Commission warns charities of negative reaction to paying trustees in new guidance
· Posted on: May 16th 2025 · read
The Charity Commission has issued new guidance on paying trustees: Charities paying a trustee or a connected person: understand the rules (CC11).
The guidance continues to emphasise how, at its core, a charity Trustee is a voluntary role. It explains how “this is what makes the charity sector unique and promotes trust and confidence in charities. As a result, external reaction to paying trustees is often negative”.
A charity must consider all options before agreeing to pay a trustee and must have legal authority though their governing document to do so. It must also be decided that it is within the best interests of the charity to pay a trustee.
The new guidance is split into a range of differing trustee payment scenarios (below) with the ultimate aim to make the legal position ‘even clearer’.
- Paying a trustee or a connected person for providing goods or services to the charity
- Employing a trustee or connected person
- Paying a trustee for carrying out trustee duties
- Compensating a trustee for loss of earnings
- Paying trustees: other types of trustee payments
The guidance clarifies that expenses do not constitute ‘trustee payments’ and reasonable costs such as travel and accommodation can be reimbursed.
Not for Profit
Read more about Not for ProfitRead moreWhat has changed?
HMRC issued Revenue & Customs Brief (“RCB”) 02/25 on 24 April 2025. The RCB makes it clear that HMRC no longer accept the efficacy of longstanding VAT planning in the care sector.
Please follow the link to the RCB here: Revenue-and-customs-brief-2-2025-the-use-of-vat-grouping-within-the-care-industry
HMRC will use existing powers to refuse new applications for VAT grouping and to remove entities from VAT groups. These actions would make the planning ineffective.
In addition, the RCB includes an instruction to contact HMRC if businesses believe they have similar arrangements in place.
Any actions by HMRC which are restricted to the powers highlighted in this RCB will not have retrospective effect.
What does this mean for my business?
The context matters in this case. This planning is not new, is well known to HMRC, and in numerous cases has either been approved in writing by HMRC or been reviewed during a routine VAT inspection. It is not clear what has triggered HMRC to challenge the planning now.
If you decide to notify HMRC and you are confident that the arrangements have been implemented correctly, you should not expect any historical VAT savings to be at risk. Conversely, if you decide to wait for a challenge, HMRC may be less sympathetic to the arrangements in place, although the powers outlined in the RCB indicate that any action will be on a prospective basis.
In summary, this is a finely balanced judgement, based on the business’ attitude to risk, the effectiveness of arrangements in place, and concern about the closer attention of HMRC.
How we can help?
MHA has the expertise to support a review of existing business relationships with local authorities and the NHS and decide how best to move forward.
