On 7 March 2024, the third set of provisions from the Charities Act 2022 came into effect. However, sections 15 and 16, relating to the amendments of the existing ex-gratia regime in section 106 of the Charities Act 2011, were absent from these provisions.
An ex-gratia payment is made by an employer without any legal obligation but out of moral consideration. Normally, ex-gratia payments would breach trust law as they use charitable funds for non-charitable purposes. However, section 106 of the Charities Act 2011 empowered the Charity Commission to authorise such payments when trustees felt morally obliged to make those payments.
The changes in the Charities Act 2022 will provide an increase in authority for charities, permitting them to make ex-gratia payments up to a certain level without the Commission's consent. The limits are income-based and as follows:
- Charities with gross income up to £25,000 can make individual payments of up to £1,000.
- Charities with income over £1 million can make individual payments of £20,000.
- A single payment exceeding the relevant cap still requires the Commission's consent.
These changes, which are expected to come into effect in Autumn 2024, would allow charities to become more flexible when dealing with termination payments.
For details of the changes which recently came in to effect, see our February 2024 edition of eNews.
