Guidance Note: Ex Gratia Payments by a Charity

This Guidance Note: Ex Gratia Payments by a Charity outlines the law and practice on “ex gratia” payments by a charity to any person or organisation. We urge all charity trustees and administrators to familiarise themselves with this guidance. 

The note:

• applies to any and all charities, irrespective of their size, type or legal form. 
• is intended to help trustees decide whether it will be lawful to proceed with any proposal by the charity either to pay any sum or to transfer any property or assets or waive/transfer any rights to another person or organisation.
• explains the steps trustees need to take before they proceed with such a proposal.
• explains the kind of payment of funds, transfer / waiver of property / assets, or transfer / waiver of rights that constitutes an ex gratia payment, transfer or waiver.
• outlines how ex gratia payments differ from other types of payment, transfer or waiver.
• gives typical examples of “ex gratia” payments.
• explains that trustees may not delegate to charity staff the power to decide to make an ex gratia payment.
• explains the need to involve the Charity Commission before making an ex gratia payment.
• explains the changes to the law on ex gratia payments proposed by the Law Commission. Those changes have now been made by the Charities Act 2022. The changes will reduce the regulation of ex gratia payments/transfers/waivers when the relevant provisions of the Act are implemented by means of Regulations yet to be made by the Secretary of State. Once those Regulations have been made and implementation dates are known, and if any legislation supporting the Act is passed which impacts on the provisions in the Act relating to ex gratia payments, this page and the guidance note will be updated as necessary. 

As indicated in the guidance, charity trustees should seek legal advice before making any payment or taking any other step to ensure that any proposal can be lawfully implemented, and to ensure that it is carried out in accordance with the law.

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