A ruling by the Scottish Charity Regulator that a Catholic adoption charity was unlawfully discriminating against gay people by refusing to accept applications from unmarried couples, has been upheld.

In January, the Scottish adoption charity St Margaret’s Children and Family Care Society, was warned that if it did not start accepting applications from gay couples it would lose its charity status.

St Margaret’s policy states that “We expect applicants to have been married for at least two years”.

Following a complaint by the National Secular Society (NSS), the Office of the Scottish Charity Regulator (OSCR) ruled that since same-sex marriage is not currently legal in the UK, the policy was excluding gay couples from their adoption system, and so it was deemed to be unlawful discrimination.

The Glasgow-based charity had contested the decision, and had asked for a review, however the watchdog upheld its original decision.

The charity now has until 22 April to comply with the Equality Act, as per the ruling, otherwise it could be removed from the register, the BBC reports.

The updated report from the OSCR read: “OSCR found that the charity does not provide public benefit because the way it provides benefit involves unlawful discrimination which causes detriment to the public and to particular groups of people, the effect of which outweighs the other positive effects of the charity’s work.

“OSCR also found that access to the benefits the charity provides is unduly restricted… therefore found that the charity fails the charity test and confirmed the decision to direct the charity to meet the charity test.”

A spokesperson for the NSS, Alistair McBay, commented on the ruling. He said: “The original decision was the only one the regulator could have made in the circumstances, to require St Margaret’s to follow well-established equality law and charity law, opening up the pool of prospective parents to gay couples being in the best interests of children awaiting adoption.

“We hope St Margaret’s will now put the best interests of children first, as many other Catholic adoption agencies have done, and comply with the law by widening the pool of prospective parents to include same-sex couples.”

The charity is part-funded by the Catholic Church, and trustees include bishops from dioceses in western Scotland.

A spokesperson for St Margarets said: “We are disappointed at the decision. We will consult our lawyers before considering what course of action to pursue… In the meantime, St Margaret’s remains open for business.”

A spokesperson for the Scottish government said: “The Scottish government is disappointed at this decision.

“We have worked with St Margaret’s to find a solution but the review process is a matter for OSCR to undertake independently. It is not for Scottish ministers to adjudicate on the law.

“There remain further appeals processes for St Margaret’s to pursue, should the society so choose.”

He said he did not think it was “in anyone’s interests to close an organisation which provides such a valuable service to vulnerable children”.