Gifts to members: church as charity and as family, simple?

We believe that church is a family, and families often give to each other. However, most churches in the UK are also charities, and as such are governed by Charity Law. Now for much of what we do as churches, these two concepts overlap each other. Church operating as a family meets the legal requirements of church operating as a charity, but…

There are legitimate times when church wants to act as a family but, in so doing, they are not acting in accordance with the legal requirements of a charity. There is no longer an overlap: the church is not acting as a charity and is in murky waters.

Regardless of the nature of the charity, all charities can only spend money in pursuit of one of the 13 recognised charitable purposes. Spending money on activities which fall outside these prescribed purposes means that such expenditure is not charitable at all and as such may have serious tax and legal ramifications for the church.

What type of expenditure can cause problems?

• Gifts given in recognition of a celebration (birthday, marriage, etc.)

As family, we all love a good birthday party or marriage celebration, and the desire to give gifts is a natural one. But before we can pay for such gifts from the charity, we need to be sure that the real purpose of the gift is for the charitable purpose of the church and not to celebrate with friends. Celebrations where, for example, the primary reason is evangelism may be OK, but a simple straightforward birthday gift is unlikely to be charitable.

• Thank-you gifts

Once again it is understandable for churches to want to say thank you to people who have contributed to the running of the church, but doing so with money can introduce serious problems:

• First, there is an issue of fairness: how do you decide who receives a gift and who does not?
• Second, there may be a legal issue if the recipient is also a trustee.
• Third, and particularly where gifts are regular, there is a danger of turning volunteers into employees, with all the potential legislation which that brings.
• Fourth, returning to our central theme, is the gift charitable?

Some gifts are charitable, for example, making a gift to someone coming to preach at a church service is recognised by both the Charity Commission and HMRC, so long as the amount paid is reasonable, but many gifts are not.

This doesn’t totally preclude the giving of occasional small thank-you gifts. If the trustees think a small, token, non-monetary gift to (for example) departing members who have served, is a tangible expression of Christian gratitude for people’s contribution to the church, that could be acceptable.  We would recommend having a formal policy around it, cap the amount, monitor the total amount given every year, and ensure it is consistently applied – so you don’t risk accusations of bias or favouritism. If these are small, and only very occasional, it is unlikely there is much of a risk of creating an expectation or an employment relationship. (There are specific considerations around trustees, where the Charity Commission does allow for small gifts for leaving trustees, but emphasise that the value should be ‘minimal’.)

This remains a risk area and the lines between what is charitable and what is not can be subjective and open to challenge. Our overall recommendation is that it is good to acknowledge people’s contributions but avoid doing it with money!

• To support those in need

An inherent part of Christian charity is supporting those in need. This is recognised, both by the Charity Commission and HMRC, to be legitimate charitable expenditure. Hence why having hardship or diaconal assistance funds are not normally a difficulty.

However, there are two aspects that arise which can cause issues:

• favouritism (where funds are only given to church members)
• amount (where large amounts are given but only when there are close relationship connections)

Whilst this does not make a gift automatically non-charitable, where this is given because we ‘like someone’, rather than because of their objective position, there can be a problem of charity law and reputation: Charity law, because charities are not allowed to make gifts only because they ‘like someone’. Reputation, since, as churches, we may be accused of using government subsidy (Gift Aid) to look after our own members, while ignoring those people in the community in greater need. There may be good reasons for doing this, and we may put in place controls and procedures to help, but it does require a well thought-through policy.

Conclusion

We want churches to be places of strong bonds of love and affection where there are no needy people, but we also want them to be models of good governance. Our briefing paper provides for a more in-depth exploration of this area, as you seek the best way for your church to move forward.