Paying trustees for providing services or goods to a charity

As a member of a charity, you will be all too aware of the regulatory obstacles preventing your charity from being able to pay its trustees.

Trustee members can often go out of pocket for their work, which can be frustrating when not able to remunerate them sufficiently.

However, 31 October 2022 saw changes to the Charity Act 2022 and gave charities the statutory power to pay trustees for providing goods or services alone to the charity in certain circumstances.

Charities can now pay trustees for:

• Services only, such as estate agency or computer consultancy
• Services and associated goods such as plumbing or painting services and their associated materials such as plumbing parts or paint
• Goods only, such as supplying stationery

Your charity can pay a trustee for any of the above that are over and above normal trustee duties. The decision to do this must be made by the trustees who will not benefit from the payment.

It is important that if you are looking to pay a trustee for goods or services, you must understand the Charity Commission’s guidance on paying trustees for goods or services.

Charity Commission guidance

This guide explains how there must be a written agreement between your charity and the trustee (or connected person) being paid, a specification on the exact or maximum amount to be paid, and a guarantee that the trustee does not take part in decisions made by the trustee board regarding any aspect of the agreement.

You must also agree that the payment is in your charity’s best interests and is reasonable for the goods or services provided, and not allow payments or other benefits to a majority of their trustee board.

Finally, the guidance advises that your charity’s governing document doesn’t stop trustees from being paid for goods or services.

If the governing document doesn’t allow your charity to pay your trustees then you will need to get consent from the Charity Commission.

Duty of care

To ensure that your trustees are being paid fairly and reasonably, your charity must follow a duty of care. To follow this duty of care, you must:

• Be clear that the payment is in your charity’s best interest
• Identify and record conflicts of interest and prevent them from affecting the decision
• Use reasonable care and skill when making a decision
• Decide what to do if the goods and services provided are unsatisfactory
• Keep records of discussions at meetings and disclose the payment in their accounts

It is important to remember that you can only pay a trustee if it is clearly in the interests of your charity and provides a significant and clear advantage over all other options.

An agreement to pay a trustee can be amended as long as there is a majority decision made by the trustees who do not stand to gain from the payment. However, the trustee being paid must also agree to the amendment or the contract to provide for such a change.

Payments to trustees must be mentioned in the accounts of charitable companies and other types of charities with a gross yearly income of more than £250,000.

Need support to adapt your charity’s operations to regulatory changes? Contact us today.