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Long awaited new rules for charities, other than certain national museums and galleries, making ex gratia payments will come into force on 27 November 2025. These are the final provisions of the Charities Act 2022 to come into force.
Sections 15 and 16 introduce new powers to allow charities to make 'small' ex gratia payments without needing Charity Commission consent. An ex gratia payment is one made by a charity based on a moral (not legal) obligation. Under s15, a 'small' ex gratia payment is defined by reference to the charity's gross income in the last financial year. For a charity with a gross income over £1 million, the maximum value per payment is £20,000. Payments over this amount will still require the Charity Commission's consent.
This streamlines the process for charities with significant legacy income who may find themselves considering whether or not a moral obligation has arisen in the context of a modest sum. There is a potential downside in that the requirement for Charity Commission consent is a useful way to explain to those advancing unconvincing requests for an ex gratia payment why the charity may not agree to a payment.
However, whilst the new provisions will reduce the number of occasions where the Charity Commission's consent is needed, charities will still need to satisfy themselves that "it can be fairly said that if the charity were an individual it would be morally wrong of him to refuse to make the payment" (the test set out in Re Snowden 1970). As noted in the Commission's current guidance (which is anticipated to be revised following the coming into force of the new provisions), the power cannot be exercised on slender grounds and the trustees must satisfy themselves that there are reasonable grounds for concluding that they are under a moral obligation to make such a payment.
The delay in implementing these provisions has been due to the concerns surrounding implications for national art galleries and museums amid calls for the restitution of cultural assets. There are a number of Acts of parliament which prevent museums from freely disposing of objects – these may be general Acts, such as the National Heritage Act 1983, or Acts in relation to specific institutions, such as the British Museum Act 1963. A 2005 High Court decision in relation to the British Museum confirmed the legal position that the ex gratia principle could not override the restrictions on disposals in the British Museum Act 1963.
Sections 15 and 16 of the Charities Act 2022, however, would have created broader powers for making 'ex gratia' transfers of charity property by trustees. If these provisions came into effect as originally drafted, they could override the statutory restrictions which would otherwise prevent the restitution of cultural assets; this is because the new power would itself be statutory and so on an equal footing with the Acts otherwise preventing disposals, rather than being a lower order power relying on the authority of the Attorney General, who cannot override statute. Fears arose surrounding the potential for unilateral repatriations of internationally significant objects, although the financial thresholds within s15 would mean that this power to make payments without Commission consent would not apply to high profile objects like the Benin Bronzes or the Parthenon Marbles. To mitigate any risk, the commencement regulations for ss15 and 16 explicitly exclude the property of certain named national museums and galleries from falling within this regime.
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