Five things not to do until you’ve taken professional advice

At Stewardship we see a lot of church accounts, hear a lot of questions and receive what regulators (such as the Charity Commission and HMRC) have to say. Some common themes emerge, and we want to share those with you.

Our desire is to see the church in the UK fulfil its mission effectively, generously and with the character that Christ displayed in His ministry. We also want to help churches navigate the complex areas of governance, charity law and taxation in ways that the Apostle Paul did when he urged the Corinthian church to ‘do what is right, not only in the eyes of God but also of men’.

We have set out five areas where we commonly see churches get into a tangle and we believe that taking some advice in advance would avoid a lot of grief later on.

1. Giving retirement or leaving gifts to ministers or trustees

The first of these is that of financial gifts, often at retirement or after long service, to those who have served the church either as staff or trustees.

As churches we often have a strong desire to thank, acknowledge and appreciate the way that people have served us. We often have strong relationships and want to allow others who have developed respect, friendship and affection to be involved. This is often thought about in terms of ‘leaving gifts’, which at times can be substantial.

Because of the relationships we have, we can make the mistake of simply thinking ‘this is just a gift’ and there are no other consequences – without thinking about legal entity, the role of the person and the regulations involved.

• Churches are nearly always structured as charities. Charities cannot just give money to people because they ‘like them’ – there must be a valid charitable reason for a payment from a charity.
• Paid leaders are very often ‘employees’ as well. Sometimes they are ‘office-holders’. There are tax, National Insurance and other implications when an employing organisation makes payments to workers. These can be very costly if not applied properly.
• Charity law proscribes payments to trustees or ‘connected parties’ (for example, close family); very often not allowing any payments, and sometimes permitting them only as part of a pre-approved contractual arrangement. The Charity Commission’s own revised guidance, published 25 April 2025, refers to certain thresholds (which for charitable companies is as low as £200).

Please refer to our briefing papers: ‘Gifts to Pastors’ and 'Church: a family, a charity or both? What that means when giving gifts to members' for more information.

2. Giving money to volunteers or paid roles to trustees

The second aspect is like the first. It is about paying people who serve.

With volunteers, it is easy to think that we should honour them with gifts, provide them ‘with a little something’ to recognise what they do in serving the church, or to cover the expenses they are not claiming. The very real danger (and we have seen it occur in practice a few times) is that these payments, even small ones, change their status from that of a ‘voluntary worker’ to that of a ‘paid worker’ or ‘employee’. This brings with it a lot of rights and obligations – most critically the obligation to pay the National Minimum Wage for every hour worked, regardless of whether the worker actually wants it. (See more in our blog: 10 things every church should know about employing staff.)

With trustees or ‘connected persons’ (see earlier) the requirements to lawfully pay them for services they provide to the charity in any capacity can be complex and nuanced. The requirements need to be read and followed carefully. We have seen many, many cases where churches have said “we are allowed to pay” and the Commission or a charity lawyer has said “no you are not!”. Common examples include:

• The permission to pay for ‘services’ does not automatically permit paying someone a salary.
• The permission to pay someone depends on the trustees going through an exercise and documenting it, which they have failed to do fully.

There are ways that many mistakes can be rectified, but these are nearly always a lot of hassle and always embarrassing.

3. Helping a minister or missionary to buy a property

Some churches will want to help their ministers or mission partners to buy a property in their own name, in order to give them a secure home and provide for their retirement. However, Christian workers who are self-supporting, have a modest income or are on fixed-term contracts, may find it difficult to borrow from a High Street lender. A loan from the church may have employment tax implications, whilst shared ownership between the church and the worker can create problems if the worker wants to move home or change role. Making a gift to help with the purchase of a house is unlikely to be charitable, because of the private benefit to the worker. If the pastor is a trustee of your church, you’ll also need to bear in mind the limits on lending or giving to a charity trustee and the need to manage the potential conflict of interests.

We’d encourage churches to talk to specialist providers, such as Christian lender Kingdom Bank, Christian shared ownership facilitator Mission Housing and provider of housing for returning missionaries, the Whitefield Christian Trust.

4. Giving large amounts overseas

This is on the list because there are both special risks and specific regulations when grants are made overseas.

The risks lie in the different environment in which the money will be held and used. These range from simple cultural understandings, through ability to see what is happening, legal issues over ownership and through to potential misuse for terrorism.

The specific regulations are in the area of tax. HMRC have special requirements to enable them to treat the amount paid as ‘charitable expenditure’. If these are not in place, the paying charity is taxed in the UK on that expenditure (see Non-charitable expenditure and especially Chapter 9).

The Charity Commission have very good guidance on how to identify and manage risks, handle money safely and protect your staff and beneficiaries overseas: How to manage risks when working internationally.

Stewardship have a free briefing paper specifically for churches making payments overseas: Guide to churches making payments overseas and blogs Managing the risks of payment methods when working overseas and Overseas ministries, governance and the Charity Commission.

Experience shows that many Christian charities have found themselves with unexpected difficulties when, what they had thought was agreed and simple, has turned out to be ‘anything but’. As a result, we believe it is important that leaders and trustees do background research and learn from those that have worked in that area, before launching into any significant project or expenditure.

The outcomes can be as simple as:

• paying small but regular amounts rather than a large amount up-front
• arranging to pay suppliers to the project rather than the overseas body or NGO that is being supported
• establishing who owns what, the details of the team overseas, is the way they do ‘safeguarding’ suitable, what feedback to expect and how often, do you need to visit, and what sort of documentation on this is right and helpful.

Much of this is worth getting agreement on at an early stage so there is less chance of a misunderstanding, with the connotation of ‘don’t you trust us?!’.

We do want the love and generosity of God to be for the world and not just the UK. However, there is a maxim that is true in this area: ‘it is better to learn from others’ mistakes than your own’!

5. Returning a donation

Sometimes it is obvious that a donation should be returned, for example when a donor makes a duplicate card payment by mistake. But what about more difficult situations, for example when the identity of your donor or their source of funds could cause reputational difficulties for your charity, a grant comes with restrictive conditions, or you discover that a past gift has left a donor in financial difficulty?

The starting point in law is that a charity should accept donations given to it. Personal considerations, objections or preferences should not necessarily dictate a charity’s decision. Once a charity has accepted a donation, there is a very high bar to overcome before it is able to return a donation. The outcome may depend on the terms of the donation and the terms of your charity’s governing document. This is where we’d encourage you to consider taking professional advice.

Prevention is of course better than cure, so we’d encourage all churches to have a clear policy setting out how potential donations will be reviewed and what donations will be accepted or refused. You can read more in our blog How to deal with tricky or challenging donations.