Charities monthly round-up – May 2025

Paying trustees – Why good intentions aren’t enough

Is your charity considering paying a trustee, or someone connected to them, for services, employment, or anything else? Are you confident you have the authority to do so and that it’s truly in your charity’s best interests?
The Charity Commission’s (the Commission)’s newly updated guidance sounds a clear warning: trustee payments are the exception, not the norm and even well-meaning arrangements can trigger regulatory issues if mishandled. The rules now span five key scenarios, from paying for professional services to compensating for lost earnings, each with differing authority, justification and process requirements.
Before moving forward, charities must ask if they can/should make the payment and if they have documented every step.
If your charity regularly makes payments to trustees or their relatives, businesses, employers, etc. or is contemplating making any such payment, now is the time to review your processes and ensure that you can make those payments/should be making them. For a practical breakdown of the new rules and how to apply them, you can read our full ebriefing here.
For additional advice on trustee payments, please contact Edwina Turner.

Red flags in charity finances – A cautionary tale

The Commission has launched a statutory inquiry into four linked education charities: Education for Gondar, Education in Sidama, Education for Nyanza and Education in Western Province, Kenya, due to concerns over potential misuse of funds. Investigations revealed that funds were transferred directly to private bank accounts and inconsistencies were found between financial records and annual returns. Additionally, all four charities submitted remarkably similar annual returns, raising questions about their independence and governance.

Key takeaways for trustees:

• Be transparent – keep clear, accurate financial records that reflect actual activity.
• Report properly – make sure your annual returns are timely, truthful and reflect your charity’s position.
• Avoid conflicts of interest – always act in the charity’s best interests, personal benefit should never come into play.
• Stay independent – ensure your charity operates with its decision-making and accountability.

You can read the details of the inquiry here.

This case underscores the importance of robust governance and financial integrity. If you have any concerns about your charity’s governance or financial controls, please contact Edwina Turner.

Getting on board with trusteeship – What the research says

Thinking about recruiting new trustees? Wondering how your board compares to others or how the role is perceived more broadly? The Commission provides some helpful guidance on recruiting, appointing and inducting new trustees, including how to identify a need for new trustees, write role descriptions and person specifications and set a clear recruitment process. While aimed at existing charities, the guidance is equally relevant when setting up a new charity. You can read the guidance here.

The Commission’s latest research, in partnership with Pro Bono Economics, also offers valuable insight into the state of trusteeship in England and Wales. The study, based on over 2,000 responses from trustees across England and Wales, reveals that:

• eight in ten trustees would recommend the role to others;
• many say it helps build skills, confidence and purpose; and
• most boards are made up of four to ten trustees, striking a balance between diversity of thought and manageability.

But the report also flags important challenges, particularly around board diversity and attracting younger trustees. Are your trustees bringing the right skills to the table? Does your board reflect the diversity and range of experiences needed to drive your charity forward? Attracting younger trustees and ensuring broader representation is essential to keeping your governance effective and relevant.

To read more about the research undertaken, click here.

If you’re reflecting on the makeup of your board or looking to strengthen its effectiveness, our charities team can help. Our team of charity experts are able to support you with trustee recruitment, succession planning and governance reviews. Please contact Edwina Turner.

Feeling the financial squeeze? You’re not alone

A recent Road Ahead 2025 report from the National Council for Voluntary Organisations highlights what many charities are already feeling: rising costs, tighter funding and increasing demand for services. It’s a tough situation, with inflation expected to climb again and less government money in the sector.

So what can you do? Now’s a good time to take a fresh look at your charity’s finances. Are you making the most of your income streams? Do your reserves give you room to breathe? Have you built enough flexibility into your plans to cope with the unexpected?

It doesn’t have to be overwhelming. Broad planning, regular reviews and a focus on financial resilience can make all the difference. You can also utilise the Commission’s free resource: the Trustee Finance Toolkit.

Have your say – Charity finance rules are changing

Two important consultations are currently open that could significantly impact how charities operate financially:

• Review of financial thresholds in charity law – the Department for Culture, Media and Sport is seeking input on whether to adjust financial thresholds (such as the audit requirement threshold) from £1 million to £1.5 million, to reflect inflation. This could affect reporting obligations for many charities. The consultation closes at 11:45pm on 12 June 2025 and can be accessed here.
• Draft charities Statement of Recommended Practice (SORP) consultation – the charities SORP making body has released an Exposure Draft SORP 2026 proposing significant changes to the SORP, including a new three-tier income-based reporting framework and revised income recognition criteria. Feedback is welcome until midday on 20 June 2025 and can be accessed here.

While the biggest impact will likely be felt by charities with incomes between £250k and £1.5m, proposed changes to financial thresholds could alter the reporting requirements for charities with lower incomes, for example, by changing the point at which accrual accounts are required or when an independent examination must be undertaken. This could mean additional administrative work or shifts in governance expectations. Even if thresholds increase, potentially easing some obligations, smaller charities need to consider how this may influence their long-term planning, particularly around growth, financial controls and future compliance. Budgeting, fundraising strategies and trustee responsibilities may all need to be reviewed in light of the new framework.

These consultations are your opportunity to influence the future of charity financial reporting and compliance. Engaging now ensures your charity’s voice is heard before changes are finalised.

As a quick reminder, the current requirements are that charities must prepare an annual report and a set of accounts, which must be filed with the Commission if your income exceeds £25,000. Charities with an income over £10,000 must also complete and submit an annual return. Depending on your charity’s legal structure, income and assets, you may also be required to have your accounts independently examined or audited. Ensuring these requirements are met accurately and on time remains essential for good governance and public trust.

If you need assistance with any filing requirements for your charity, please contact Edwina Turner.

Is your charity ready for changes to direct marketing?

Direct marketing refers to any communication sent to individuals that promotes your charity’s aims, services, or fundraising appeals. This includes letters, emails, phone calls and texts. If your charity uses direct marketing, you must comply with data protection laws, including the UK GDPR and the Privacy and Electronic Communications Regulations. These rules govern how and when you can contact individuals, requiring a lawful basis for processing personal data, consent for most electronic communications and a clear and easy way to opt out.

Under current rules, charities can only rely on the ‘soft opt-in’ for electronic marketing (such as emails or texts) in connection with commercial activities, for example, selling products or tickets to an event. This means that if someone has previously bought something or similarly interacted with your charity, you can send them related marketing messages without needing their explicit consent each time.

However, this could be about to change. The Data (Use and Access) Bill, currently before Parliament, proposes extending the soft opt-in to allow charities to send fundraising emails or texts to supporters, even if they haven’t made a recent purchase or booking.

If passed, this change could simplify how you communicate with donors and supporters. Now is a good time to review your marketing strategy and ensure your processes are ready to adapt. How do you currently engage with supporters? Do you have a clear, compliant marketing plan in place? If you’re relying on email or text for fundraising, the upcoming changes could have a significant impact.

For any advice on your charity’s marketing strategies, please contact Emma Watt.

Employment update

With the April 2025 increases to statutory payments now in effect, it’s the perfect time to ensure your payroll is up to date. Statutory Sick Pay, Maternity Pay and other family-related leave entitlements have all risen, which could affect your budgeting, especially if you’re a smaller charity. If you haven’t yet reviewed your internal policies or updated payroll software, now’s the time. These changes could also impact your employment contracts and staff handbooks. Our employment team has outlined the key updates in a helpful blog.

Additionally, the UK Supreme Court’s recent ruling in For Women Scotland Ltd v The Scottish Ministers clarified that ‘woman’ and ‘sex’ under the Equality Act 2010 refer to biological sex, not gender identity. This decision may have practical implications for charities, particularly those providing single-sex services or developing equality and inclusion policies. For example, it could affect how you manage access to women-only spaces or define eligibility for programmes aimed at specific sexes. For more details about the case and its potential implications, you can read our full ebriefing here.

For employment-related queries, please contact Libby Hubbard.

For more information or advice on the topics covered in this month’s newsletter, please get in touch with Edwina Turner, your editor for this month.

For those who don’t know me, I am a legal director at AC and lead the charities governance team. I have extensive experience advising national and international charities on governance, restructures and mergers. I work closely with boards and chief executives to guide them through challenging changes, aiming to make the process as smooth and positive as possible. I am also appointed by the Commission as an interim manager of charities that are the subject of a statutory inquiry.

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