The public benefit test: does it actually work?
The 2006 Charities Act required all charities to demonstrate public benefit but never defined it. The 2011 Upper Tribunal ruling set the bar low. Is the test fit for purpose?
The debate in brief
Every charity in England and Wales must exist for a charitable purpose that is for the public benefit. The Charities Act 2006 removed the centuries-old presumption that certain purposes -- education, religion, poverty relief -- were automatically beneficial, and required all charities to demonstrate public benefit. But Parliament never defined what "public benefit" actually means, leaving the Charity Commission to interpret it through guidance. When the Commission tried to set a meaningful standard for fee-charging institutions -- independent schools, private hospitals, exclusive membership bodies -- it was overturned by the Upper Tribunal in 2011. The result is a test that exists in law but lacks teeth in practice: charities must show public benefit, but the threshold for doing so is remarkably low.
Quick takeaways
| Question | Answer |
|---|---|
| What is the public benefit test? | A legal requirement that every charity must exist for purposes that benefit the public, not just private individuals. It is set out in section 4 of the Charities Act 2011. |
| Who decides whether a charity meets it? | The Charity Commission assesses public benefit at registration and through ongoing regulation, guided by its PB1 and PB2 guidance documents. |
| Can a charity charge fees and still meet the test? | Yes. Fee-charging is permitted provided those who cannot afford to pay are not entirely excluded from benefit. The level of access required is left largely to trustees' discretion. |
| Has any charity lost its status for failing the test? | No mainstream fee-charging charity has been stripped of charitable status for failing the public benefit requirement. |
| Is the test under review? | Not actively. Despite the Public Administration Select Committee calling it "critically flawed" in 2013, no government has legislated to define public benefit more precisely. |
The arguments
The test is too weak to be meaningful
The central criticism is that the public benefit test exists on paper but fails to constrain anything in practice. Parliament deliberately left "public benefit" undefined in the 2006 Act, expecting the Charity Commission to develop the concept through guidance and enforcement. When the Commission attempted to do so -- publishing guidance in 2008 that told fee-charging charities they must ensure people unable to pay could "benefit in some material way related to the charity's aims" -- the Independent Schools Council challenged it. The Upper Tribunal's 2011 ruling sided substantially with the schools, holding that the Commission had overstepped and that charity trustees retain broad discretion over how they provide public benefit, subject only to a "more than token or de minimis" threshold.
The Public Administration Select Committee's 2013 post-legislative scrutiny report was blunt: the Charities Act 2006 is "critically flawed" on public benefit, the Act left the Commission in "an impossible position" by requiring it to produce guidance on a concept Parliament refused to define, and the resulting legal disputes cost the Commission and the sector significant resources for no meaningful change. The committee recommended Parliament revisit the question. It never did.
The test works well enough -- and a stricter one would cause harm
Defenders of the current framework argue that a light-touch public benefit test is appropriate precisely because charity law must accommodate enormous diversity. The same test applies to a village hall, a hospice, a university, and a learned society. Imposing rigid, quantifiable standards would be unworkable across such different contexts and would risk excluding organisations that genuinely serve the public in ways that do not fit a formula.
The Charity Commission itself argued in a 2024 blog post that think tanks deserve charitable status because they educate the public and inform debate -- a form of public benefit that cannot be measured by who walks through the door. The same principle extends to museums, research institutions, and cultural bodies whose benefit is diffuse rather than transactional. There is also a pragmatic argument: the Commission has powers to investigate and remove charities from the register, and the fact that it has rarely acted against fee-charging charities may reflect that most are providing genuine public benefit.
A middle path: define public benefit, do not prescribe it
The most credible reform position accepts that public benefit should remain flexible but argues it must be more transparent and accountable. The Law Commission's 2017 report on technical issues in charity law did not recommend a statutory definition of public benefit, but the broader consensus among charity lawyers is that the current guidance -- last substantively updated in 2013 following the Upper Tribunal ruling -- is overdue for revision.
This position would require fee-charging charities to report more rigorously on who actually benefits from their work: not just aggregate bursary figures, but the income distribution of beneficiaries, the scale and nature of community access, and how benefit is monitored over time. The aim is not to set a single threshold but to make the test meaningful through transparency rather than prescription.
The evidence
The evidence base on public benefit is surprisingly thin, largely because the concept has been left deliberately vague.
The Charity Commission's PB1 guidance (September 2013) sets out two components: a "benefit aspect" (the purpose must be beneficial) and a "public aspect" (the benefit must reach a sufficient section of the public and not be unreasonably restricted by fees or other barriers). PB2 addresses how charities should operate to fulfil public benefit. Both were revised after the 2011 ruling and have not been substantively updated since.
At 31 March 2024, there were 170,056 charities on the register. There is no central data on how many are fee-charging, nor any systematic assessment of how they demonstrate public benefit in practice. The Commission does not publish public benefit compliance rates.
The 2023 Supreme Court case London Borough of Merton v Nuffield Health ([2023] UKSC 18) illustrated the breadth of the current test. Nuffield Health, the UK's largest charity by turnover (approximately GBP 1.45 billion in 2024), operates gyms and hospitals that charge commercial-level fees. The Supreme Court unanimously upheld Nuffield's entitlement to 80% business rates relief, ruling that a charity's activities should be viewed "as a whole" rather than property by property, and that providing benefits to those who can afford to pay may be as charitable as providing them to those who cannot -- unless the charity's specific purpose is poverty relief. The ruling reinforced that the public benefit bar, even for fee-charging institutions, remains low.
Current context
The public benefit test is not under active legislative review, despite persistent criticism. The Charities Act 2022, which received Royal Assent in February 2022 and has been progressively brought into force, focused on administrative modernisation -- simplifying land disposal, ex gratia payments, and trustee powers -- rather than revisiting the public benefit framework. The Law Commission's 2017 report on technical issues in charity law, which informed the 2022 Act, did not recommend changes to the public benefit requirement.
Labour's 2025 measures on independent schools -- applying VAT to fees and removing charitable business rates relief -- addressed tax treatment rather than charitable status or the public benefit test itself. The Charity Commission has not signalled any intention to revise its PB1 or PB2 guidance. In 2025, the Commission opened compliance cases into both the Institute of Economic Affairs (May 2025) and Policy Exchange (November 2025), both registered as educational charities -- but these concerned political activity rather than the adequacy of public benefit provision.
The question of whether the public benefit test is fit for purpose therefore remains where it has been since 2013: acknowledged as a problem, with no political appetite to fix it.
Last updated: April 2026
What this means for charities
For fee-charging charities of any kind -- schools, hospitals, cultural institutions, professional bodies, membership organisations -- the current framework offers legal security but not public legitimacy. The test is easy to pass but increasingly hard to defend. Public expectations of what "charity" means are diverging from the legal definition, and the independent schools debate has made that gap visible.
Charity boards should not treat the low legal threshold as permission to do the minimum. The practical risk is reputational rather than regulatory: a charity that technically meets the public benefit test but cannot articulate who benefits and how is vulnerable to challenge from the media, from policymakers, and from the public. Nuffield Health won its Supreme Court case, but the headline -- a billion-pound gym chain claiming charity tax relief -- did the broader sector no favours.
The smartest fee-charging charities are getting ahead of this by publishing granular data on access, bursaries, and community benefit voluntarily, rather than waiting for the Commission or Parliament to require it.
Common questions
What does "public benefit" mean in charity law?
Public benefit has two components under the Charity Commission's guidance: the purpose must be beneficial (not harmful), and the benefit must be available to a sufficient section of the public rather than being confined to private individuals. There is no statutory definition. The concept is drawn from centuries of case law and interpreted by the Charity Commission through its PB1 and PB2 guidance, last updated in 2013.
Can a charity charge high fees and still be a charity?
Yes. The Upper Tribunal confirmed in 2011 that fee-charging is compatible with charitable status, provided those who cannot afford fees are not entirely excluded from benefit. The level of access required is left to trustees' discretion, subject to a "more than token" threshold. The 2023 Supreme Court ruling in Nuffield Health reinforced this, holding that providing services to those who can pay commercial fees can still constitute charitable activity.
Has the Charity Commission ever removed a charity for failing the public benefit test?
No mainstream fee-charging charity has been deregistered specifically for failing to demonstrate public benefit. The Commission has the power to do so under the Charities Act 2011, but has not used it in this context. Its approach has been to engage with charities through guidance and compliance work rather than enforcement action on public benefit grounds.
Why did Parliament not define public benefit in the 2006 Act?
The legislative history suggests Parliament deliberately avoided a definition to preserve judicial flexibility and because the concept was considered too context-dependent to codify. The Public Administration Select Committee concluded in 2013 that this decision was a mistake, leaving the Charity Commission to interpret and enforce a requirement it had no power to define -- and then overturning the Commission's interpretation via the Upper Tribunal.
Does the public benefit test apply differently in Scotland?
Yes. The Office of the Scottish Charity Regulator (OSCR) operates under the Charities and Trustee Investment (Scotland) Act 2005, which includes a "charity test" with its own public benefit requirement. OSCR conducted its own reviews of fee-charging schools and has taken a somewhat more proactive stance on assessing public benefit in practice than the Charity Commission.
What would a stronger public benefit test look like?
Common proposals include: requiring fee-charging charities to report annually on the income profile of their beneficiaries; setting minimum thresholds for means-tested access; or giving the Charity Commission statutory power to set and enforce public benefit standards rather than relying on guidance that can be overturned by tribunals. None of these proposals is currently before Parliament.
Key sources and further reading
Charities Act 2011, section 4 -- UK Parliament. The statutory provision establishing the public benefit requirement for all charities in England and Wales.
Public benefit: the public benefit requirement (PB1) -- Charity Commission, September 2013. The Commission's statutory guidance on the legal meaning of public benefit and how it applies to different types of charity.
Public benefit: running a charity (PB2) -- Charity Commission, September 2013. Guidance on how existing charities should operate to fulfil the public benefit requirement, including provisions on fee-charging.
Independent Schools Council v Charity Commission [2011] UKUT 421 (TCC) -- Upper Tribunal, October 2011. The landmark ruling that overturned elements of the Commission's public benefit guidance for fee-charging schools and established the "more than token" threshold.
The role of the Charity Commission and "public benefit": post-legislative scrutiny of the Charities Act 2006 -- Public Administration Select Committee, June 2013. The parliamentary report that called the public benefit framework "critically flawed."
London Borough of Merton v Nuffield Health [2023] UKSC 18 -- Supreme Court, June 2023. The ruling confirming that a fee-charging charity's public benefit should be assessed across its activities as a whole, not property by property.
Technical Issues in Charity Law -- Law Commission, September 2017. The review of charity law that informed the Charities Act 2022 but did not recommend changes to the public benefit requirement.
Stronger charities for a stronger society -- House of Lords Select Committee on Charities, March 2017. A broad review of charity regulation including recommendations on public benefit and the Commission's role.
The unearned privilege of charity law: how the law maintains elite education -- Tilly Clough, Discourse: Studies in the Cultural Politics of Education, 2024. An academic analysis of how the public benefit test has failed to challenge fee-charging educational institutions.