Scientology and Charitable Status

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1. Introduction

In today’s society, charitable status is of significant importance. The controversial Church of Scientology, founded by the science-fiction writer L. Ron Hubbard, has long craved charitable status in the United Kingdom but was turned down by the Charity Commission in 1999. The Times article titled ‘Scientologists set to cash in on tax break’ has raised some interesting legal and policy issues related to the charitable status of religious organisations since the enactment of the 2006 Charities Act. On the surface, the article raises practical issues of fiscal privileges but the article also provides an opportunity to discuss some broader policy considerations related with religious charities and how the Charities Act has made some subtle but significant changes to how they are treated. In this essay I intend to examine the legal impact of the changes the Charities Act 2006 has had on religious charitable status and on the Church of Scientology’s bid for charitable status. In addition, I will consider some of the broader policy issues rising from the changes from the 2006 Act and the debate surrounding religious charities more generally. But before discussing the legal and policy implication of charitable status of religious organisation, first it is appropriate to address the benefits of charitable status.

2. Advantages of Charitable Status

 

Much of charities law is derived from the law of trusts. Trusts for charitable purposes attract certain forms of special treatment, which are unusual rules within the law of trusts, but some are not restricted to trusts and can be extended to other vehicles that promote a charitable purpose. Special treatments that extend to charitable trusts include certainty of objects, the perpetuity rule and the cypres doctrine. In terms of trusts law rules are more relaxed for charities than they are for private trusts. One main advantage is in the form of fiscal privileges, which are the most visible special treatment of charities. The Times article pays particular attention to the tax benefits which Scientologists will enjoy if they become a religious charity. Broadly speaking they are not liable to income tax, corporation tax, capital gains tax and stamp duty and they received limited favourable treatment in respect of value added tax. Moreover, since April 2000, Charities can claim income tax on most donations through ‘Gift Aid’. Therefore the main body of Scientology in the UK which has an estimated income of 10 millions pounds annually will be able to reclaim at the basic tax rate and increase their value by 22%. Another fiscal advantage that can be gained through charitable status is in relation to fundraising. The public is much more likely to donate to groups that have been approved by the state.

3. Charitable Status of Scientology and the Charities Act 2006: The Legal Implication

(i)The Position of the Church of Scientology Pre- Charities Act 2006

In order to assess the legal impact of the changes made by the Charities Act 2006, it is necessary to examine the reasoning behind the Charity Commission’s rejection of Scientology’s application to become a charity. The evaluation of the decision will follow in the policy section.

In 1999, Church of Scientology had submitted that "it was established for the advancement of religion [third head of charity] or to promote the moral or spiritual welfare or improvement of the community [fourth head]".

With regards to the third head of charity, after considering case law, the Charity Commission decided that the Church of Scientology did not qualify as a religion.

Generally, a belief in a God and the worship of that God has been considered a pre-requisite to ‘a gift to be seen as advancing religion’. Dillon J. has said in Re South Place Ethical Society; “It seems to me that two of the essential attributes of religion are faith and worship; faith in a god and a worship of that god.” 

This was the same line of argument taken from the earlier case of Regina V Registrar General, Ex Parte Segerdal, a case concerned with the claim made by the Church of Scientology to exempt a chapel used by the Church from rates as a place of worship. In Segerdal, Buckley LJ said ‘worship I take to be something that must have some at least of the following characteristics: submission to the object worshipped, veneration of that object, praise, thanksgiving prayer or intercession.” When the Charity Commission ruled that Scientology was not a religion under existing case law, it was not because it lacked a ‘Supreme Being’. After hearing expert evidence the Commission conceded that a ‘Supreme Being’ existed in Scientology. Rather their practices, which included ‘auditing’ and ‘training’, did not constitute ‘worship’ as defined by existing legal authorities.  

Under the fourth heading of charity, the Commission found that the key aspect of the charitable purpose of promoting moral and spiritual welfare or improvement was not proved as prescribed in Re Price. On balance, the nature and the organisation of the practices of Scientology was not generally accessible to the public and capable of being applied or adopted by individuals. 

 Additionally Scientology failed to prove public benefit under either heads. Normally, religious groups are afforded the presumption of public benefit but in an unusual move, the Charity Commission decided that ‘public and judicial concern’ and the ‘newness of Scientology’ had in part rebutted the presumption and demanded a positive proof of public benefit.

The principles of public benefit differ for different heads of charity. The public benefit requirement contains two main principles: first there must be identifiable benefit to be derived from the application of the funds and second the benefit must be extended to the public at large or a sufficiently wide section thereof so as to constitute what might be seen as a ‘public’ benefit. In Gilmour V Coates the property was left on trusts for a Carmelite convent. The Carmelites are a contemplative order who live in seclusion. Their nuns claimed that they were praying for all mankind thereby serving a public benefit. However it was held that prayer and spiritual belief alone were not tangible public benefit. With regards to whether a religious group served a sufficient section of the public, in Society of the Precious Blood which concerned Anglican nuns, the courts held that because the nuns were not cut off from the outside world the Society was charitable. By working in the community, the Anglican nuns provided a benefit to the public.

The problem for Scientology was that the ‘central religious practices of Scientology are conducted in private and not in public’. Auditing and training were not carried out in public even though members of the public may sign up for a course of auditing and training after making appropriate payment. Moreover, the Charity Commission concluded that ‘auditing and training are in their very nature private rather than public’. Auditing and training were held on an individual basis and not intended to be directed at observers if observation was allowed. Moreover, the Commissioners highlighted that the requirement to pay a set sum to the Church of Scientology in order to be a part of counselling and auditing reinforced the idea that they were private activities that did not confer any legally recognised benefit to the public.

(ii) Assessing religious charitable status Post- Charities Act 2006

The Times article is a reaction to the changes made in charity law by the Charities Act 2006. As a relatively new piece of legislation its effects and impacts cannot be fully appreciated. However, it contains some changes that have the potential to make some changes in the way that charitable status is assessed.

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One of the most obvious changes brought about by Charities Act 2006 has been the substitution of Lord Macnaghten’s four heads for charitable purpose as established in Pemsel with new thirteen heads. The advancement religion is included in this new list but it now contains a new definition of religion.

Section 2 (3) of the Charities Act 2006 clarifies that religion as used in the heading of advancement of religion, now includes (i) a religion which involves belief in more than one god, and (ii) a religion which does not involve belief in a god. This is precisely the section in ...

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