The Charity Commission’s latest guidance on accepting and refusing donations might not be legally correct, charity lawyers have been told. 

In March, the regulator published its latest guidance on the factors for charities to consider when deciding whether to refuse or accept donations.

Speaking at the Charity Law Association conference in central London yesterday, Laura Soley, partner at the law firm Bates Wells, called for the regulator to publish its legal rationale on changes made.

“Some practitioners, including some members of the CLA working party, have expressed reservations as to whether it is legally correct and whether, generally speaking, trustees can use general catch-all powers or a power to dispose of property to return a donation,” Soley said.

“The issue being whether this could be an allocation of funds in furtherance of the charity’s purposes, so it would be really helpful for the Charity Commission to publish its rationale.”

The regulator said it was confident its guidance was accurate and did not include a legal rationale because it was written for trustees, not legal professionals.

A Section 105 order gives the regulator power to authorise a payment, whether or not the trustees have power to make it, where that payment is in the interests of the charity.

The new guidance does not say whether the regulator would be willing to authorise return of donations by way of Section 105 order, for example in really high-risk or high-value cases, Solely said.

“We know that the general approach for the Charity Commission is not to make a Section 105 order where trustees have power to do something,” Solely said.

“But that could leave trustees in a really difficult position if they’re dealing with something that’s really high-risk or complex, so we’d really welcome clarification on that point.”

Charities returning donations using catch-all powers could be far-reaching, Soley said.

“For example, could this be used by non-statutory museum charities seeking to return cultural artefacts?”

An ex-gratia payment is one trustees believe they are under a moral obligation to make but they do not have power to do so and they cannot justify the payment as being in the best interest of the charity.

“I also wonder whether the ex-gratia payment regime may be used less in the future,” Solely said.

“Historically, it seems likely that most payments could be justified as being in the interest of the charity on reputational grounds going forward, so I do wonder whether that power is going to be used as often.”

Jane McGarry, assistant director of legal services at the Charity Commission, said: “The commission’s guidance about accepting, refusing and returning donations does not include a legal rationale because it is written for trustees, not legal professionals.

“The commission is confident that its donations guidance is accurate, including what it says about powers to refuse or return donations.

“The commission is clear, in its guidance, that the starting point is to accept or keep donations so that they can be used to further a charity’s purposes. It advises that charities can only use their powers to refuse or return donations if they are satisfied that it is in the best interests of their charity to do so.

"It also advises that trustees must make their decision in accordance with their legal duties. We expect trustees to do this by following the advice in the donations guidance as well as our decision-making guidance.

“The donations guidance also sets out when charities will need to apply to the commission for authority. Our guidance on decision-making sets out that when matters are complex or high risk, trustees can apply to the commission for formal advice.

“Where trustees have a moral obligation to refuse/return items or funds, they must use the ex-gratia regime including seeking consent from the commission”.