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Charities' income would drop as result of paying trustees 1

Finance | Niki May Young | 26 Sep 2011

Charities would suffer from lower incomes if trustees were to be paid, warns VAT specialist Socrates Socratous, commenting on Lord Hodgson's claim last week that payment of trustees was inevitable.

Speaking at the Charity Commission annual public meeting last Thursday, Lord Hodgson responded to concerns from the audience that a new lighter-touch Charity Commission would put more pressure on trustees and lead to calls for remuneration. He said he believed "it's going to come", despite a 50/50 split in opinion on the matter, documented during his time as chair of the Red Tape Taskforce responsible for reducing bureaucracy in the sector.

But commenting on the story Socrates Socratous, director of VAT consultancy SOC VAT Consultants, warned that the action of payment for trustees would have wider implications, in particular for cultural charities:

"Before moving down this road, full consideration should also be given to the potential impact for VAT purposes, particularly in the cultural sector where many charities are able to exempt admission fees on the basis that they are 'managed and administered on a voluntary basis'," he said.

"Payments to the trustees would remove entitlement to exemption resulting in higher admission fees or less income for the charity," he warned.

Lord Hodgson claims 'outrageous'

Some sector leaders commenting on civilsociety.co.uk have disagreed with Lord Hodgson's synopsis of inevitability, saying the claim is "misguided", "outrageous" and "offensive".

Debra Allcock Tyler, CEO of the Directory for Social Change, said: "It isn't inevitable, and the vast majority of current or future trustees will or already do understand that.

"I can reassure you that many trustees of larger charities, as well as small ones, do understand their responsibility to the public and their beneficiaries and are equally vehemently against getting paid. And for that small handful who are currently paid...shame on you."

Nigel Edward-Few, chief executive of Jubilee Action asked: "Is this what we want for our sector? If it is inevitable that trustees are to be paid, then it is equally inevitable that we will end up with many in it for what they can get out of it. Whatever happened to service without expectation?"

Larger charities could benefit from paying trustees

However speaking with civilsociety.co.uk, Leo Sowerby, chief executive of Affinity Trust which paid £48,648 to its trustees in the year to 30 September 2010, said that while he doesn't personally believe it's necessary for all charities, remuneration for larger and more complex charities is appropriate. Affinity Trust employs 1,000 people in the UK.

"Our trustees are asked to take on quite significant responsibilities. We're asking for their expertise and time and to manage a significant level of risk. Remuneration allows us to have a professional expectation of the trustees," he said.

"The scale of risk becomes larger with larger charities, and I think the level of complexity can increase too... Also I think there is more of an ethos of volunteerism in smaller charities, rather than larger charities working across regional boundaries," he added.

Sowerby said that paying its 12 trustees was in line with the professional ethos of the organisation, and prevents exclusivity. "It means that people interested in being a trustee do not have to support themselves, we're not excluding people," he said.

"We were actually advertising for trustees earlier this year, and we received 200 applications. Now, I can't say that this wouldn't have been the case if we didn't pay our trustees, but I have worked for over 30 years in the sector and I've never seen a response like that."

Affinity Trust appointed an independent pay committee in 2009. Meeting once a year it reviews the demands, expectations of time, percentage of attendance and other external factors such as inflation within its assessment, Sowerby advised.  He added that in the five years he has been CEO of the organisation, the payments to trustees have remained largely the same. 

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Who's Who: Socrates Socratous | Lord Hodgson of Astley Abbotts | Nigel Edward-Few | Debra Allcock Tyler