It's a personal thing

Do you appreciate the implications for trustees receiving personal benefit from the charity? Kathy Faulks, VAL's Small Groups Worker, explains.

Street scene with people

As you may be aware charities must carry out their purposes for the public benefit.

A charity can only provide personal or private benefit if this is 'incidental' to carrying out its purpose.

What does 'incidental' mean? It means that the result is a necessary result of carrying out the purpose of the charity. It is, if you like a by-product.

Reasonable Costs

Let me give you an example: Trustees may receive reasonable costs that they have incurred in order to carry out their duties as trustees. These costs are known as expenses and are not subject to tax. However, there are certain payments which would not be regarded as legitimate expenses and examples of these are:      

  • Expenses which are excessive and which do not relate to trustee activities.
  • Payment of hotel accommodation or travel costs for spouse or partners who are not carrying out charity business. 
  • Petrol mileage rates above the level approved by HMRC.

These are just examples.

For more detail about trustee payments read the Charity Commission guidance Trustee expenses and payments (CC11) available from the Charity Commission website. 

Connected Persons & Personal Benefit

You will notice a reference to spouses and partners in one of the examples above. It is not only trustees who need to be vigilant about personal benefit; everything that applies to trustees also applies to what are called 'connected persons' the connection is to trustees and the list is as follows: ยท 

  • A trustees: child, stepchild, parent, grandchild, grandparent, brother or sister. 
  • The spouse or civil partner of any of the above. 
  • A person carrying on business in partnership with any of the persons mentioned above.
  • Any institution which which is controlled either individually or by two or more people mentioned above.
  • A body corporate in which any of the people mentioned above has a substantial interest

More information

If you are not sure whether or not your charity is correctly interpreting and applying personal benefit, I would be happy to discuss this with you, to get in touch email kathy.faulks@val.org.uk or call 0113 297 7920

For more information the Charity Commission also provides guidance, see Examples of personal benefit on their website.

Payments

Finally, if a trustee board is considering making a payment to a trustee, other than for reimbursement of legitimate expenses, the Charity Commission highlights six key factors to consider:

  1. Who will receive the payment?
  2. What is the payment expected to cover?
  3. Is the payment in the best interests of the charity?
  4. Is there a legal authority to make this payment?
  5. What conditions must be met if the payment is to be made?
  6. How will any conflict of interest be managed?

Next time

For my next blog I think I will write about conflict of interest!

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