But it has not been uncontroversial. While meeting charitable objects might be easy enough (for instance, the promotion of education, the arts, culture and heritage), meeting the public access requirements has been more of a stumbling block, with many clubs prizing the privacy of their premises. This can range from the “snob value” of exclusive possession of their premises the whole time, to commercial concerns about sacrificing profitable trading for meeting public access requirements.

Yet the “public benefit” guidelines in English charity law have do have a strong degree of reasonableness and proportionality, and they recognise that the public benefit may be limited to “a sufficient section of the public,” rather than several million people marching through the same lobby. While that would not be as limited as the members of the club itself, it might be limited to those members of the public who have expressed an interest in taking a look at the architecture of the building, by prior appointment on a handful of available dates in a year.

Most clubs have found that they can satisfy a public access requirement simply by participating in an annual “Open House” weekend (when the Club would be closed on the weekend anyway), and offering one or two annual tours to architectural groups - all of them strictly capped in numbers, and by pre-appointment only. A club may find that something as modest as a dozen tours a year, capped at ten people people apiece (for reasons of security and feasibility), more than meets the necessary requirements.

The benefit to the Club is in expanding what they can do around the proper management of their cultural or heritage assets. They can apply for public grants - including Heritage Lottery Funding. They can launch fundraising campaigns. They can secure Gift Aid as a new fundraising stream. They can - for reasons I will go into below - become a much more attractive vehicle for donations. And properly administered, a well-run charitable trust should improve how the building and its cultural assets are run, since their sole objective is to further that, not to see the cultural assets through the lens of day-to-day club finances. It can therefore also give more security to the Club’s building and assets, in ensuring that they are run with the long-term interest in mind, for their original purpose, resisting the old short-term pressure of “We need some cash by next week, so why not sell a couple of valuable old paintings?”

There is a common misconception that the Club will receive significant tax relief by turning over its assets to a charity. This is far from necessarily the case. The most obvious tax benefit to the Club is Gift Aid, which effectively increases the value of charitable donations by 25% through matched government funding. But this is a subsidy, rather than a tax break. It works as an incentive to fundraise more, since the more is raised, the greater the value of the subsidy. If a charity is not actively fundraising, it will not benefit.

There is a theoretical tax break with regards to rate relief - business rates are a huge and ever-increasing item of expenditure for clubs. This has been particularly the case in London, where the last decade has seen businesses in Westminster (where most of the central London clubs are) have their annual business rates increase by several times, from five-figure sums to six-figure sums. But charitable relief is just one of many types of business rate relief. The wider question - since rates are calculated by measuring floorspace - is working out what percentage of a club’s floorspace is engaged in taxable trading activity, and what proportion is dedicated to non-commercial activities. Charitable status is only part of the equation (and a small one at that).

The most notable tax advantage is arguably to the individual donor, not to the charity or the club. I am referring to tax relief on estates, when somebody dies. If 10% or more of an estate is left to charity, then that estate may have tax relief from Inheritance Tax. For that reason, there is a strong financial incentive for those with sizeable estates to look at leaving a portion of their estate to a registered charity. For that reason, charitable trusts around a club’s assets may often pitch to their members that they be remembered in their will. The income to that charity may be years (or decades) away; but when it eventually comes through, it can be substantial.

Over time, multi-million-pound endowments can be built up that can be used for the conservation and restoration of a historic building - the very ruinously expensive once-in-a-generation financial outlays that can normally bankrupt a club, can be taken off its balance sheet entirely, and can be met by a dedicated fund. Paintings, archives and libraries can enjoy proper collection care, and can be properly funded for preservation and expansion. The charity can also be an employer, either in directly hiring staff such as archivists and librarians; or in contracting out work to club staff, for instance, hiring them by the hour to work on administrative work for the charity, such as the preparation of its accounts, or the running of its tours.

Charities around club causes

Clubs often have themes; indeed, I have often observed that the most resilient clubs are usually those with a tightly-drawn theme (or at least culture) around which the members can unite.

This means that it is entirely natural for clubs to sponsor worthy causes that are close to their theme of choice. But not all of them are necessarily charitable - a political club, for instance, can sponsor as a charitable object a cultural cause around its chosen philosophy, but a political party or campaign cannot be charitable. Nevertheless, the fact is that a great many of these activities are inherently charitable: military clubs funding veterans’ causes, arts clubs funding practising artists, a religious club sponsoring scholarships for priests, etc.

Where charity is involved, this has more traditionally been in the realm of club philanthropy - the Club is giving to an outside charity. Some clubs even have philanthropy as one of their core goals.

But it is also not unusual for a club to have been involved in setting up an independent charity for doing work in its area of interest, and for that to be the preferred charity to which members donate. Again, the financial affairs of club and charity are (and must be) completely separate.

Clubs hosting charities

This is by far the area fraught with the most ambiguity - and peril. This is where a charity has either no connection to the Club, or only the loosest relationship to it; but from time to time it holds events in the Club.

In these cases, the charity is more of a commercial partner like any other, and its charitable status may be more or less irrelevant to the wider issues of the relationship with the Club, save for possible discounts in securing rooms at a ‘charity rate.’

Beware charities of doubtful effectiveness. There are many possible yardsticks for this, but I would suggest the hypothetical example of a one-person charity holding a sumptuous dinner at £150 a head, with just £10 of the ticket price donated to a charity. This may sound far-fetched, but it is far from uncommon for private clubs to host such events. Given that they are effectively simply paying the corporate rate for a private hire dinner, one might ask - if the charitable objects really were central - why the organisers did not arrange for the event to be done the other way around, with a home-cooked banquet with ingredients costing £10 per head, and £140 of the £150 ticket price donated to charity? Consequently, the “charity” component of the dinner might be seen as mere window-dressing.

Historically, high ticket prices placed a high bar to the fundraising element of such evenings, i.e. a dinner for 50 might only raise a few hundred pounds in profit from its tickets, but a charity auction held at that dinner may raise £20,000, making it a very effective fundraiser. How germane the charitable objectives are to the overall event may be measured by the percentage of the event’s total turnover which ends up with the charity. Where this sum is a derisory proportion, a club may treat the “charitable” claims of the event with extreme care, and may choose to treat it as a corporate event like any other.

Clubs should therefore be very wary of involvement in such enterprises, and should satisfy themselves that the charities they are hosting are indeed dedicated wholly to charitable giving. The standard test for any corporate partner applies: “Are we proud to be seen hosting these people, and to be associated with them?”

Charitable independence

It should finally be noted that to properly meet the goals of a charity, independence is essential.

This touches on every aspect of the charity. It cannot simply be a wing, or a sub-committee of the club - at least some of the trustees need to be individuals who are not members of the club, and have no connection to it. (The “non-member” trustees might be appointed on account of their expertise, for instance.)

And it means the charity has to be robust in sticking to its remit. It is not unusual, for instance, for the club to ask the charity to fund something, only for the charity to say “No.” (i.e. “We will not fund this kitchen refurbishment for the Club, which is a commercial activity that has nothing to do with our charitable remit, and properly belongs as a line item in the Club’s own budget. But we are very happy to do bona fida repair work such as to the roof of the Listed building, to maintain a heritage asset.”)

Many clubs prefer to not go down the charitable route, as they prefer to maintain a much higher level of control, which is incompatible with an independent trust.

Conclusion

Given the complex nature of this whole area, and the amount of expert legal advice which needs to be consulted, it is quite understandable why many clubs prefer to run a million miles than to have any involvement in charity, keeping their club separate.

But club members are not inherently uncharitable people - quite the reverse, as the annual Christmas fund appeal can show. And with so many of the functions of a club coming under the remit of charitable pruposes - particularly for the more culturally themed clubs, with a strong heritage dimension - it is all too easy to see why it can be very sensible for some clubs to farm out the care of their building and/or heritage assets to an independent charity, for conservation, preservation and restoration of a unique cultural institution that can endure for generations more.

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