The Charity Commission – the regulator for foundations and charities in the UK – needs more powers to ensure effective regulation of the sector, an influential committee of MPs has said.

But the joint committee on the Draft Protection of Charities Bill – draft legislation published in October 2014 – said effective safeguards must be in place to ensure charities and their trustees are treated fairly by the Commission.

Lord Hope, chair of the committee, said: “Much of what is proposed, including extending the scope of offences that would disqualify someone from being a charity trustee to include money laundering and terrorism offences, is designed simply to close loopholes.

“But there are areas where it can be improved further before the government introduces a Bill in the new Parliament.”

In its report on the draft law, the committee said abuse – distinct from honest mistakes and persistent mismanagement – is rare in the charity sector.

But it said, when such abuse does occur, the financial costs and reputational damage to the charity sector can be considerable.

The committee supports the proposal to introduce a power for the Charity Commission to issue a statutory warning to a charity where there are regulatory concerns, as a useful tool that falls in between issuing guidance and the opening of an inquiry.

It also supports extending the list of offences for which conviction would automatically disqualify a person from acting as a charity trustee, to include terrorism, money laundering and perjury.

But it called for an extra provision to prevent individuals disqualified from trusteeship from assuming another position of power within a charity, and a power allowing the Charity Commission to prevent or restrict trustees from taking certain action.

In addition, the committee expressed concern over the desire by both government and Charity Commission to include a power to disqualify someone who has been found not “fit and proper” by HM Revenue & Customs (HMRC) in relation to a charity.

It said there were significant misgivings over the move to apply tax law, and recommended that, before finalising any provision on a “fit and proper person” test, there should be further discussions between the Charity Commission, HMRC and the Cabinet Office, which published the Bill.

William Shawcross, chairman of the Charity Commission, said: “I am delighted the joint committee has given the draft Bill its vote of confidence and has supported our calls for additional powers to be added to the legislation.

“The Bill will help us deal more effectively with charities that are at risk of deliberate abuse or the negligent action of trustees.”

Shawcross added: “The committee noted the unusual consensus behind these proposals – its endorsement underlines the importance of the draft Bill becoming law swiftly.”

A Cabinet Office spokesman said it would be for the new government elected in May to decide whether and when to introduce the legislation to Parliament.

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