It may come as a surprise that in many circumstances charity trustees can be paid. Earlier this year provisions under the Charities Act 2006 came into force setting out specific circumstances permitting these payments. But even before the new law there were many cases of trustees being paid, lawfully.

In general the law permits payment to trustees only for additional services. In other words trustees cannot be paid for being a trustee. They can only be paid for other things, the most obvious being payment of their expenses, such as travel costs to board meetings.

A little publicised recent Charity Commission survey also showed that 23 of the top 100 charities paid at least one their trustees for being a trustee, regardless of any additional services they might provide. But these are the largest charities in the UK and a special case has to be made to allow such payments.

In most cases the types of payments which trustees are permitted remain within the principle of voluntarism - generally they include:

• Providing services such as accountancy, secretarial, design, or legal services.
• Expenses incurred in carrying out trustee duties
• Interest on loans
• Rental payments on premises owned by a trustee.

Prior to March of this year, even these types of payment were only permissible if a charity’s constitution explicitly allowed it. Now they are permitted provided the constitution does not explicitly prohibit them.

In order to fall within the legislation a charity should check carefully that there is no prohibition on the payments in question (or payments in general) and then ensure that:

1. the amount being paid is reasonable in the circumstances

2. there is a written agreement setting out the amount to be paid

3. it is in the best interests of the charity, and the trustees must have exercised proper skill and care in authorising the payment(s)

4. only a minority of trustees are paid to provide services to the charity. For instance if a board has seven members, only three can be paid to provide these services

5. the Charity Commission’s guidance on payment of trustees must be considered (available through the Charity Commission’s website)

6. the trustee(s) in question are not be involved in the decision about the payment including prior discussions (although they can give their input before the discussion begins).

It is important to note that these restrictions on payments apply not only to trustees themselves but also to any person connected to them through family or business.

And a final warning. The proper procedure for paying a trustee must be followed before the payment takes place. It is not lawful to start paying a trustee and then subsequently to authorise it (though of course it is better to authorise payments going forward than to continue making unauthorised payments).

Where the correct procedures have not been followed, a trustee receiving unauthorised payments will have been acting in breach of trust. If the trustees are not extremely careful, not only will the trustee who has been paid be liable to repay all the money they have received, but the other trustees will be in breach of trust if they do not seek such repayment.

Lawrence Simanowitz is a partner in the Charities and Social Enterprise team at Bates, Wells & Braithwaite Solicitors. He can be contacted on l.simanowitz@bwbllp.com.