Every Contract a Charity Needs in the UK (2025)
Last updated: February 2025
Legal Requirements for a Charity
UK charities are regulated by the Charities Act 2011 and overseen by the Charity Commission for England and Wales (or OSCR in Scotland, CCNI in Northern Ireland). Charities must have a governing document, register if income exceeds £5,000, and comply with charity accounting regulations (SORP). Trustees have fiduciary duties under the Trustee Act 2000. The Fundraising Regulator's Code of Practice applies to all fundraising activities. Charities with employees must comply with employment law including auto-enrolment pension duties.
Essential Contracts
The foundational legal document defining the charity's objects, powers, and governance — must meet Charity Commission requirements
Documents trustee duties and manages conflicts of interest as required by the Charities Act 2011 and Charity Commission guidance CC29
Standard terms for receiving grants, donations, and restricted funds — clearly documenting restrictions on use is essential for SORP compliance
Required under the Employment Rights Act 1996 for all paid staff, including the CEO — charity-specific clauses around benefit-in-kind are important
Establishes volunteer relationships without creating employment obligations — particularly important for safeguarding and DBS checks
Recommended Contracts
Required under the Charities Act 2011 when using professional fundraisers or commercial participators — must include specific statutory statements
Essential under UK GDPR for donor data, beneficiary records, and any third-party data sharing
Required by HMRC for claiming Gift Aid on donations — must contain specific wording to be valid
Common Legal Risks for a Charity
- Trustee personal liability for breach of fiduciary duty without proper governance documentation
- Loss of charitable status due to non-compliance with Charity Commission reporting requirements
- Fundraising complaints to the Fundraising Regulator without documented compliance with the Code of Practice
- HMRC clawback of Gift Aid claimed on invalid declarations
- Restricted fund misuse leading to Charity Commission inquiry
Industry-Specific Notes
Charities should ensure their governing document is compatible with Charity Commission model documents. Trustee indemnity insurance is strongly recommended. Charities trading commercially should consider establishing a separate trading subsidiary to protect charitable status and tax exemptions.
FAQ
Can charity trustees be personally liable for the charity's debts?
It depends on the charity's legal structure. Trustees of unincorporated charities (trusts and associations) can be personally liable for debts and contractual obligations. Trustees of incorporated charities (CIOs and charitable companies) generally have limited liability. However, trustees of any structure can face personal liability for breach of duty under the Charities Act 2011 or Trustee Act 2000, such as making unauthorised investments or failing to act in the charity's best interests.
What contracts must a charity have when using professional fundraisers?
Under Sections 59-62 of the Charities Act 2011, charities must have a written agreement with any professional fundraiser or commercial participator before fundraising begins. The agreement must include the fundraiser's remuneration, the proportion of funds going to the charity, and the right to end the agreement. The fundraiser must also make a solicitation statement to donors. Failure to comply is a criminal offence.
Does a charity need different employment contracts than a normal business?
Charity employment contracts must comply with the same Employment Rights Act 1996 requirements as any employer. However, charity-specific considerations include: trustee benefit provisions (paying trustees requires Charity Commission authority), benefit-in-kind policies, volunteer management boundaries, safeguarding obligations, and any restrictions from the charity's governing document on staff remuneration levels.
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