Trusts and Inheritance Tax

Trustees’ duties and liabilities

Produced by Tolley in association with Speechly Bircham LLP
  • 03 Nov 2021 11:52

The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Speechly Bircham LLP provides comprehensive and up to date tax information covering:

  • Trustees’ duties and liabilities
  • Payment of trustees
  • Avoiding conflicts of interest
  • The financial duties of trustees
  • Investing a charity’s funds
  • Buying, selling or leasing land or borrowing money on the security of land
  • Personal liability of charity trustees
  • Trustee indemnity insurance
  • Other matters for consideration

Trustees’ duties and liabilities

Payment of trustees

Most trustees are unpaid and must not benefit in any way from their charity trusteeship. However, they are entitled to receive payment of reasonable and necessary expenses from the charity’s funds, for example travel and other costs of attending meetings.

A charity trustee may only be paid for serving as a trustee where the payment is in the interests of the charity. There is no general power in law for this type of payment. A charity would need a specific authority in the governing document or authority would need to be given by the Charity Commission or the courts.

See the Trustee expenses and payments guidance published by the Charity Commission.

Avoiding conflicts of interest

Charity trustees have a duty to identify and manage conflicts of interest. A conflict of interest is any situation in which a trustee’s personal interests, or interests that they owe to another body, may influence or affect their decision making.

Trustees must not receive any benefit from their charity in return for any goods or services they provide to the charity unless they have express legal authority to do so. Such authority may exist in the charity's governing document, or where there is no adequate provision in the governing document, trustees may approach the Charity Commission or the Court for consent. In all cases, it is essential that any conditions attached to the authority are strictly followed.

Generally, a charity trustee cannot become an employee of the charity and an employee cannot become a charity trustee.

Any charity trustee (including a director of a charitable company) who breaks these rules may have to refund the charity for any benefits they have received, or make good any loss to the charity (see below).

The financial duties of trustees

Charity trustees must:

  1. exercise proper financial management to ensure the charity is and will remain solvent (see the Internal Financial Controls for Charities guidance published by the Charity Commission)

  2. use charitable funds and assets

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