Charities Alert

The Data (Use and Access) Act received Royal Assent on 19 June 2025. It is a wide-ranging Act which includes provisions to enable the growth of digital verification services, new Smart Data schemes like Open Banking and a new National Underground Asset Register. It also includes important changes to the UK’s data protection and privacy legislation.

The DUAA will not replace the UK General Data Protection Regulation (“UK GDPR”), Data Protection Act 2018 or the Privacy and Electronic Communications (EC Directive) Regulations 2003, but it makes some changes to them to make the rules simpler for organisations, encourage innovation, help law enforcement agencies to tackle crime and allow responsible data-sharing while maintaining high data protection standards.

Key changes are on:

• Automated decision making
• Subject access
• Children’s Protection Services
• Scientific Research
• Recognised legitimate interests
• International Data Transfers
• Responding to Complaints
• Storage and Access Technologies
• Changes to the law on the areas which regulate law enforcement processing and processing by intelligence services.

The changes will be commenced in stages and exact dates for each measure will be set out in the commencement regulations.

Or particular interest to charities is the changes to ‘soft opt-in’. The Information Commissioner’s office (‘ICO’) published guidance on this on 28 April 2026 with a new section on how use soft opt-ins. These changes are expected to benefit charities by enabling more contact with supporters but will only apply to electronic mail marketing relating to charitable purposes without the recipient’s consent, provided they meet certain requirements.

This is good news for charities with the Data & Marketing Association estimating that the extension of the soft-opt in could raise an extra £290 million a year for the sector. There are nuances to this, for example, not all purchases may indicate support for charitable purposes where the intention is to be just transactional and therefore the guidance on direct marketing using electronic mail should be reviewed.

The Charity Commission’s recent blog launching its updated guidance on conflicts of interest explains that through its annual research and case work the Charity Commission has identified that trustees struggle with conflicts of interest. The guidance reiterates that a conflict of interest is any situation where a trustee's personal interests — or their loyalty to someone or something outside the charity — could influence a decision they're making on behalf of the charity. These will not always be through dishonesty and can arise even when the arrangement is sensible and the charity is receiving a good deal.

It is important to check governing documents to ensure that rules are followed for managing conflicts of interest and if these do not state anything, the Charity Commission recommends a step-by-step approach: identify, declare, remove, manage and record.

The revised guidance also includes what a conflict of interest policy should contain, how to manage serious or complex conflicts, when to involve the Commission and provides useful examples.

Following intensive lobbying by the sector, the government has recently announced that it will exclude certain charitable memberships from the new subscription rules under the DMCCA. The aim of the Act is to enhance consumer protection and provide more enforcement powers to the Competition and Markets Authority. However, there were worries that it may have impacted large membership charities, which have subscription/membership arrangements in place as it gives the public the right to cancel a subscription contract during a two-week “cooling off” period. The challenge is that it would allow members free entry to the site for a 14-day period before claiming refunds and it could jeopardise the ability to claim gift aid on memberships, which has until now been treated as a charitable donation by law. Broadly the legislation will now exclude contracts which are between a charity and a consumer and that allow consumers to attend performances, see collection, or visit places (for example, museums, galleries, historical properties, landscapes, wildlife, performing arts) which are related to their charitable purposes.

Furthermore, subject to existing HMRC rules, Gift Aid should continue to be available on qualifying membership income. Some charity subscriptions and trading activity may still fall within scope and further detail will be set out in secondary legislation. For example, memberships or subscriptions that are purely digital in nature, professional or supporter memberships not linked to access, lottery or prize draw subscriptions, subscriptions operated through commercial trading subsidiaries, or hybrid arrangements offering substantial commercial benefits may still require careful analysis to determine whether they fall within scope of the DMCCA rules.

The new subscription regime is expected to come into force in Spring 2027, and more detail will be provided in secondary legislation. In preparation, charities may want to ensure that membership benefits are clearly linked to their charitable purposes.

A report published by NCVO shows Charities’ employees, volunteers and beneficiaries are feeling “increasingly unsafe” against a backdrop of growing hostility, fear and operational disruption linked to growing social and political division around the UK. Four major areas of concern were identified:

• 'a pervasive climate of fear'
• 'operational disruption and forced invisibility'
• 'direct targeting and abuse'
• 'increasing internal tensions within organisations'.

This report was cited by Mark Sims outgoing interim Chair of the CC in his speech, which is on the CC website. This guidance aims to provide clarity, practical steps, and reassurance to help charities navigate difficult circumstances.

The Charity Commission states that it will always be clear about the right of charities to campaign in support of, or opposition to, specific policies where this furthers their purposes and is in the charity’s best interests. Reporting of SIRS reiterated but must also:

• follow your relevant policies and procedures that keep people safe
• act quickly, ensuring you stop or minimise any further harm or damage
• plan what to say to those involved with your charity and the media if appropriate
• report it to all relevant agencies and regulators when required.

Charities should keep the security and safety of their staff, visitors and premises under regular review and consider whether further protective measures are necessary and are best placed to assess and respond to any increased risks.

Please read here, for more guidance on How charities can respond to the current hostile environment.

The Charity Commission has updated its guidance for charities making moral or ‘ex gratia’ payments as a result of the changes to charity law. The changes should mean that fewer charities will need to ask the Commission for authority before making these payments.

Ex gratia payments are payments that the Trustee could reasonably be regarded as being under a moral obligation to make, but where:

• They are not under any legal obligation to do so.
• The charity’s governing document does not have any powers which can be used to make it.
• There are no other legal powers which the trustees can use.
• The trustees cannot justify it as being in the best interests of the charity.

Key changes which apply from 27 November

• The introduction of an objective legal test requiring that the Trustees could reasonably be seen as being under a moral obligation. The basis for making a moral payment is that the charity has been ‘unjustly enriched’ and the Trustees wish to make a payment, even though there is no legal obligation to do so. Put simply, the test is whether the Trustees could reasonably be regarded as being under a moral obligation to make the payment. Examples are wills and legacies or someone donating money they could not afford. Section 9 gives examples.
• Self-authorisation: charities may not need to seek permission from the Charity Commission for small moral payments, provided specific criteria are met.
• Scaled financial limits: The maximum amount a charity can pay without the Commission’s approval is based on its gross annual income from the previous financial year. Payments above this financial threshold still require Charity Commission authorisation. Income over £1 million maximum individual payment allowed without CC authority is £20,000; £250,000 to £1 million income, max is £10,000, and £25,000 to £250,000 income max is £2,500 and below £25,000 income maximum is £1000. If above these limits, then it must apply to the CC.
• Delegation of decisions: Trustees can delegate the authority to make moral payment decisions to staff or committees, though trustees remain ultimately responsible.

Whether or not these powers are available in relation to any proposed payment depends on the individual case and charity. For example, the new statutory powers may not apply if a charity’s governing document or legislation explicitly restricts it.

Other types of payments

This section is about payments that are not moral payments because you consider them to be in your charity’s best interests. You are not under any legal obligation to make them. For example, enhanced redundancy.

Check your charity’s governing document. If it contains a suitable power you can use to make this type of payment, use that power. For example, Trustees may be able to use a power for the Trustees to do anything incidental to furthering the charity’s purposes.

If the governing document does not contain a suitable power, you must get authority from the Charity Commission. The Commission:

• will only authorise this type of payment where you can demonstrate that the charity will receive a benefit from making the payment
• cannot authorise anything that is prohibited by your charity’s governing document or the law.

The Charity Governance Code was updated in October 2025 and a more interactive website is being launched by them in 2026. The Code can be found at: https://www.charitygovernancecode.org/

There are eight universal principles which describes expectations in a charity with 41 outcomes to show that governance is working well. All charities, regardless of size or complexity are expected to follow the principles to achieve the outcomes for each principles. For each principle and outcome there is now:

• a list of behaviours that support the charity’s achievement
• policies, processes and practices
• evidence of good governance section.

The Governance Code encourages charities to publish a brief statement (a short narrative rather than a lengthy ‘audit’ of policies and procedures) in their annual report explaining their use of the Code and we therefore anticipate that you will be including an appropriate comment on this in your Trustees’ Report. 

The Charity Commission has released its latest annual report on public trust in charities. The findings indicate that trust levels have improved with over six in 10 people believing donations are reaching their intended cause and confidence increasing by 7% in 12 months. However the percentage of people donating or raising funds for charity fell from 62% to 48% over the past year due to cost of living pressures resulting in nearly half of charity trustees stating their charity had been forced to make changes including 11% stopping some services and 17% using more of their reserves than expected.

The report, which includes interviews with a diverse range of the public, reveals that overall participants value transparency, accountability and clear communications about how funds are used while expressing concerns about mismanagement, high executive salaries and scepticism about some types of fundraising. For more details, see the full report.

NCVO estimates that NI increases cost the charity sector £1.4 billion. All costs cannot be passed on to a consumer so the impact is that ultimately there will be cuts to services and beneficiaries.

The Charity Finance Group (CFG) surveyed 54 charity leaders in October 2025 and found that the financial health of many charities has declined markedly over the past year. 56% of respondents reported their finances are slightly worse than in October 2024, while a further 21% say they are significantly worse. Half of all respondents recorded a deficit in 2024/25 for at least the second year running, while 12% faced deficit for the first time. Among the 37% maintaining a surplus it was noted this was only achieved through unsustainable measures such as selling property assets or receiving one-off endowments that masked underlying deficits.

Respondents said the rise in ERNICs was a major cost driver, with 46% of charities saying this was causing ‘a major impact’. CFG also reports that charities said they were also struggling with the triple whammy of high inflation (96%), increased energy costs (49%) and the rise in the National Living Wage (59%), which are ‘hitting simultaneously, causing unprecedented financial strain which, in some cases, is insurmountable.’

Charities have been forced to make not fill vacancy or make redundancies or cancel plans for new hires, and more than one in five (22%) have frozen or reduced salaries. There has also been a major impact on beneficiaries with more than a fifth of the respondents having reduced or closed services, while 25% have cancelled plans for new services.

CFG reports that: “Among those who haven't yet taken such measures, the warnings are ominous: "Not yet – but currently considering options," said one respondent. Others echoed: "But we are considering it in 2025/26" and "Not yet but we are planning to do so in 2026."

There is worsening outlook with nearly two-thirds of charities (63%) anticipating the need for further cost-reduction measures in the next six to 12 months and just one fifth believing they probably or definitely won't need to take additional action.

Smee & Ford legacy giving report 2025 reported record legacy income of £4.5 billion in 2024, marking a 9% increase. The biggest contributing factor to growth in 2024 was as a result of HMCTS reducing the backlog of estates. Residual gifts were worth an average of £65,000 while pecuniary gifts are worth £4,500. Health remained the largest recipient by sector (40%) followed by the animal sector at 16%. In both sectors a small number of charities account for the majority of gifts. The report highlights that 21% of the bequests were made by baby boomers and legacy income is forecast to hit £5.1 billion by 2030 growing by 2.8% annually. there is further growth anticipated from Baby Boomer bequests with an increase in annual deaths expected to rise to over £730k by 2035 translating to 47,000 charitable cases per year, in the years to come. The report also considers the potential impact of IHT changes on bequests with a positive impact if more people consider reducing their IHT bill by taking advantage of charity tax relief or it may be negative impact if more money is given to potential beneficiaries before death to reduce the tax bill.

Additionally, the CAF UK Giving Report 2025 revealed that donations reached £15.4 billion in 2025, up from £13.9 billion in 2024. However, donations and sponsorship levels are at the lowest recorded by CAF and compared to 2019 there were four million few donors and six million less people providing sponsorships, with 16-24 year olds seeing the greatest decline of all age groups. There is also a decline of 1.5 million adults volunteering compared to 2023. The report also has some interesting statistics around donations contributing to core costs with only 25% being happy to pay for the salary of functions like Finance and HR.

It is now accepted thinking that the uncertainty of the past few years is here to stay due to global economic uncertainties, geopolitical instability and as a result of rapid technological change.

These continuing challenges signal a new normal which requires all organisations to adapt to survive and thrive. While there have been uncertainties in the past, the level and number have increased, as has the speed with which these will impact an organisation.

For non profit organisations, the ever-present challenge is how they can deliver their mission in times of growing demand amid a squeeze on income and rising costs. It becomes even more imperative for boards and the leadership teams to continue to focus on organisational purpose, impact and culture. Juggling competing priorities often results in a lack of focus on matters related to climate risks or EDI and ESG. It is key that organisations focus on strategy at different time horizons to avoid falling behind the curve.

Further information can be found on our insight Building Resilience.

CC48: Charity Meetings

The CC48 guidance from the Charity Commission, updated July 2024, provides essential rules for charity meetings that must be adhered to. The guidance emphasises the necessity for charities to adhere to their Governing Document rules on planning, running and recording meetings.

The Governing Document must be amended where rules are outdated to ensure decisions made in meetings are valid. For example. CC48 provides specific guidance on updating the Governing Document to allow for virtual and hybrid meetings. It also covers different types of meetings, such as trustee meetings and Annual General Meetings (AGMs), each with their own rules that must be followed.

CC48 can be found here.

CC27: Decision Making for Trustees

The CC27 guidance from the Charity Commission outlines seven principles and best practices for trustees on decision-making.

The seven decision-making principles are:

1. Trustees must act within their powers
2. Trustees must act in good faith
3. Trustees must be sufficiently informed
4. Trustees must take account of all relevant factors
5. Trustees must identify and disregard irrelevant factors
6. Trustees must manage conflicts of interest
7. Trustees must ensure their decision is within the range of decisions that a reasonable trustee body could make.

This guidance provides detail on each principle but particularly when making significant or strategic decisions and how to record the decisions made.

Whilst CC27 applies specifically to all trustees of all charities in England and Wales – whether registered, unregistered or exempt, including corporate charity trustees – the guidance can be useful for other members of the charity to be aware of in considering their decision-making.

CC27 can be found here.

The Fundraising Regulator became responsible for regulating fundraising in the UK in 2016 and therefore took over responsibility for the Code of Fundraising Practice. Since then, the code has been updated several times.

The updated code is designed to help fundraisers in three key areas and includes a list of top tips to help you in charities fundraising activity:

• Documenting your fundraising decisions
• Due diligence and fundraising
• Monitoring fundraising partners

There is a structured transition period (May to November 2025) to help fundraising organisations implement the new code. The code has been shortened and is more principle based. Some instructions for charities which were previously considered as being overly restrictive have been replaced. For example, previously charities were instructed not pay fundraisers “excessive amounts” or by commission. This has been replaced with “give appropriate consideration to the approach you choose for paying fundraisers and whether this fits the values of your charitable institution”.

The Fundraising Regulator has published its latest Annual Complaints Report which presents insights from casework alongside complaints reported by a sample of the UK’s largest fundraising charities. This report analyses data for the period 1 April 2023 to 31 March 2024.

Misleading fundraising and misleading information continue to be the most complained about theme. This is a trend for the past three years in the ‘complaints and a common cause for complaints’ across different types of fundraising. Clear, considered wording in materials and scripts is a useful tool in managing this risk.

The report also highlights that: “Door-to-door fundraising has continued to be one of the more complained about fundraising methods to the regulator and sample charities. Complaints about door-to-door fundraising included concerns that vulnerable members of the public were being targeted; the legitimacy of the door-to-door fundraisers; and the time of day that fundraisers were knocking on doors. Agency use of subcontractors and sub-subcontractors can make it more challenging for charities to retain appropriate oversight and control of compliance with the relevant standards.” The Regulator had 26 self-reports submitted to them in 2023/24, an increase of 37% from the 19 organisations that self-reported in 2022/23. Investigations were opened into two self-reports relating to separate media articles regarding door-to-door fundraising.

As part of the introduction of the new code, the Fundraising regulator has provided additional guidance on fundraising events, fundraising on social media and online gaming and fundraising.

They have also produced guidance on handling cashless donations. A cashless donation means a donation of money made without using physical banknotes or coins. Cashless donations are commonly made by credit or debit card, Direct Debits, bank transfers or other types of electronic payment. They might be accepted during a variety of fundraising methods including face-to-face, online, and at staffed or unstaffed collections, for example.  This also includes crypto currencies.

The regulator has also published new guidance to support charities using AI in fundraising aimed at helping fundraisers comply with the Code of Fundraising Practice when using AI and in light of the Charity Digital Skills report which shows significant number of charities using AI. The guidance takes a life cycle approach to using AI and therefore applies whether a charity is exploring if AI can support its fundraising or preparing to implement or already using AI. It is also relevant if the charity is working with third parties. It reiterates that trustees are ultimately accountable and therefore should be involved in strategic decisions relating to exploring or adopting AI and trustees should have the skills and be provided the necessary training to adequately evaluate the range of AI opportunities and risks.

While the rules on trustee payments have not changed, the Charity Commission has refined its guidance on paying a trustee (‘CC11’) to make it clearer and better help trustees navigate the law.

CC11 is now split into sections covering paying a trustee or connected person for goods or services, payments for loss of earnings, employing a trustee or a connected person, paying a trustee to carry out trustee duties and other payment types.

Trustee payments

The underlying rules on trustee payments have not changed. The redesigned guidance continues to stress that it must be clearly in the charity’s best interests to pay a trustee (or person connected to them), with all other options having been carefully considered, and the resulting conflict of interest managed. Additionally, a charity must have legal authority to pay. 

The guidance also covers payment for trustee expenses clarifying that these do not constitute trustee ‘payments’ and that trustees are entitled to have their reasonable expenses reimbursed by the charity which includes travel and accommodation costs but may also include costs for things like childcare or adjustments enabling those with disabilities to conduct their role.

You can view the news article here.

The Charity Commission with Pro Bono Economics have carried out a national survey of charity trustees, which while does not have any recommendations does have findings and insights which are valuable to all those interested in charity governance.

Key takeaways from the research are:

• 80% would recommend it to others with many reporting experiencing multiple and profound benefits.
• 94% believe their contributions to board meetings are heard and respected.
• 93% feel valued and supported by fellow members of the board and 91% feel that their contributions are welcomed and respected by staff and volunteers.
• 95% have a strong understanding of their role and responsibilities and feel confident sharing their views in board meetings.
• Older people currently fill most of the Trustee roles and there are still more male than female Trustees, with smaller charities having more female trustees proportionally.
• People from an Asian background, people of mixed ethnicity and other ethnicities are less likely to hold Trustee roles, in comparison with the general population.
• There are proportionally more Trustees in those under 60 who are Black (7% compared to 5% in the population) and proportionally fewer who are Asian (5% compared to 11%).

The majority of Trustees surveyed reported serving on boards of between four and 10 members (74%). Just over one in 10 (12%) Trustees reported being on a board with three members or fewer.

The survey found the majority of the Trustee population have served on their boards for four years or more (55%). 22% have been a member of their board for more than 10 years, with just 36% having been a member of their board for two years or less. 13% were new to their board, having been a member for less than a year.

There is a mixed picture of skills present at the board level, with most Trustees reporting significant skills and experience in service delivery. While many Trustees reported their board had significant finance skills and experience (59%), there is an overall low prevalence of artificial intelligence (AI) skills for the Trustee population (8%).

In a recent report published by the Charity Commission and Probono Economics, it was revealed that only 6% of trustees applied for their roles through an advert, and that more than half the charities relied on personal contacts.

Subsequently, the regulator has refreshed its guidance to focus on practical steps charities can take to connect with a broader range of candidates. They also recommend considering a skills audit to identify what the charity needs from its trustees. The guidance makes it clear that trustees can pay for a recruitment service but also signposts a range of free resources. There is also a section on induction to help with retaining good trustees and making them more effective.

The Charities Act 2022 (the Act) received Royal Assent on 24 February 2022 and brings into force a number of key changes to the Charities Act 2011, aimed at simplifying a number of processes.

The Charity Commission are currently working through implementing the various changes brought about by the legislation, and set out an indicative timetable. Most of the provisions have now come into force.

Provisions of the Act in force that came into force on 31 October 2022

• Section 5: Orders under section 73 of the Charities Act 2011
• Section 8: Power of the court and the Commission to make schemes
• Section 32: Trustee of charitable trust: status as trust corporation
• Section 36: Costs incurred in relation to Tribunal proceedings etc
• Part of Section 37: Public notice as regards Commission orders etc.
• Part of Section 40 and Schedule 2: Minor and consequential amendments

Provisions of the Act that came into force on 14 June 2023

• Sections 9-14 and 35a: Permanent endowment
• Sections 17, 19-22: Charity land
• Sections 25-28: Charity names
• Section 38 and 39: Connected persons
• Part of Section 40 and Schedule 2: Minor and consequential amendments

Provisions of the Act that came into force on 7 March 2024

• Section 1-3: Charity constitutions
• Sections 18* and 23: Charity land
• Section 24 and Schedule 1: Amendments of the Universities and College Estates Act 1925**
• Section 29: Powers relating to appointments of trustees
• Section 31: Remuneration etc of charity trustees etc
• Sections 33, 34 and 35(b): Charity mergers
• Section 37: For remaining purposes
• Section 40 and Schedule 2: For remaining purposes

* Section 18(1) (in part), (2)(a), (2)(c) and (3)(a) will come into force on 7 March 2024. Due to the provisions being linked to section 24 and Schedule 1, section 18(1) (for remaining purposes), (2)(b) and (3)(b) will come into force on 19 May 2025.

** Section 24 and Schedule 1 will come into force on 19 May 2025.

Provisions of the Act that came into force on 27 November 2025

• Sections 15 and 16: Ex gratia payments

The key provisions of the Act that have been implemented to date are set out below, and further information can be found here.

How charities can make a moral, or ‘ex gratia’, payment (CC7) – Updated November 2025.

The Charity Commission has updated its guidance for charities making moral or ‘ex gratia’ payments as a result of the changes to charity law. The changes should mean that fewer charities will need to ask the Commission for authority before making these payments.

Ex gratia payments are a payment that the trustee could reasonably be regarded as being under a moral obligation to make, but where:

• they are not under any legal obligation to do so
• the charity’s governing document does not have any powers which can be used to make it
• there are no other legal powers which the trustees can use, and
• the trustees cannot justify it as being in the best interests of the charity

Key changes which apply from 27 November are:

• The introduction of an objective legal test requiring that the trustees could reasonably be seen as being under a moral obligation - The basis for making a moral payment is that the charity has been ‘unjustly enriched’ and the trustees wish to make a payment, even though there is no legal obligation to do so. Put simply, the test is whether the trustees could reasonably be regarded as being under a moral obligation to make the payment. Examples are wills and legacies or someone donating money they could not afford. Section nine gives examples.
• self-authorisation: charities may not need to seek permission from the Charity Commission for small moral payments, provided specific criteria are met.
• scaled financial limits: the maximum amount a charity can pay without the Commission’s approval is based on its gross annual income from the previous financial year. Payments above this financial threshold still require Charity Commission authorisation. Income over £1 million maximum individual payment allowed without CC authority is £20,000; £250,000 to £1 million income, max is £10,000 and £25,00 to £250,000 income max is £2,500 and below £25,000 income maximum is £1,000. If above these limits then must apply to the CC.
• delegation of decisions: trustees can delegate the authority to make moral payment decisions to staff or committees, though trustees remain ultimately responsible.

Whether or not these powers are available in relation to any proposed payment depends on the individual case and charity. For example, the new statutory powers may not apply if a charity’s governing document or legislation explicitly restricts it.

Other types of payments

This section is about payments that are not moral payments because: you consider they are in your charity’s best interests, but you are not under any legal obligation to make them e.g. enhanced redundancy

Check your charity’s governing document. If it contains a suitable power you can use to make this type of payment, use that power. For example, trustees may be able to use a power for the trustees to do anything that is incidental to furthering the charity’s purposes.

If the governing document does not contain a suitable power, you must get authority from the Charity Commission.

The Commission:

• will only authorise this type of payment where you can demonstrate that the charity will receive a benefit from making the payment
• cannot authorise anything that is prohibited by your charity’s governing document or the law.

Making changes to governing documents

The Act introduces a new statutory power to allows trusts and unincorporated associations to make changes to their governing documents.

Charities will still however need to get the Commission’s authority to make certain ‘regulated alterations’ in the same way as companies and Charitable Incorporated Organisations (CIO).

Other related changes include:

• how unincorporated charities must pass trustee and (where they have members) member resolutions when using the new power
• that the Commission will apply the same legal test when deciding whether to give authority to charitable companies, CIOs, and unincorporated charities changing their charitable purposes
• a power for the Commission to give public notice to, or to direct charities to give notice to, regulated alterations they make.

The Commission have updated CC36 to reflect these changes.

Selling, leasing or otherwise disposing of charity land

The following provisions are now in force:

• provisions relating to disposals by liquidators, provisional liquidators, receivers, mortgagees or administrators
• provisions relating to the taking out of mortgages by liquidators, provisional liquidators, receivers, mortgagees or administrators
• changes about what must be included in statements and certificates for both disposals and mortgages

Charities must comply with certain legal requirements before they dispose of charity land. Disposal can include selling, transferring or leasing charity land. The Act simplifies some of these legal requirements. The changes include:

• widening the category of designated advisers who can provide charities with advice on certain disposals
• confirming that a trustee, officer or employee can provide advice on a disposal if they meet the relevant requirements
• giving trustees discretion to decide how to advertise a proposed disposal of charity land
• removing the requirement for charities to get Commission authority to grant a residential lease to a charity employee for a short periodic or fixed term tenancy.

The Commission have updated CC28 to reflect these changes.

Charity mergers

For certain mergers, new rules are now in force that will allow most gifts to charities that merge to take effect as gifts to the charity they have merged with. Updated guidance on charity mergers can be found here.

Failed appeals

The Act introduces new rules granting the power for trustees to apply cy-près, allowing charities more flexibility in response to a charity appeal that has failed, allowing donations to be applied for another charitable purposes rather than having to be returned to donors under certain conditions:

• The donation is a single gift of £120 or less; and the Trustees reasonably believe that during the financial year the total amount received from the donor for the specific charitable purpose is £120 or less (unless the donor states in writing that the gift must be returned if the charitable purposes fail); or
• The donor, after all agreed actions have been taken, cannot be identified or found; or
• The donor cannot be identified (for example cash collections)

The Charity Commission published guidance in relation to failed appeals on 31 October 2022.

The Charity Commission has also updated its guidance CC20 Charity fundraising: a guide to trustee duties to reflect these changes.

The Fundraising Regulator has also published guidance, further details of which are provided below.

Payments to Trustees for providing goods to the charity

The Charities Act 2011 provided a statutory power for charities, in certain circumstances, to pay trustees for providing a service to a charity beyond usual trustee duties. The Act extends this power to allow, in certain circumstances for payments to trustees for providing goods to the charity.

The Charity Commission has also updated its guidance CC29 ‘Conflicts of interest: a guide for charity trustees’ and CC11 ‘Trustee expenses and payments’ to reflect these changes. See above for further details.

Power to amend Royal Charters

Royal Charter charities are able to use a new statutory power to change sections in their Royal Charter which they cannot currently change, if that change is approved by the Privy Council.

Using permanent endowment

The Act introduces new statutory powers to enable:

• charities to spend, in certain circumstances, from a ‘smaller value’ permanent endowment fund of £25,000 or less without Commission authority
• certain charities to borrow up to 25% of the value of their permanent endowment fund without Commission authority

Charities that cannot use the statutory powers will require Charity Commission authority.

In addition, a new statutory power enables charities that have opted into a total return approach to investment to use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains.

Updated guidance for total return investment.

Crowe are pleased to have been involved in a research project looking at the essential attributes that charity Chairs of the future will need to embrace. This research explored the topic through roundtable discussions and in-depth interviews, with the final thought leadership report published in June 2024.

The research aimed to:

• Contribute ideas that will help to shape the future development and recruitment of charity Chairs.
• Enhance the future sustainability of the charity sector by highlighting longer term considerations for Board discussion.
• Provide fresh thinking to positively influence regulation and best practice guidance for the sector.
• Emphasise the value of good charity governance and the need for it to continually evolve to remain relevant.

The research highlighted a number of key findings, including challenges from a lack of diversity within charities (including trustees, staff and volunteers), and the need to recruit individuals who represent the charity’s beneficiaries.

Recommendations raised within the report include developing a leadership development programme for current Chairs, succession planning and a need to promote the role as one of ambition and aspiration.

The full report can be found here: The future charity chair | Bayes Business School (city.ac.uk)

This guidance has been updated to provide examples of what to report to the Commission if a charity is facing unacceptable experiences such as harm to their charity or people associated with it which includes charity’s beneficiaries, staff, volunteers or others who come into contact with your charity through its work.

Failure by trustees to sufficiently manage safeguarding risks is of serious regulatory concern to the Commission and may be considered to be misconduct and/or mismanagement. It can also damage public trust and confidence in charities and impact upon the sector as a whole.

A copy of the guidance Serious incident reports can be found here.

In March 2024, the Charity Commission published new guidance to help charities when deciding whether to accept, refuse or return a donation.

The guidance explains when donations must be refused or returned and when these might likely need to be refused or returned. The guidance makes clear that trustees should start from a position of accepting donations, but from time to time a charity may face a difficult decision as whether to refuse or return a donation. The guidance sets out an approach for trustees to take on these occasions, advising they: 

• consider the risks involved in refusing or returning the donation, and how likely and serious these are. These include negative financial impact, ability to deliver services and ability to attract donations in future 
• consider the risks involved in accepting or keeping the donation, and how likely and serious these are. These include the likelihood of reduced support or reputational harm, particularly among supporters or beneficiaries 
• determine how any decision aligns with their charity’s purposes 
• determine what steps they can take to mitigate the risks. These include negotiating the terms of a conditional donation with the donor or developing a public explanation for a decision

It explains that if a charity is considering refusing or returning a donation, the charity must have the legal power to refuse or return a donation. In some situations, there are additional legal rules to consider e.g. disposal or land or properties of a special trust.

The charity should also consider whether it needs to make a SIR when it refuses or returns a donation.

Ultimately, as the guidance states: “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.”

The full guidance can be obtained here: https://www.gov.uk/guidance/accepting-refusing-and-returning-donations-to-your-charity

A new failure to prevent fraud offence has been introduced by the Economic Crime and Transparency Act 2023. It will apply to all large corporate entities, including charitable companies, Royal Charters and CIOs.

When considering the size criteria, it is worth noting that the legislation references the financial year of the entity that precedes the year of the fraud offence.
An offence is committed where an employee or agent commits fraud. The penalty is an unlimited fine for the organisation, and no personal liability will be introduced for trustees or management failure to prevent fraud.

The legislation is far-reaching, and where an organisation operates or is based overseas, if an employee commits fraud under UK law or affecting UK victims, the company can be prosecuted.

There is a defence to the failure to prevent economic crimes if the organisation can prove that it had reasonable prevention measures in place, or that it was not reasonable in all the circumstances to expect it to have had any procedures in place.

The guidance for the new corporate criminal offence of 'failure to prevent fraud' has been published by the UK government. The Act aims to hold large organisations accountable if they benefit, or there is an intention to benefit, from fraudulent activities conducted by their employees, agents, subsidiaries, or other associated persons. Organisations have to put in place proactive measures and reasonable procedures to provide a defence to criminal liability for failing to prevent fraud and other economic crimes by associated persons.
The offence sits alongside existing law; for example, the person who committed the fraud may be prosecuted individually for that fraud, while the organisation may be prosecuted for failing to prevent it. 

The offence, which will come into effect on 1 September 2025, applies to all large incorporated bodies, subsidiaries, partnerships, and large not-for-profit organisations such as charities if they are incorporated and have a Royal Charter. Whilst unincorporated charitable trusts may not be included, this guidance is considered as being best practice. It is important to note that the size criteria is considered in the year preceding the fraud offence. An organisation will be criminally liable if an associated person commits fraud intending to benefit the organisation, such as through dishonest sales or commercial practices, hiding important information from consumers or investors, or dishonest practices in financial markets.

The guidance sets out six principles that should inform fraud prevention frameworks put in place by organisations in order to comply with the law – top-level commitment, risk assessment, proportionate risk-based prevention procedures, due diligence, communication (including training), and ongoing monitoring and reviews. 

Risk assessments must fully consider the potential for relevant economic crimes to be committed. These include but are not limited to fraud. Onboarding of employees and ‘associates’ must be reviewed and mitigation measures put in place. Sufficiency of training, which is properly tailored to the particular employees involved, is increasingly an area of regulatory focus and must be part of the policies and procedures put in place.

Full details of the guidance can be found here.

Another aspect of the Act is to improve the accuracy and quality of data filed with the Registrar of Companies, helping to tackle economic crime and boost confidence in the UK economy.
From a company secretarial point of view, the most significant change introduced by the Act is the reform of Companies House.

Key changes

Registered office address to be ‘appropriate’

All companies must now have an ‘appropriate address’ as their registered office. This means that documents sent to the registered office address will reach someone acting on behalf of the company and that delivery can be acknowledged. Companies are not allowed to use a PO Box address. In the event of non-compliance, Companies House will change the registered office address to a default address.

Registered email address

Both existing and new companies must provide Companies House with a registered email address for communication purposes. This information must be included when filing the next confirmation statement with a statement date of 5 March 2024 onwards or at the time of incorporation. A new company cannot be incorporated without this information, and existing companies will not be able to file a confirmation statement without it.

Statement of lawful purpose

After 4 March 2024, new companies must confirm that they are being incorporated for a lawful purpose. Existing companies will need to confirm annually in the confirmation statement that their intended future activities will be lawful.

Broadening of Registrar’s powers

The Registrar will have enhanced powers to question information filed at Companies House and request additional information to ensure that documents are timely, accurate, and not misleading. Companies House will have greater authority to scrutinise, query, and reject information that is filed or is in the process of being filed.

Authorised Corporate Service Provider (ACSP)

Under new identity verification measures, most documents filed at Companies House must be delivered by an ACSP. This includes incorporations, officer appointments (directors, secretary, members of LLP, partner of LP) and PSC appointment. This means if you are filing these documents with Companies House, then you will need professional corporate service providers to do this for you, or you will have to follow the additional identity verification steps to be introduced by Companies House.

Changes to be introduced to Company Accounts

Companies House is currently working on mandating digital filing and full tagging of financial information in an iXBRL format. The number of times a company can shorten its Accounting Reference Period will be reduced. Small companies will be required to file a profit and loss account and a directors’ report, while micro-entities will need to file a profit and loss account. The option to file abridged accounts will be removed, and companies claiming an audit exemption will need to provide an additional eligibility statement.

Restrictions on the use of corporate directors

All directors (or director equivalents) of the entity that have been appointed as a corporate director must be natural persons, and those natural person directors must have undergone an appropriate identity verification process. Historically, any corporate entity could be appointed as a corporate director of a UK company. However, moving forward, only UK-registered entities will be eligible for appointment as corporate directors, and all directors (or director equivalents) of such entities must be natural persons. Companies with existing corporate directors will be given 12 months to comply; within that time, they must either ensure their corporate director is compliant with the principles or resign them.

Considering the recent changes introduced by the Act, boards of directors will need to review their current processes for filing at Companies House, adopt new systems for verifying filings, monitor identity verification requirements, introduce new policies on director changes, and review the appropriateness of the company's registered office address.

On 10 April 2025, the government published the results of its Cyber security breaches survey 2025. Its clear from the results that cyber security breaches and attacks remain a common threat.

Headline statistics from the report include:

• Just over four in ten businesses (43%) and three in ten charities (30%) reported having experienced any kind of cyber security breach or attack in the last 12 months. This equates to approximately 612,000 UK businesses and 61,000 UK charities that identified a cyber breach or attack in the past year. This represents a decrease in prevalence among businesses compared to 2024 (where 50% experienced a breach or attack, equating to 718,000 businesses).
• Of businesses or charities that experienced a breach or attack in the last 12 months, phishing attacks remain the most prevalent and disruptive type of breach or attack (experienced by 85% of businesses and 86% of charities). The qualitative interviews highlighted that phishing attacks were often cited as time-consuming to address due to their volume and the need for investigation and staff training. The qualitative interviews also found that organisations had a growing consciousness that increasingly sophisticated methods, such as AI impersonation, were becoming mainstream.

Cyber hygiene

Encouragingly, small businesses showed improvement in several cyber hygiene practices, including showing an increased uptake of cyber security risk assessments (48%, an increase from 41% in 2024), cyber insurance (62% up from 49% in 2024), formal cyber security policy covering cyber security risks (59% up from 51% in 2024), and business continuity plans that address cyber security (53% up from 44% in 2024).

Conversely, high-income charities showed a decline in several key areas compared to 2024, including activities to identify cyber security risks (75% down from 86% in 2024), reviewing immediate supplier risks (21% down from 36% in 2024), and having a formal cyber security strategy in place (39% down from 47% in 2024). Insight from the qualitative interviews suggest this could be linked to budget constraints.

A formal cyber security strategy was in place for seven in ten large businesses (70%) and significantly fewer medium businesses (57%).

The majority of businesses and charities have implemented basic technical controls, such as updated malware protection (77% businesses and 64% charities), password policies (73% businesses and 57% charities), network firewalls (72% businesses and 49% charities), backing up data securely via a cloud service (71% businesses and 58% charities) and restricted admin rights (68% businesses and 68% charities). However, adoption of more advanced controls like two-factor authentication (40% businesses and 35% charities), a virtual private network for staff connecting remotely (31% businesses and 20% charities) and user monitoring (30% businesses and 31% charities) remains lower than other measures.

Staff training and awareness raising activities on cyber security were more prevalent in large businesses (76% compared to 19% businesses overall). Whilst a consistent increase among large businesses on this measure was observed in recent years, the proportion of large businesses in 2025 remains in line with 2024 (74%).

Cyber incidents — Volunteers

While M&S and the Co-Op cyber incidents have taken the majority of the headlines over the recent period, there is a need for charities to continue to focus upon this as a key risk. Cyber is often “red” rated on the risk register, but there is a need to break this down further into its constituent elements. The M&S attack has been reported as being initiated through social engineering, potentially through a third party supplier.

However, there have been a number of recent reports across our client base of attempted social engineering attacks on charities targeting (either directly (through spear phishing) or more general phishing activity in respect of volunteers with charity email accounts. The number of volunteer accounts can be considerable, including (but by no means limited to) committee members, INEs, retail workers, fundraising and those campaigning for the charity.

This can be a third party account which may have access to considerable data and may sit outside the charities established training and security controls. For example, a “VIP” list of key individuals who if subject to a security alert would trigger a targeted response is beneficial, but it’s very unlikely volunteer accounts would be subject to such a response. In addition, there is the potential for volunteer accounts to not be used on a regular basis and as such, if successfully accessed may not be identified for an extended period. 

As such, while not exhaustive, we’d recommend the following proactive actions:

• Consider how volunteer accounts are understood across the organisation, how are they obtained and importantly, closed due to inactivity.
• Consider how volunteer accounts are administered, including access levels, reviews of user access themselves and activity logs.
• Remind and engage with volunteers regarding cyber risks – use existing communication forums preferably through direct engagement rather than a general email. Discuss new risk areas, where voice technology and even deep fake images can be utilised.
• Consider if volunteers can be included in any false phishing campaigns

More generally, and as highlighted in the M&S case, ensure that you have considered the “Minimum Viable Charity” – what are the essential systems to either keep running or are the first priority to be restored in the event of an incident occurring.

A recent report published by Charity Excellence ‘From quiet use to strategic leadership: AI in the Charity Sector 2026’ finds that AI is being used but not strategically and often lacks oversight but that most charities are still at the start of their AI journey. Just over half of charities strongly agree that AI can benefit their organisations.

Unsurprisingly, charities are cautious and uneasy about using AI-generated imagery due to ethical, reputational and practical concerns and three quarters of respondents believe that authentic imagery is essential for trust.

The report cites the two key barriers to AI adoption as being legal and ethical issues and concern about the ability to manage and use AI safely.

The Fundraising Regulator has published its latest Annual Complaints Report which presents insights from casework alongside complaints reported by a sample of the UK’s largest fundraising charities. This report analyses data for the period 1 April 2023 to 31 March 2024.

Misleading fundraising and misleading information continue to be the most complained about theme. This is a trend for the past three years in the ‘complaints and a common cause for complaints’ across different types of fundraising. Clear, considered wording in materials and scripts is a useful tool in managing this risk.

The report also highlights that: “Door-to-door fundraising has continued to be one of the more complained about fundraising methods to the regulator and sample charities. Complaints about door-to-door fundraising included concerns that vulnerable members of the public were being targeted; the legitimacy of the door-to-door fundraisers; and the time of day that fundraisers were knocking on doors. Agency use of subcontractors and sub-subcontractors can make it more challenging for charities to retain appropriate oversight and control of compliance with the relevant standards.” The Regulator had 26 self-reports submitted to them in 2023/24, an increase of 37% from the 19 organisations that self-reported in 2022/23. Investigations were opened into two self-reports relating to separate media articles regarding door-to-door fundraising.

The regulator has made the decision to pause collecting data from charities for part two of the Annual Complaints Report (ACR) for around two years. They have developed a new approach that will widen participation, deepen insights, and better reflect the sector’s needs. This new approach will also include separating our reporting on fundraising complaints from charities from their analysis of complaints they receive from the public for part one of the ACR.

The National Cyber Security Centre have launched a new free digital service, MyNCSC, which aims to enhance charities’ cyber security approach.

MyNCSC combines Active Cyber Deference (ACD) digital services, offering a unified experience tailored to each user’s needs, including content, vulnerabilities, and alerts.

The MyNCSC platform is a free service for UK registered charities, enabling organisations to access various ACD services, such as: 

• early warning 
• mail check, assessing email security compliance 
• web check, finding and fixing common security vulnerabilities in the charity’s website

There are plans to gradually increase the number of ACD services integrated with MyNCSC.

MyNCSC offers a unified user interface for accessing multiple services promoting collaboration within organisations when managing digital assets and viewing findings.

For further information and guidance on how MyNCSC works, visit: https://www.ncsc.gov.uk/information/myncsc

Charities SORP 2026

The final Charities SORP 2026 was published on 31 October 2025 and applies to accounting periods starting on or after 1 January 2026. With the SORP now finalised, charities should ensure they are preparing for the new requirements. Key areas of change include:

1. Five step model for income from contracts with customers
   The revised SORP adopts a five step revenue recognition model, aligning charities more closely with commercial accounting practices. This affects income arising from exchange transactions (e.g., contracts, service-level agreements, membership fees and some grants). Charities must identify the contract, the performance obligations, and the transaction price, then recognise income as performance obligations are satisfied. This ensures more accurate matching of income to delivery of charitable activities. Charities may need to adjust existing systems to track contractual performance.
2. Non exchange income (donations, grants, legacies)
   While the core framework for donations, legacies and grants remains similar, the golden rules of income recognition (entitlement, probability and measurement from the extant Charities SORP) have changed, and now focus on recognising income when the charity controls the resource, and inflow is probable and measurable.
3. Lease accounting
   SORP 2026 significantly changes lease accounting for charities by bringing most operating leases onto the balance sheet as right of use assets with corresponding liabilities, except where certain exemptions apply. Below market value leases must be split between exchange and gifted elements. The SORP also includes charity specific examples to guide valuation, treatment of exemptions, and disclosure requirements. These changes will increase reported assets and liabilities, affect reserves, financial ratios, and potentially bank covenants, requiring trustees to explain impacts within the enhanced narrative reporting.
4. Three tier reporting structure
   Charities are now categorised by income as follows:
   • Tier 1: up to £500,000
   • Tier 2: £500,000 – £15 million
   • Tier 3: above £15 million
5. Reporting expectations increase through the tiers, with the largest charities required to provide more detailed disclosures.
6. Trustees’ Annual Report enhancements
   Requirements have been refreshed, with strengthened expectations around reserves, future plans, impact reporting, and ESG related disclosures.

The new SORP represents a significant shift in charity reporting, and we strongly recommend that charities begin transition planning now — particularly in the areas of revenue recognition and lease accounting. We have produced guidance and an Excel based toolkit for lease accounting to support charities through these changes, which can be found here.

Explore more on our SORP hub

ICAEW, with input from Crowe, has published guidance exploring ten myths surrounding charities and their operations, with a view to encourage transparent communication in areas where these misconceptions are prevalent. The ten myths considered are: 

• Charities spend too much on fundraising. 
• They should not make a surplus or build up cash reserves. 
• Too much is spent on highly paid executives. 
• Charities should be run and staffed [for free] by volunteers. 
• Too much is spent on overheads. 
• Charities don’t pay taxes, so need less money. 
• Professional qualifications are needed to become a charity trustee. 
• Charities are less vulnerable to fraud than other organisations. 
• Charities should not engage in campaigning and political activity.

The guidance includes access to a webinar discussing some of the key myths with voices from the sector.

The Guidance can be found here: Dispelling common myths about charities | ICAEW

The Charity Digital Skills annual report, now in its ninth year, continues to serve as an essential measure of the charity sectors’ digital proficiency, attitudes, and behaviour. As charities face ongoing challenges from the cost-of-living crisis and adapt to a rapidly changing digital landscape, this report aims to highlight how charities are increasingly leveraging digital tools and identifying key trends.

The report highlights that:

• 44% of charities have a digital strategy which has declined from 50% last year and 63% making progress with digital compared to 76% last year. 
• Developing a strategy for digital, data or AI is a priority for 49% of charities but the biggest barrier charities face when looking to progress is squeezed organisational finances (69%); funds to invest (64%) and a lack of headspace (63%).
• The top areas that charities need support in relation to data are:
• Using AI tools to analyse data (45%).
• Storytelling with data (42%, down from 48% last year).
• Website and social media analytics (38%, falling from 43% in 2024).

The report can be found here.

HMRC has published new guidance on the tax treatment of ecosystem services, bringing clarity for charities and other organisations involved in biodiversity, carbon and habitat projects. The technical note details HMRC’s position on the tax treatment of income and expenditure related to schemes including Biodiversity Net Gain (BNG), the Woodland Carbon Code and the Peatland Code.

Importantly for charities, the guidance confirms that where the landowner is a charity, activities to create ecosystem services and income arising from those activities will benefit from the exemption on profits of a charitable trade so long as the activities fall within the primary purpose of the charity based on its charitable objects. If, for example, the charitable purpose includes the preservation of land, the ecosystem activities will likely be within that purpose.

The guidance also advises that where carbon credits are acquired for a purpose other than trading, their disposal could be chargeable to capital gains tax. For charities, disposals for capital gains tax purposes are usually tax-exempt when the gain is applied for charitable purposes.

Details of the VAT, SDLT and inheritance tax treatment of ecosystem services and related transactions are also covered in the Government full guidance.

Chancellor Rachel Reeves unexpectedly announced the government’s Great British Summer Savings scheme, aimed at lowering costs for families in time for the summer holidays. It is a positive message in trying to reduce costs and incentivise consumers to spend on UK hospitality and attractions over the summer period.

There is limited time for organisations to review, understand the scope of the changes, assess any “grey areas” and update their processes to ensure VAT is accounted for correctly.

The government expects the temporary rate reduction to increase footfall for organisations, while also anticipating that the VAT savings will be passed on to customers. Read more in our insight, Temporary change of VAT for children’s meals, tickets and family attractions.

HMRC has recently confirmed its revised approach to defined benefit pension schemes, which should give employers additional scope to recover VAT. Further information is in our insight, Pension fund VAT recovery HMRC guidance.

HMRC have included a new box in the supplementary company tax return pages for charities (CT600E) to report total legacy income, together with an additional table to provide details of individual legators. Charities that are unable or choose not to provide details of legators must still complete the first row of the table but may simply enter an ‘X’ in each of the forename, surname, address and overseas columns, a valid date in the date column and the combined amounts of the legacies in the amount column.

The approved mileage allowance payments (AMAPs) have increased to 55p per business mile for the first 10,000 miles, backdated to 6 April 2026. The 25p rate for miles over 10,000 remains unchanged. The change was announced on 21 May 2026, and as the change is backdated, organisations may consider whether to top up mileage already paid since 6 April and how to process this through payroll or expenses.

Full details of the updated rates can be found here: Travel — mileage and fuel rates and allowances - GOV.UK

HMRC has published CT600P, a new supplementary form for entities claiming creative industries tax reliefs or expenditure credits, including Theatre Tax Relief, Museums and Galleries Exhibition Tax Relief and Orchestra Tax Relief. From 6 April 2026, CT600P must be submitted with the Company Tax Return (CT600). The additional information form (AIF) will continue to be required and submitted separately.

Further information is available here: New CT600P supplementary pages

Following a previous consultation on tax compliance for charities, the Finance Act 2026 has now introduced three changes to tax legislation, which are effective from 6 April 2026. A summary of the changes is outlined below.

Preventing donors from obtaining a financial benefit from their donation

The change: Legislation on Tainted Charity Donations has been amended to widen the scope for challenging transactions, and the previous motive test has been replaced with an outcome test. This is expected to allow HMRC to consider a series of transactions in the round and allow for a more objective assessment of the interactions between a donor and a charity.

Issues to consider: Charities may wish to assess any long-term arrangements they have with donors in order to be ready to assess whether, viewed in the round, these could now fall within the broadened scope of the tainted donation rules. Detailed HMRC guidance on the new rules.

Preventing abuse of the charitable investment rules

The change: Legislation has been amended so that all investments must be demonstrably for the benefit of the charity and not for the avoidance of tax. Investments that do not meet this test will not be approved as charitable investments and may lead to a tax exposure. Under previous rules, 11 specific types of investment qualified automatically without needing to meet this test, but under the new rules, there are no exceptions.

Issues to consider: Charities may wish to review their investment policies for all types of investment to ensure that sufficient evidence will be available in the event of an enquiry to demonstrate that all investments are made for the financial or charitable benefit of the charity. Further guidance on approved charitable investments.

Closing a gap in non-charitable expenditure rules

The change: Legislation has been amended so that legacy income is now included within the ‘attributable income’ definition for the purpose of the non-charitable expenditure rules. This effectively closes a loophole which allowed legacy income to be applied for non-charitable purposes without tax consequences.

Issues to consider: Charities should assess their proposed expenditure from legacy funding to ensure that this will not fall within the tax law definition of non-charitable expenditure. Further guidance on non-charitable expenditure.

A fourth proposed compliance measure, under which charities that do not meet their filing and payment obligations will be sanctioned, has been postponed. A government policy paper from July 2025 indicates that this measure is still expected to be introduced in the future.

With effect from 1 January 2026, most UK charities and Community Amateur Sports Clubs (CASCs) are effectively exempt from the registration and reporting requirements under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) regimes for automatic exchange of information (AEOI). 

These regimes are primarily concerned with the sharing of account holder information held by financial institutions between tax authorities of different jurisdictions, and are not primarily targeted at charities. However, UK charities have, in some cases, been capable of falling within the definition of a financial institution for the purpose of these regimes, particularly if the charity’s investment income exceeds 50% of total income. Historically, this has not, in most cases, led to any reporting requirements, because charities do not usually have any account holders, but recent legislation has introduced a requirement for all qualifying financial institutions with reporting status to register with HMRC by 31 December 2025, even if the entity does not have any account holders.

From 1 January 2026, a UK charity that is within the definition of a “Financial Institution” and which meets certain conditions will be a “Non-Reporting Financial Institution” and will not be required to register with HMRC for AEOI purposes. HMRC has stated in guidance that they accept that any charity or non-profit organisation that is a Non-Reporting Financial Institution from 1 January 2026 and which did not have any previous reporting requirements under the AEOI regimes does not need to comply with the above-mentioned requirement to be registered by 31 December 2025.

To qualify for this non-reporting status, the charity must meet the following conditions set out in sub-paragraph D(9)(h) of Section VIII of the CRS:

1. the Entity is established and operated in the UK exclusively for religious, charitable, scientific, artistic, cultural, athletic, or educational purposes; or it is established and operated in the UK and it is a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare
2. it is exempt from income tax in the UK
3. it has no shareholders or members who have a proprietary or beneficial interest in its income or assets  
4. the applicable laws of the UK or the Entity’s formation documents do not permit any income or assets of the Entity to be distributed to, or applied for the benefit of, a private person or a noncharitable Entity other than pursuant to the conduct of the Entity’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the Entity has purchased
5. the applicable laws of the UK or the Entity’s formation documents require that, upon the Entity’s liquidation or dissolution, all of its assets be distributed to a Governmental Entity or other Entity that meets the conditions set out in i) to v), or escheat to the government of the UK or any political subdivision thereof.

In addition, the charity must be:

• registered as a charity with the Charity Commission of England and Wales, the Office of the Scottish Charity Regulator, or the Charity Commission for Northern Ireland, or
• registered with HMRC for charitable tax purposes or as a CASC.

HMRC’s Retail Gift Aid guidance was updated in November 2025. The updated guidance includes new template end-of-year letters and details on the process for sending out these letters to donors.

The updated guidance can be seen in Chapter 3.42.

The penalties for late filing of company tax returns will be doubled from their existing rates with effect for returns with a filing date on or after 1 April 2026. This is the first increase to late filing penalties since 1998.

The immediate penalty for a single late filing will increase from £100 to £200, with higher flat rate penalties of up to £2,000 applicable in instances of multiple failures and/or where returns are more than three months late.

Charitable companies will be subject to these late filing penalties for tax returns filed late in respect of any period for which a notice to file a tax return was issued to the charity by HMRC.

National Insurance contributions relief on pension contributions made through salary sacrifice schemes will be capped at £2,000 per year of contributions for each employee with effect from April 2029. Contributions above the £2,000 limit will be subject to both employee’s and employer’s contributions.

HMRC have updated their Gift Aid guidance to set out an interim position on the Gift Aid eligibility of charity membership subscriptions subject to the provisions of the Digital Markets, Competition and Consumers Act 2024, while legislation on this matter as promised at the Spring Budget 2024 is awaited.

The updated guidance confirms that membership schemes and contracts that are subject to consumer protection law, where a charity is required by those protections to provide a full or partial refund to a consumer, will not be treated as being subject to a condition as to repayment for Gift Aid purposes. Where a refund is actually made, however, the membership subscription will cease to qualify for Gift Aid.

The updated guidance is available at section 3.13.4 here.

A major VAT reform unveiled in the Budget is expected to unlock millions of pounds’ worth of surplus goods for charity and significantly reduce the volume of usable products sent to landfill.

From 1 April 2026, businesses will be able to donate goods to registered charities without incurring a VAT charge, removing a long-criticised tax barrier that has deterred companies from giving away unsold, returned or surplus items.

Under current rules, gifting goods — even to a charity — can trigger VAT on a “deemed supply” basis, meaning many firms choose to destroy stock rather than shoulder a tax liability. The government says the new relief will eliminate that cost entirely for donations made.

The scheme will use a simple two-tier valuation system:

• A £100 per-item limit for most donated goods.
• A £200 per-item limit for essential items including white goods, furniture, computers, phones and tablets — targeting support for households experiencing digital or material poverty.

Increase to company size thresholds for IR35

The issue Under the off-payroll working rules (IR35), medium and large organisations are responsible for determining the employment status of contractors.

The change: From 6 April 2025, the thresholds that define a medium/large organisation have increased to:

• turnover: Over £15 million (previously £10.2 million)
• balance sheet total: Over £7.5 million (previously £5.1 million)
• employees: 50 or more (unchanged).

Charities that fall below these thresholds will not be responsible for assessing IR35 status, the obligation lays with the contractor.

Issues to consider: Charities should review their latest accounts to confirm whether they now qualify as 'small' under the revised thresholds. Where group structures exist, it’s important to check whether a parent entity’s size could still bring the charity within scope. While this change reduces the compliance burden, reputational and operational risks remain if off-payroll arrangements are not well managed.

Joint and Several Liability for Umbrella Company PAYE Failures

The issue: Umbrella companies often manage payroll for temporary workers and contractors. However, some have failed to meet PAYE obligations historically, leaving HMRC unable to recover tax and National Insurance Contributions (NICs). To date, end clients have not typically been held liable for these failures.

The change:  From April 2026, HMRC will be able to pursue joint and several liability for unpaid PAYE where an umbrella company fails to meet its obligations. This means that charities engaging workers through umbrella arrangements could be held liable for unpaid tax, even if they were not directly responsible for the failure.

Issues to consider: Charities should review their use of umbrella companies and ensure robust due diligence is in place. This includes verifying PAYE compliance, understanding the full labour supply chain, and documenting checks. More detail can be found here.

Using a VAT trading subsidiary within a VAT group to apply VAT to care services

The issue: Revenue and Customs brief 02/2025 covered updated guidance in relation to using a trading subsidiary in a VAT group to apply VAT to care services that would otherwise be VAT exempt. This planning has been adopted by a number of charities because its implementation improves VAT recovery on costs.

The change: HMRC will no longer allow VAT groups to include subsidiaries on this basis and will also seek to remove them from a VAT group where the reason for inclusion is deemed necessary to ‘protect the revenue’. Any charities using this planning need to review their current arrangements to consider what action should be taken. Please click here for more information and areas to consider if your charity has adopted this planning.

VAT exemption for fundraising events

The issue: Revenue and Customs brief 03/2025 provided information in relation to the exemption that covers fundraising events following the case of Yorkshire Agricultural Society.

The change: This potentially broadens the exemption, as the Tribunal found that HMRC had been too narrow in its definition of the primary purpose of the event – this could mean that a claim for overpaid VAT could be made to HMRC. Please click here for more information.

VAT Compliance Controls

HMRC issued very detailed guidance on VAT compliance and what they expect from taxpayers: Help with VAT compliance controls — Guidelines for Compliance GfC8 - GOV.UK

There is a lot of detail to wade through with ten different elements to consider. The overriding point from HMRC is that you must document the VAT risks and how you have reduced the risk of errors. We suggest that such processes need to be recorded and checked.

“The guidelines set out HMRC’s recommended approach and are designed to help you understand our expectations as you plan, carry out, and review the accounting and compliance processes that ensure VAT is accurately declared by your business.”

HMRC would expect to see a tax control framework, i.e., written processes/documentation of internal controls. As HMRC are beginning to increase the level of taxpayer visits, we would expect them to ask for this documentation.

HMRC’s Gift Aid guidance has been updated to clarify that Gift Aid declarations should not include a company name or joint names, as this will invalidate the declaration.

HMRC also confirmed recently that they have been checking Gift Aid claims using specific search terms to ensure that the address provided by the donor is not a business address.

Charities are encouraged to review the guidance (https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid#chapter-36-gift-aid-declarations) to make sure that the information on their Gift Aid declarations and claims are consistent with the specific requirements of the guidance.