Changes to rules for ex-gratia payments

Many of you may have spotted that new rules were due to come into force this Autumn as part of the Charities Act 2022 for moral or ‘ex gratia’ payments, which are frequently linked to legacy gifts. Please note that this regulatory change is now on hold.

The initial proposal is summarised below.

What is an ‘ex gratia’ payment?

This is where there is no legal duty, but the trustees feel a moral obligation to make a payment. So, for example, this might occur when a charity is in receipt of a legacy and evidence emerges that the donor has changed their mind since making their Will.

What changes are being made?

The change in regulation was expected to bring in new powers that would enable charities to process small ex gratia payments without applying to the regulator. Those payments are capped in tiered levels according to the charity’s gross income for the last financial year, ranging from £2,500 for charities with income of £25,000-£250,000 to £20,000 for those with an income of over £1 million. Read more here

This story was updated in November 2022.