Can a board authorise ex gratia payments and transfers (gifts)?
Under current law, charity trustees may authorise a gift only if:
- It is in the best interests of the charity;
- The charity has power to do so under an existing express or implied authority in its constitution.
- If there is any doubt as to whether the trustees have authority, it is possible to apply to the Charity Commission for permission.
- An ex-gratia payment is a payment that the trustees could reasonably be regarded as being under a moral obligation, but are not under any legal obligation to make. Historically, this created a problem for trustees because the charity’s governing document was unlikely to include any powers that could be used to make an ex-gratia payment, and it wasn’t clear that the trustees could justify the payment as being in the best interests of the charity.
- Examples include where the charity trustees wish to make redundancy payments to employees which exceed the payments that would be required to make under employment law.
- As of 27 November 2025, the Charities Act 2022 reforms have come into force, introducing a statutory power for charities to make small ex gratia (moral) payments without prior Charity Commission consent.
Key Points:
- Trustees may now make payments based on an objective test of moral obligation.
- Thresholds for small ex gratia payments depend on the charity’s annual gross income; payments above the thresholds still require Charity Commission consent. All charities can authorise payments of up to £1000; those with gross annual income of over £25,000 can authorise payments of up to £2,500; those with gross annual income of over £250,000 can authorise £10,000 and those with gross annual income of over £1m can authorise £20,000.
- Trustees may delegate authority to staff or committees where permitted by the charity’s governing documents.
- This statutory power does not generally apply to national museums and galleries for collection items or certain overseas payments.
- All ex-gratia payments must be disclosed in the charity’s annual accounts, and may create tax consequences.
- The Arts Council England guidance, Restitution and Repatriation: A Practical Guide for Museums in England , outlines four key factors for trustees to consider (e.g., provenance, cultural significance, moral obligation, and impact on the charity’s purposes).
- Trustees should ensure that all decisions regarding ex gratia payments or restitution are properly documented and demonstrably in the best interests of the charity.
