Can the Charity Commission ease up on paying charity trustees?

The charity sector is experiencing a "trustee crisis", with many charities struggling to fill vacancies on their boards and concerns about a lack of diversity and availability of the right skills and experience. Faced with such challenges, charities are increasingly asking us to guide them on whether paying charity trustees is a realistic option.

This article looks at the rules on paying charity trustees, considers whether there is any leeway for the Charity Commission to move the goalposts, and suggests alternative strategies for opening charity trustee roles up to a wider audience.

Recent research from the Charity Commission and Pro Bono Economics reveals that charity trustees in England and Wales continue to be disproportionately male, white, older and relatively wealthy. Charity trustees from ethnic minorities are unrepresented compared with the national average. There has been little shift in this demographic since research was last carried out in 2017.

Primacy of voluntary trusteeship

It is argued that paying trustees would widen the role’s appeal, attracting a more diverse pool including those who cannot afford to volunteer their time. However, the Charity Commission’s recently redesigned Guidance on paying a charity trustee re-emphasises the Primacy of voluntary charity trusteeship, opening with the statement:

“Being a trustee is generally a voluntary role. 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.”

The regulator’s stance regularly draws calls to relax the rules on paying charity trustees, to aid recruitment, assist with retention and provide greater flexibility to create unitary boards, comprising a mix of executive and non-executive trustees. However, this ignores the fact that the Charity Commission’s hands are tied by the law as it currently stands. The voluntary charity trusteeship principle is more than just a time-honoured tradition that the Charity Commission can alter or dispense with at will; it has deep legal roots.

Deep-rooted no profit rule

The principle derives from the duty of undivided loyalty that charity trustees owe to their charity’s beneficiaries and to the charity itself. A key component of this obligation is that a charity trustee must not profit from their position (the "no profit rule"). These strict rules have been in place for centuries and are regularly applied and restated by the courts.

In a 2010 Court of Appeal decision, Lord Justice Jacob explained that:

“English law has always taken a very, very strict position as regards trustees benefiting from the trust of which they are a trustee. It is almost, to lay people, unbelievably strict. It has been so for a very, very long time. Experience over the years as the law of trusts was built up suggested that the only thing to do was to be very, very tough on trustees. Otherwise, the temptation on trustees to profit from the trust can be too great to be resisted.”

The no-profit rule says that a charity trustee (or anyone connected to them) must not receive any payment or other material benefit from the charity they manage and administer, unless they are authorised to do so by:

• An express provision in the charity’s governing document.

• A statutory provision, such as the power to pay a charity trustee (or anyone connected to them) for providing goods or services (or both) to the charity (sections 185-188, Charities Act 2011).

• The Charity Commission or the court.

While the rule derives from trust law and was first applied to trustees of charitable trusts, it is read across to apply to charity trustees of all other forms of charity, such as a charitable company, charitable incorporated organisation (CIO) or Royal Charter charity.

Applications to the Charity Commission requesting permission to insert a power to remunerate a trustee for acting in that capacity (being a payment that extends beyond the statutory power to pay a trustee for providing goods or services) are routinely declined. The Commission’s stance is based on the approach of the Court. In Smallpiece v Attorney General in 1990, the High Court was willing to authorise certain past payments to trustees but would not entertain adding a power to a governing document to authorise future payments.

Breaching the no profit rule has serious implications, as a charity trustee who receives an unauthorised payment acts in breach of trust and may be required to repay the charity (irrespective of whether the payment was made in the charity’s best interests).

Charity Commission’s guidance reflects strict rule

It is therefore no surprise that the Charity Commission takes a robust approach.

On paying a trustee for carrying out their trustee duties, the Charity Commission’s guidance says that this should only be considered in “exceptional circumstances and for a temporary period of time when paying a trustee clearly brings a significant advantage to the charity over other options”.

An example might be where, due to the sudden departure of the chief executive officer (CEO), the chair of trustees is required to take on a more "hands-on" role in the day-to-day management of the charity while remaining on the board, and until a new CEO is recruited.

While some employers provide paid volunteering leave, such benefits are far from the norm, limited in scope and clearly not available to those who are self-employed.

Where it can be shown that an individual will lose out financially if they cannot work due to the demands of their trustee role, a case can be put to the Charity Commission to compensate them for loss of earnings (a charity’s governing document will not usually provide a clear power permitting this). However, this is unlikely to work for those pursuing a portfolio career.

Our experience is that the Commission remains reluctant to authorise a charity to pay trustees other than in exceptional circumstances. Charities seeking to explore routes to pay trustees for acting in that capacity are generally well-advised to have a backup plan should their request be refused.

Providing goods or services to your charity

Charity Commission guidance makes it clear that the statutory power to pay a trustee for providing goods or services (or both) to their charity does not apply to paying a trustee for carrying out their duties. However, this may be available where a charity has a discrete need, such as for administrative or IT consultancy services, that a trustee is best placed to provide.

Care needs to be taken when seeking to take advantage of this power and it is likely to be prudent to take legal advice. In particular, the power is subject to six conditions that must all be met (including putting a written agreement in place, managing conflicts and for only a minority of trustees to be paid at any one time) and cannot be used to provide auditing or independent examination services (as there must be independent scrutiny of charity accounts).

Also, the line between providing consultancy services under a contract and employee status is not always easy to navigate and may have tax consequences.

Board diversity

As charities become ever larger, more complex and subject to greater levels of regulation and scrutiny, the challenge to recruit a diverse range of individuals with the necessary skills, expertise, time and lived experience to meet a charity’s governance needs remains challenging for many organisations.

While there may be a case that a less rigid framework to enable trustees to be paid might help some charities respond effectively to this challenge, the Charity Commission’s stance is consistent with the current law.

The Charity Commission’s research also shows that most trustees are recruited by word of mouth (with only 6% applying for their role via an advert) and evidence from the volunteering charity Reach is that, where trustee positions are advertised, a diverse pool of applicants apply.

Charities looking to attract the right candidates to fill trustee positions might therefore wish to consider whether all other avenues have been fully explored (such as recruitment policies and policies on paying trustee expenses) before heading down the trustee payment route.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2025