Trusts (Capital and Income) Bill gets Royal Assent

A new law enabling permanently endowed charities to take a more flexible approach to managing their investments has come into effect.

The Trusts (Capital and Income) Bill gained Royal Assent on 31 January and gives trustees of permanently endowed charities a statutory power to decide how much of their investment returns should be applied for charitable purposes and how much should be reinvested.

Formerly, trusts law ruled that any increase in the value of permanent endowments had to be allocated to capital, and a charity had to obtain an order from the Charity Commission to apply returns in another way.

Now, trustees will be able pass a resolution under a new section 104A of the Charities Act 2011 to the effect that their endowment should be invested on a total return basis without having to maintain a balance between capital and income returns, and should therefore be freed from the restrictions as to the expenditure of capital.

The Charity Commission is now expected to start a consultation on the form of regulations that will be used to give effect to the new Trusts (Capital and Income) Act.