Ex Gratia payments explained: What charity trustees need to know

Are there times when your church or charity board feels under a moral obligation to make a payment that it is not technically in the best interests of the charity to make? How would you as trustees approach such a decision?

In November 2025, the Charity Commission recently published guidance to address this question, following the new provisions of the Charities Act coming into force.

What is an ex gratia payment?

An ex gratia payment is defined as a payment which the trustees could reasonably be regarded as under a moral obligation to make but, importantly, which:

• a charity doesn’t have a legal obligation (for example, under contract) to make
• the charity does not have any other legal power to make
• it cannot be justified as being in the best interests of the charity

Therefore, you can see that this is a relatively narrow type of payment that will only arise in quite specific circumstances. We will look at examples later in this blog.

It is also important to note that under the SORP 2026, charities will be required to disclose any ex gratia payments, including the reasons for and nature of the payment in their accounts.  So remember that such payments will not be confidential.

Who can make the decision to make an ex gratia payment?

Given that an ex gratia payment is one that the trustees would reasonably be considered under a moral obligation to make, the decision is ultimately the responsibility of the trustees. 

However, the  updated guidance allows trustees to delegate decisions regarding ex gratia payments to others within the charity. For a charity with a staff team, this could reduce the burden on the trustees, especially where such a decision is of a relatively low value and is not considered of high risk to the charity. The guidance suggests these decisions could be delegated to committees of the trustees or relevant staff. 

It also requires that the trustees should set out terms of reference for the decision-makers they delegate to, setting out what they can and cannot do. These decisions and the process involved must also be recorded.

Is Charity Commission consent needed?

Whereas Charity Commission consent was previously required to make any ex gratia payment, there are now certain payments which can be made by the trustees (or those they have delegated to) without obtaining specific Charity Commission consent. The threshold depends on the charity’s gross income for the last financial year, as follows:

If trustees want to make an ex gratia payment that is not within these financial thresholds they cannot do so without the consent of the Charity Commission.

Deciding what is and is not an ex gratia payment

The Charity Commission guidance gives a long list of examples to help in deciding if a potential payment could be classed as an ex gratia payment. The majority of examples relate to legacies from wills, such as where someone has clearly expressed an intent to change their will to give a gift to a friend but dies before the will is updated. The trustees of a beneficiary charity could be considered to have a moral obligation to pay the intended gift to the friend out of the legacy they received in the will. 

There are a number of payments which in our experience look to trustees like ex gratia payments but are in fact not. Rather these payments could be made if they are in furtherance of the charity’s purposes or under powers the charity already has. 

These include:

• funding a missionary
• settling litigation or threatened litigation
• returning a donation from someone without capacity
• retirement gifts for staff, trustees or pastors (see our paper Gifts to pastors)

Examples of ex gratia payments for churches and charities

Here are some examples of payments trustees might wish to make and for which they would need to consider if they fall into the ex gratia payment scheme:

1.    Damage in the car park

A member of the public parked their car in the car park of a small community hub charity. During a period of high winds, a loose exterior panel from the charity’s building became dislodged and fell onto the parked vehicle, causing damage.

The owner of the car contacted the charity and asked it to pay for the repairs but have indicated that they are unlikely to take any legal action against the charity. After reviewing the circumstances, the charity concluded that:

• The building was properly maintained.
• The incident was accidental and not due to negligence.
• The car owner’s insurance policy did not cover this type of accidental damage.
• The charity’s insurance policy did not cover the loss.
• The charity had no legal obligation to pay.

However, the trustees are wondering whether they have a moral obligation to make the payment. Because the charity has no legal power to make such a payment, the trustees need to consider whether an ex gratia payment would be justified.

2.    Reimbursing a financial scam 

A volunteer intern at a local church received an email that appeared to come from the church’s pastor. The email stated that the pastor was unexpectedly stranded abroad, needed urgent financial help and asked the intern to transfer money on their behalf.

Believing the message to be genuine, the intern made the significant payment from their own personal funds. Shortly afterwards, the church discovered that the email was a fraudulent scam.

The intern asked whether the church could reimburse the amount they had lost. The trustees reviewed the situation and concluded that:

• The charity was not legally liable for the intern’s loss.
• The charity had no contractual or employment obligation to reimburse them.
• The charity did not have any existing legal power in its governing document to compensate volunteers for personal financial losses caused by third‑party fraud (as opposed to reimbursing legitimate expenses).
• The charity’s insurance policy did not cover the loss.
• Although the loss was not the charity’s fault, the trustees felt a strong moral obligation to support the intern, given that the fraud related to the intern acting in good faith in what they thought was a work‑related situation.

Because the charity lacks any legal power to make the reimbursement, the trustees need to consider whether this would be an ex gratia payment.

3.  Supporter funeral expenses

A long‑standing supporter of a church had regularly given to the church throughout their life. When the supporter died, their family approached the charity and asked whether it would contribute towards the funeral expenses. 

The trustees considered the request and concluded that:

• The charity had no legal obligation to pay for funeral costs, as these are normally expenses of the estate.
• The charity’s governing document did not give it any power to make payments for private family expenses, unless the situation fell within a charitable purpose such as relief of poverty. In this case there was no evidence that the family were in financial hardship, although the funeral expenses are considerable and the family is not wealthy.
• Covering funeral costs would be a personal benefit to private individuals and did not further the charity’s own purposes.
• The payment could therefore not be justified as being in the best interests of the charity.

However, the trustees felt a degree of sympathy for the family and appreciated the long relationship the supporter had with the church. Because the church had no legal power to make such a payment but the trustees felt a moral obligation, they need to consider whether this would be an ex gratia payment.

4. Charity Commission example: pastor hardship

It is worth noting that the final example given in the Charity Commission’s guidance regards a pastor who received an occasional allowance (rather than a fixed salary) from the church he served:

“When the pastor dies unexpectedly, the trustees acknowledge how hard the pastor worked for the church over the years and that the church’s inability to make the monthly payments had caused the family financial hardship. The church is in a better financial position, and the trustees decide that they could reasonably be regarded as having a moral obligation to make a one-off payment to the pastor’s widow.”

This is given as an example of an ex gratia payment as the payment would not further the charitable objects of the church and the church did not have the legal power to make this sort of payment.