Can you pay yourself from your own charity?
A charity can sometimes pay its founder or trustees, within strict rules. Being a trustee is generally a voluntary role.
| What for | Allowed? | What it takes |
|---|---|---|
| Expenses: travel, childcare, meals, training for the role | Yes | Reasonable and properly incurred, with receipts where practical. No Commission approval. Not a trustee payment, not taxable income |
| A job with the charity, as a trustee who stays on the board | Sometimes | A clear power in the governing document (following any conditions in it), or Commission authority. Where the Commission's authority is needed, it will usually require the trustee to resign. Fair recruitment, reasonable pay, the other trustees decide |
| A job, after resigning as a trustee | Sometimes | Unless the governing document clearly allows it, Commission authority if you resigned or agreed to resign after the offer, or took part as a trustee in decisions about the job, such as creating it or setting its pay |
| Goods or services you sell to the charity (not employment) | Yes, with conditions | The statutory power: six conditions, below |
| Being a trustee | Rarely | Only in exceptional circumstances, for a temporary period, with a power or Commission authority |
| A job for a founder who isn't a trustee | Possible | The trustees decide independently, in the charity's best interests, and manage any conflict. If the founder is connected to a trustee, or was a trustee involved in the job, the rules above apply. The application asks about employing a founder and wants the minutes |
Goods and services: the six conditions
Things like hiring out a meeting room, admin work, repairs, or running a training course. Buying or leasing land has separate rules. Under the statutory power:
- The governing document mustn't prohibit it.
- It must be in the charity's best interests.
- The amount must be reasonable.
- There must be a separate written agreement, made before the goods or service are provided, naming the supplier, describing what's supplied and setting the amount or maximum amount.
- Only a minority of trustees can be paid or benefit at any one time, counting employed trustees and those connected to anyone paid.
- Every conflicted trustee stays out of the discussion and decision, and doesn't count in the quorum.
It doesn't cover employment, auditing the charity's accounts, or paying a trustee for trustee duties.
Being employed while a trustee
- The other trustees must decide it's in the charity's best interests.
- Use a fair, open recruitment process: think about how you advertise and assess candidates, and set the skills for the role, not the person. Don't create a job to benefit a trustee.
- The trustee who wants the job takes no part in decisions about it, including the job description or pay.
- Pay must be reasonable and affordable. For a new role, compare similar jobs at similar charities or get specialist advice.
- You need a clear power in the governing document (and must follow any conditions in it, such as getting Commission consent), or Commission authority. A power that only mentions sections 185 to 188 of the Charities Act 2011 covers goods and services, not employment.
"Connected" people count too
Payments to people connected to a trustee are trustee payments too. For the goods and services power, the law (section 188 of the Charities Act 2011) lists: a trustee's child, parent, grandchild, grandparent, brother or sister; a spouse or civil partner of a trustee or of those relatives; a business partner of the trustee or of one of those relatives; and organisations any of them control or have a substantial interest in. For employment, check your governing document's power and any prohibition. Without a suitable power, the Commission's authority is needed where the person and the trustee are financially interdependent, or where a prohibition covers the relationship.
Paying a trustee for being a trustee
The Commission says consider it only in exceptional circumstances, temporarily, where it clearly brings a significant advantage. Its examples are a trustee supporting a stand-in chief executive for 3 months, or a chair overseeing a 12-month restructure. It considers each application on its merits.
What the application asks
- Whether the charity employs, or will employ, a trustee, the founder, their relatives, or a connected organisation, with minutes of the meeting that agreed it.
- Whether it buys, or will buy, goods or services from any of them, with minutes.
- Any other benefit someone involved receives: who, what and the connection.
- Premises owned by any of them: who, how used, the lease and minutes.
On the trustee declaration, each trustee also confirms that any payment to a trustee for being a trustee, or to a trustee or connected person for goods or services, will be in the charity's best interests, lawful and authorised, and help carry out its purposes or be a necessary by-product of doing so.
Considering a CIC
The Commission's pre-start checklist says trustees, people connected to them, or the founder, can't receive personal benefit unless it's incidental, with independent decisions and conflicts properly managed. A community interest company can pay its directors for their services, if the pay is reasonable and transparent. The CIC Regulator says CICs have no tax advantages, and a CIC still has to serve the community. CIC or charity?
Record it and disclose it
Record each decision to pay a trustee or connected person, with the reasons and any Commission authority. Accruals accounts must disclose trustee and connected-person payments; receipts and payments accounts should include them. Unauthorised payments may have to be repaid.