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Registering and operating a charity: Personal benefit and charity status

Author: Daniel Warner, Case Manager, Registration Division, Charity Commission

Published: 04 Jan 2024

Assessing the public benefit requirement is an essential part of any registration application. Personal benefit is an important part of that requirement and can come in various shapes and sizes. Applicants should in all instances consider the nature and scope of any personal benefit and how that impacts the organisation’s claim to charitable status. This article outlines the principles of personal benefit in more detail and what applicants need to consider when submitting their application.

The principles of personal benefit

As explained previously, an essential aspect of the public benefit requirement is that a purpose must benefit the public in general (or a sufficient section of the public) and not give rise to more than incidental personal benefit. A purpose cannot be charitable if the public benefit requirement is not met.

A personal benefit means a benefit that someone receives from a charity and is incidental where (having regard to both its nature and its amount) it is a necessary result or by-product of carrying out the purpose. Personal benefit can relate to an individual or an organisation and is not limited to financial gain (such as cash and grants). It is a direct or indirect benefit of any nature and includes non-financial benefits (goods, services or reputation), membership benefits and benefits to trustees.

The law states that trustees cannot receive any benefit from their charity, including in return for any service they provide to it unless they have legal authority to do so.

Many personal benefit issues stem from running a charity (such as employment) and are operational matters, but they may become directly relevant to charitable status when the scale or nature of the benefit permitted by the purpose calls into question who the organisation is set up to benefit.

Examples of personal benefit can include:

  • Beneficiaries receiving a benefit from the charity in furtherance of its purpose, for example through pupils receiving education at a school
  • Enhancing the reputation of a person or organisation, for example through a museum dedicated to the work of a particular artist
  • Improving or preserving a privately owned property that a charity uses
  • A membership organisation that will promote business and employment amongst its members

In each case, the Commission assesses whether the potential for personal benefit is legitimately incidental. The personal benefit to individuals is clearly incidental in the first case but is less clear in the remaining examples. The distinction between what may be incidental or not can be fine and this is why we recommend providing full and detailed responses in the application form.

Running a charity – trustee employment and remuneration

The principle of personal benefit also applies to any employment or payments that trustees or connected persons may receive as part of the charity’s operation. Charities can pay trustees or connected persons for the supply of services, and trustees or connected persons may become employees of their charity, if this is authorised by the governing document. This may not directly impact a registration decision but, once the charity is registered, it is important that it is run for and carries out its purposes for the public benefit.

If your organisation is considering employing a trustee or remunerating them for the provision of goods or services, you must consider:

  • Whether and how any payments are authorised by the governing document
  • If this in in the best interests of the organisation
  • How any potential personal benefit conferred would be legitimately incidental to the organisation carrying out its purpose for the public benefit

The same considerations apply for persons or businesses that are connected to a trustee.

The following hints and tips may be useful when considering employing or remunerating a trustee:

  • Know your governing document. Precisely what does it allow and do your proposals stay within those rules?
  • Consider how any conflicts of interest will be addressed from the outset. If the trustees are connected and are proposing to be employed, how in practice would that be managed?
  • It is highly unusual for a trustee to be paid for serving as a trustee. There is no general power in law for this type of payment and a charity would need a specific authority to do so (whether that be a power in its governing document, or authority provided by the Commission or the courts). The Commission will only authorise these arrangements in very specific circumstances.
  • Trustee employment and benefits should be disclosed during the application process. The Commission fully appreciates that trustee employment and benefit can be acceptable in certain circumstances.

What’s next?

Next time, we’ll look at connections to non-charitable entities and what information the applicants need to provide when they are establishing a connected charity.

*The views expressed are the author's and not ICAEW's.