Guidance on how private schools justify their charitable status must be “corrected”, judges have ruled.
They concluded that parts of the Charity Commission’s guidance were “erroneous”.
The Independent Schools Council (ISC) which brought the case said it was “delighted” that the Upper Tribunal had ruled in its favour.
The ICS represents eight organisations collectively educating almost half a million children in 1,270 schools, of which approximately 980 are charities.
It had argued that the commission’s guidance must be quashed because it was too vague, and claimed the commission was guilty of “micro-managing” individual charities.
The commission had argued that its guidelines were clear and it had only provided “supportive assistance”.
It is understood that following the ruling, there needs to be an agreement from both parties on how the guidance is changed.
If an agreement is not reached, there could be another court hearing to decide if the parts of the guidance challenged by the ISC should be quashed and rewritten, or amended.
Matthew Burgess, ISC’s general counsel, said the organisation would be seeking to have the parts of the guidance contested quashed.
He said: “The ruling liberates schools to innovate and be creative in their charitable provision.
“The commission’s former approach, now discredited by the tribunal, had the effect of reducing the public benefit of independent schools to a crude calculation of fees and bursaries. The tribunal has recognised the crucial independence of schools to pursue a panoply of public benefit strategies, free from the apprehension of failing to measure up to an artificial arithmetic benchmark.”
The Charity Commission insisted that the tribunal’s decision had confirmed its interpretation of the law on public benefit and private schools.
“We accept of course the tribunal’s conclusion that some parts of our guidance do not explain the law clearly enough. We will amend the relevant parts of our public benefit guidance in the light of the tribunal’s decision, a process we have already begun.
“It is a matter for individual charitable independent schools to decide for themselves how to meet the public benefit requirement as long as it gives more than a tokenistic benefit to the poor.”
The case before the Upper Tribunal centred on the 2006 Charities Act which removed the presumption that all charities providing education also provide a public benefit.
Under the new rules private schools must prove they benefit children who cannot afford their fees in order to keep their charitable status and the tax breaks that come with it.
Mr Justice Warren, president of the Upper Tribunal (Tax and Chancery Chamber), sitting with Judge Alison McKenna and Judge Elizabeth Ovey, ruled that the guidance “should be corrected” following a hearing in London in May. The panel concluded that parts of the guidance were “erroneous”.
The tribunal members said they had “every sympathy” with the Charity Commission “in the difficulty of the task it faced in producing guidance on this area of the law”.