Guidance

Accepting, refusing and returning donations to your charity

Legal rules for trustees when deciding whether to accept, refuse or return a donation.

From:
The Charity Commission
Published
4 March 2024

Applies to England and Wales

As trustees, your principal duty is to further your charity’s purposes.

Your starting point should be to accept and keep a donation offered or given to your charity. This is because donations are important to successfully delivering your charity’s purposes.

But sometimes you must refuse or return a donation, and in other circumstances you can decide that it is in your charity’s best interests to do this. 

Your decision will often be significant for your charity. You must always carefully balance all of the factors that are relevant to your charity’s circumstances.

Use this guidance to help you make your decision in line with:

  • the law
  • your trustee duties
  • your charity’s powers

Your decisions must be in the best interests of your charity.

What we mean by a donation

In this guidance ‘donation’ has a broad meaning.

It can be money, land, goods or other property of any kind freely given to your charity.

Some examples are money or property given:

  • in response to any of your charity’s fundraising activity
  • as a gift, or a gift in a will (a legacy)
  • as a grant

A grant can be a donation or a contract

If a grant is a donation, it has been freely given to your charity. This means that the donor has no right to receive anything in return but can attach terms and conditions setting out how the grant is to be spent.

A contract is a legally enforceable agreement between two or more parties where one party agrees to provide a service or other activity in return for payment in any form.

If your charity is considering returning grant-funding, you should take legal advice if you think the grant may be a contract rather than a donation. This is because different legal rules relevant to contracts will apply. The particular terms of the contract will also be relevant, for example any termination provisions.

Donations you must refuse or return

In certain circumstances you have a legal obligation to refuse or return a donation.

Donations that you must refuse because they are from illegal sources or come with illegal conditions

You must refuse a donation that comes from an illegal source or with an illegal condition.

For example, where the donation has come from terrorist or other criminal activity. 

If you suspect that your charity has received a donation from an illegal source, you should not return it or contact the donor. You must follow the law and this guidance, and you may need to take advice about your next steps.

Find out more about:

Other donations that you must refuse or return

You also have a legal obligation to refuse or return a donation that:

  • is from a donor who does not have the mental ability to decide to donate. This is sometimes called lack of capacity. Find out more about this and how to identify donors in vulnerable circumstances
  • cannot legally be given to your charity. For example, where the donor does not own the property that they are donating
  • under the terms of the donation, must be returned in certain circumstances. For example, a grant agreement that says that your charity must return any unused funds by a particular date,  or return any funds that cannot be used for the purpose for which they were given

Donations that you are likely to need to refuse or return

You are also likely to need to refuse or return a donation where, for example, it:

  • is for purposes that fall outside your charity’s purposes
  • would result in a valid legal claim or risk of claim against your charity if you accept or keep it. For example, there is a reason to doubt that the donor owns the property that they are donating. Find out more about how to assess a claim against your charity and your powers to compromise
  • has features or conditions that may undermine your charity’s independence. For example, the donation comes with a condition that would require trustees to agree key decisions with the donor
  • would bring unacceptable burdens that outweigh its benefit to your charity. For example, a gift of land with an unaffordable mortgage, or property that is too expensive to insure
  • may involve unacceptable private benefit to an individual or organisation. For example, where a donor of property wishes to keep rights to use it privately that are too significant

In most of these cases you could consider whether it is possible to work with the donor to change the terms of the donation so that you can accept or keep it. For example, you can work with the donor to:  

  • keep more flexibility in how the donation can be used
  • align the donation with your charity’s purposes
  • make sure that any private benefit  is no more than incidental, necessary in the circumstances and reasonable in amount

Build good relationships with donors to encourage giving to your charity. This can include having early conversations with a donor about any proposed terms or restrictions on a gift. 

If you accept a donation with legal conditions or restrictions, you must follow them, and be able to show that you have done this.

Your options and obligations will depend on the circumstances. You should take advice if you are unsure about your powers to accept, refuse or return a donation in any of the categories listed in this section of the guidance.

Separate rules apply if you are considering returning or waiving (giving up your right to) some or all of a donation and all of the following apply:

  • you believe you are under a moral obligation to do this
  • you do not have any legal obligation to do this
  • you cannot justify this as being in the best interests of your charity

This is sometimes called making an ex gratia payment. Find examples of ex gratia payments.

It is important to read and follow our guidance on ex gratia payments before making a decision.

This is because:

  • there are specific procedures and legal rules that you must follow
  • you must obtain Commission authority to make an ex gratia payment

You may be required to return donations when an appeal for a specific purpose has ‘failed’.

An example of a failed appeal is where a heritage charity makes an appeal to restore a particular historic building and one of the following happens:

  • donations to the appeal are more than the charity needs to carry out the purpose of the appeal
  • donations to the appeal are not enough to carry out the purpose of the appeal
  • circumstances change so that the charity can no longer achieve the purpose of the appeal

You must follow our guidance about specific procedures and legal rules for using donations to a failed fundraising appeal.   

In some circumstances you must apply for Commission authority to use donations to a failed appeal.

If you are considering refusing or returning a donation, and the previous sections of this guidance do not apply, your next step is to check your charity’s powers.

You must have a legal power to refuse or return a donation and be satisfied that using the power is in the best interests of your charity.  

Which power you use will depend on the circumstances, and on whether you are considering refusing or returning a donation.

You should take legal advice if you are unsure about:

  • your charity’s powers
  • whether you are in a refuse or return situation. For example, if a donation is made through an online platform, the terms and conditions of that platform may be relevant

You must follow any conditions or restrictions that come with a power you are using.

Powers to refuse a donation

Charities usually have a general power under the law to refuse a donation.

But, in all cases, you must check and follow your charity’s governing document. It may:   

  • include a specific power to refuse donations
  • include provisions that mean that you cannot refuse a donation

It may be possible for you to change your charity’s governing document to either:  

  • remove provisions that mean that you cannot refuse a donation
  • include a specific power to refuse a donation, rather than relying on a general power

If you decide it is necessary to change your charity’s governing document, in some circumstances you must obtain Commission authority.

Powers to return a donation

Your charity’s governing document will usually include provisions that allow you to return a donation, but you must check this before deciding to do so.

The most common governing document powers are likely to be:

  • a general power
  • a power that allows you to dispose of your charity’s property

A general power in your governing document is likely to be worded in a similar way to the following:

  • power to do anything which is calculated to further your charity’s purposes or is conducive or incidental to doing so
  • power to do any lawful thing that is necessary or desirable for the achievement of the objects

This wording is from the Commission’s model governing documents, but a general power in your charity’s governing document may be worded differently.

If either of the following applies, you should change your charity’s governing document:

  • there is no appropriate power in your governing document
  • you are unsure about whether a governing document power allows you to make the return

In rare circumstances your governing document may include provisions that mean that you cannot return a donation. It may be possible for you to change your charity’s governing document  to remove these provisions.

Where you are changing your charity’s governing document, in some circumstances you must obtain Commission authority.

Returning donations in specific situations

In some situations where you are returning a donation, you may have additional legal rules to follow. For example, if you are returning a donation:

  • of land, you usually have a power to transfer land that comes from your governing document or the law to do this, but you must follow legal rules for disposing of charity land
  • of property that is special trust or permanent endowment . There will usually be extra steps to take, and you may need legal advice
  • as part of a compromise agreement, you have a power to do this that comes from your governing document or the law where there is a valid legal claim or risk of claim against your charity. A compromise is a legal agreement to settle a dispute claim without it going to court. You should follow this guidance.
  • that you have received under a grant agreement, as its terms may allow or require the return

Making your decision

If you are satisfied that you have the power to refuse or return a donation, you can only use it in line with:

Your trustee duties

You must follow your general trustee duties and the following decision-making principles. You must:

  • act within your powers
  • act in good faith and only in the best interests of your charity
  • make sure that you are sufficiently informed
  • take account of all relevant factors
  • ignore any irrelevant factors
  • manage conflicts of interest
  • make decisions that are within the range of decisions that a reasonable trustee body could make

Complying with the principles set out above will help you to make a legal and effective decision.

If there is a conflict of interest in your decision making that you cannot manage, you must obtain Commission authority.

Your decision

Your starting point is to accept or keep donations so that you can use them to further your charity’s purposes.

But you can decide to refuse or return a donation where this would be in your charity’s best interests.

Deciding whether to accept, refuse or return a donation is likely to involve a careful balancing exercise. There may be no right or wrong answer, but your decision must be rational and reasonable, and supported by clear evidence.

Consider how your decision will be implemented, including who needs to be informed at your charity to help identify or manage risks.

As trustees, you must:

  • identify the factors that are relevant to your charity and your decision. These may vary from charity to charity in nature and significance
  • make a reasonable decision about what is in the best interests of your charity to further its purposes
  • not allow yours or others’ personal motives, opinions, or interests to affect your decision

Your decision may be finely balanced and may have significant consequences for your charity. You should:

  • have objective, strong and reliable evidence to support your decision and your assessment of risk
  • take enough time to allow sufficient information to emerge before making your decision, balancing short and long-term risk and impact
  • allow trustees to ask questions, challenge assumptions and express any differing views about what is in the best interests of your charity

Example relevant factors to consider and balance when deciding whether to refuse or return a donation

Some example factors to consider and balance are:

  • the value of the donation and its potential to help you further your charity’s purposes
  • the financial loss that will result from refusing or returning the donation, and how serious this is
  • the likely short and long-term impact of your decision on your ability to further your charity’s purposes, and how serious any impact is
  • the extent of any potential conflict between the donation and your charity’s purposes, and how likely and serious this is. For example, a cancer research charity may decide not to accept donations from donors that mainly produce or sell tobacco
  • the risks involved in refusing or returning the donation, and how likely and serious these are. For example, any negative impact on your charity’s ability to deliver its services, or on its beneficiaries, or on its ability to attract or secure future donations. Consider how any risks you identify are likely to affect your charity in the short and long-term
  • the risks involved in accepting or keeping the donation, and how likely and serious these are. For example, the risk of reduced support for your charity or harm to its reputation, particularly amongst its supporters or beneficiaries, but also with its other funders, stakeholders, employees, and volunteers. Consider how  any risks you identify are likely to affect your charity in the short and long-term
  • your donors and other stakeholders’ views about accepting, refusing, or returning the donation, where it is proportionate to seek them. You shouldn’t make assumptions about what their views will be, and they may have different views from each other. Stakeholders who are consulted should be clear that the final decision will be made by the trustees
  • if any negative public criticism of your charity, or other reputational damage, is likely to be short-lived or longer lasting
  • if you can accept the donation whilst managing reputational or other risks that you have identified. For example, you can consider negotiating with the donor about the terms of the donation, or develop a public explanation of your decision to keep the donation and your plans for it
  • the cost or impact of complying with any donor conditions. For example, a donor asks for naming rights to your charity’s buildings or work programmes that it is out of proportion to the value of their donation. As above, consider negotiating with the donor about their conditions
  • any policy or guiding principles that your charity uses to support individual decisions about accepting, refusing or returning donations. Not all charities will have a policy or guiding principles

Additional example considerations when deciding whether to return a donation

A decision to return a donation can be even more significant than a decision to refuse one.

This is because you may have spent the donation or included it in your charity’s plans and budgets.

Before deciding to return a donation, in addition to the factors listed above and others that are relevant to your charity, you should also consider: 

  • the length of time that has passed since the donation was given
  • the impact of the return on your charity’s funds, activities, commitments, plans, budgets, and reporting
  • if your charity can afford to return the donation

Serious incident reporting

Consider whether you need to report a serious incident to the Commission if you decide to refuse or return a donation.

Accounting and tax

If you are deciding to  return funds, you may need specialist advice on:

  • how to show the return in your charity’s accounts
  • any gift aid or other tax implications

Ringfencing donations

If your charity is considering returning funds that you have received, it may be possible to separate the donation from your charity’s general funds while you make your decision. For example, if the trustees do not consider that they have sufficient information or evidence to make a proper decision, they could consider ringfencing a donation while further information is gathered.

You should balance any practical advantages of taking this approach against any risks, including how long you intend to hold the donation for.

You may need to take legal and accountancy advice about this approach.

Making decisions about donations that are special trusts

Your charity may receive a donation that is a special trust. This means the donation has been given for a particular purpose that is narrower than the purposes of your charity. For example, an animal rescue charity receives a donation that is given for work only with cats.

When you are deciding whether to refuse or return a donation that is a special trust you must consider the narrower purposes of the special trust and what is in the best interests of those purposes. However, it may be appropriate to also consider the impact of your decision on your charity’s general purposes.

Making decisions about contested heritage assets

The Department for Digital, Culture Media & Sport provide guidance on dealing with contested heritage assets.

Keep a record of your decision

You should keep a record of your decisions and how you reached them.       

You can delegate some decisions to others. For example, to:

  • your staff
  • a trustee sub-committee

But the overall responsibility remains yours.

Find out more about:

The Commission’s role

As trustees, decisions about whether to accept, refuse or return a donation are yours to take, in line with this guidance.

Your decision must be in the best interests of your charity, and you cannot use a power to refuse or return a donation unless you are satisfied of this.

Your decision can be different from one that trustees of another charity would reach, but it must be an informed and reasonable one in your charity’s circumstances.

The Commission may look into your decision if you cannot show that you have:

  • acted within your powers
  • complied with your trustee duties and your governing document
  • considered and balanced relevant factors, and ignored irrelevant factors
  • reached a reasonable decision in the best interests of your charity.

If your decision will involve benefit to a trustee or person or organisation connected to a trustee, you must obtain Commission authority if required.

You must also obtain Commission authority if all of the following apply:

  • you have decided it is in your charity’s best interests to refuse or return a donation
  • you do not have the power to do this
  • you cannot change your governing document to include a power

Setting a policy

You may want to consider setting a policy for your charity on accepting, refusing, and returning donations.

This can help you, for example, to:

  • make sure that your decision-making is consistent across your charity, and in line with your trustee duties
  • set out for trustees and staff who should be involved in decision-making

Review any policy at regular intervals to check that it is appropriate for your charity’s circumstances.

Assessing anonymous donations

Some donors want to remain anonymous, and your charity can accept anonymous donations.

However, you should look out for any suspicious circumstances and put adequate safeguards in place.

If your charity operates abroad, you should check if accepting anonymous donations complies with local law or local tax regulations.

You should report a serious incident to the Commission if you receive an anonymous donation of £25,000 or more.

Published 4 March 2024
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