Sale of goods by trustees to their charity and payment for work carried out

The Charities Act 2022 received Royal Assent on 24 February 2022. Most of its provisions have come into effect. The rest are expected to be implemented during the remainder of 2024. 

Section 30 of the Act was implemented with effect from 31 October 2022. That Section amends Section 185 of the Charities Act 2011, and it now enables a charity to pay any of its trustees for goods that they provide to the charity (even if it is not expressly permitted in the charity’s governing document), without needing Charity Commission approval but subject to appropriate safeguards set out in the Act. This power is available to a charity if paying for those goods is in the charity’s best interests, the amount to be paid to the trustee is reasonable, and the charity and the trustee enter into a written agreement for the goods which states the amount to be paid. 

The 2011 Act (as amended by Section 30 of the 2022 Act) also provides that, from the effective date (31 October 2022), Charity Commission approval is also not needed in the case of supply of services to a charity by a trustee.

The effect of these amendments to the 2011 Act is to align the rules on supply of goods by a trustee with the existing rules allowing trustees to be paid for services that they provide to their charity. These changes create consistency in the rules and enable charities to access goods which may be offered at more favourable terms by a trustee than elsewhere.

Trustees are therefore now able to supply either goods or services or a combination of goods and services and be paid for that supply. The changes made by the 2022 Act do not also extend to allowing trustees to be paid for services to a charity comprising acting as a trustee of the charity or to be paid as an employee of the charity: such payment is not permitted.

Secondly, Section 31 of the 2022 Act has also been implemented by H M Government with effect from 7 March 2024. Section 31 amended Section 186 of the 2011 Act to create a new power for the Charity Commission to order a charity to make payment to trustees for exceptional skill and effort with which they have carried out work for their charity in circumstances where it would be unjust not to do so. Since the Commission now has this power, there is no longer any need for a charity to have to apply to court obtain such an order. 

The Commission has to bear in mind several factors when making its decision as to whether to exercise this power under Section 186 to authorise payment and the amount of the payment to be made. These factors include whether if the trustee had not carried out the work, the charity would have paid someone else to carry it out, the level of skill with which the work was carried out, any express provision in the charity’s constitution prohibiting a trustee from receiving the remuneration, and whether making the payment would encourage breaches of trust or duty by anyone else acting as a trustee of any charity.