Paragraph 19 – Trustee remuneration
198.Sections 67 and 68 of the 2005 Act deal with remuneration (i.e. payment) of charity trustees. In general, section 67 originally provided that where a charity trustee provided services or might benefit from remuneration paid to a connected person (such as the trustee’s spouse) for their services, remuneration could only be paid from the charity’s funds if various conditions were met.
199.Sub-paragraph (2)(a) of this paragraph of the Act’s schedule makes an initial adjustment to when the remuneration rules apply. Instead of applying where a charity trustee provides services or might benefit from remuneration paid to a connected person, the rules will apply where a charity trustee provides services or is connected with a person who provides services. That is, the concept of whether the charity trustee might benefit from the remuneration paid to the connected person is removed and is replaced instead with a straightforward test based on whether or not there is a connection. This mirrors the approach taken in section 69(4)(c) of the 2005 Act where the question is simply the existence of the connection without needing to second-guess whether the person “might” benefit as a result. In practice, the concept of when someone “might benefit” has been construed so widely that it is not expected that this will result in any different conclusions being reached.
200.Sub-paragraph (2)(b) of this paragraph of the Act’s schedule then makes an adjustment to section 67(4)(c) of the 2005 Act. As noted above, where the remuneration rules apply, remuneration can only be paid from the charity’s funds if various conditions are met. Originally, one of these conditions was that immediately after entering into an agreement about the provision of those services, fewer than half of the charity trustees were—
party to such a service agreement,
otherwise entitled to receive remuneration from the charity, or
connected with another charity trustee who falls within either of the bullet points above.
201.As such, the overarching rules apply where a charity trustee is connected to someone who is receiving remuneration but is not themselves a charity trustee (for example, where a trustee’s spouse is paid for providing advertising services to the charity). However, the condition set out above would not be concerned with such a payment because the spouse is not themselves a charity trustee of the charity.
202.Sub-paragraph (2)(b) of this paragraph of the Act’s schedule addresses this by changing the final bullet point to instead cover a charity trustee who is connected with anyone (whether another trustee or not) who is party to a service agreement or otherwise entitled to receive remuneration from the charity. In the example above, this would mean that the charity trustee whose spouse received remuneration would be counted as a remunerated trustee for the purposes of the rule requiring fewer than half of the trustees to have a financial interest in the charity’s affairs, despite the spouse not being a trustee themselves. As such, if the charity had only three charity trustees, no other charity trustees could be remunerated or connected with remunerated persons (as if two of the three trustees fell into that category then that would constitute 67% of the charity trustees and the line is set at needing to be below 50%).
203.Separately, sub-paragraph (3) of this paragraph of the Act’s schedule makes a minor change to correct a missed consequential during the passage of the 2005 Act. Section 68(2) of the 2005 Act defines who counts as a “connected person” for the purpose of the trustee remuneration rules. Under paragraph (b), this includes certain relatives of a charity trustee, as well as any spouse of such a relative. This is now adjusted to also include the civil partner of such a relative.
