Charitable trust

A creature of equity, governed by:

• The trust deed itself — the document that creates the trust, names trustees and sets purposes
• The Trustee Act 2000 — statutory powers of investment, delegation, agents, nominees and custodians
• The Charities Act 2011 (as amended by Charities Act 2022) — charity-law overlay on top of trust law: registration, purposes test, public benefit, reporting, regulator powers
• Common law of charitable trusts — centuries of case law on what counts as a valid charitable purpose, cy-près doctrine, perpetuity rules (modified by the Perpetuities and Accumulations Act 2009)

A trust has no separate legal personality. It cannot hold property in its own name, contract, sue or be sued. Trustees do all of these things personally, holding assets and entering contracts on the trust's behalf. They are personally liable for trust obligations, but they are indemnified out of trust assetswhere they have acted properly (i.e. within the trust's powers and without breach of duty).

1. Settle on the charitable purposes — must be exclusively charitable within Charities Act 2011 s.3 and satisfy the public-benefit test (s.4)
2. Draft the trust deed covering: name of the trust; purposes (objects); initial trustees and how successors are appointed; powers (investment, delegation, etc.); how the trust can be amended; how it can be wound up; what happens to remaining assets on dissolution
3. Have the trust deed executed as a deed — signed by the settlor and (typically) the initial trustees, witnessed
4. Open a bank accountin the trustees' names “as trustees of [trust name]” — see community group bank account
5. Register with the Charity Commissionif income exceeds £5,000 (E&W) — typically 45 working days target
6. Register with HMRC for charity tax recognition and Gift Aid (separate application using ChA1)

Setup cost: £0 to the regulators; legal fees for trust-deed drafting typically £200–£1,500 depending on complexity. The Charity Commission publishes model trust deeds; specialist charity solicitors are the standard route for anything bespoke.

• Grant-making trusts.A trust holds an endowment and the trustees make grants to other charities or directly to beneficiaries. Examples range from the biggest UK family foundations (Garfield Weston, Esmée Fairbairn, Lloyds Bank Foundation) down to a local memorial trust giving £500 a year
• Legacy and memorial funds. A bequest in a will creates a trust in memory of an individual; trustees apply the funds for the stated purpose. Common at parish and community-organisation level
• Small endowed charitieswhere the original capital is preserved (a “permanent endowment”) and only the income is applied. Charities Act 2022 Phase 2 made it easier to release small permanent endowments
• Family philanthropic vehicles structured as discretionary charitable trusts with family-member trustees
• Legacy charity holdings — historic parish, village hall or recreation-ground trusts often established decades ago, sometimes pre-dating the Charities Acts entirely. Many are now being modernised under Charities Act 2022 powers

For an active operational charity — with employees, premises, suppliers and contracts — the trust form has real practical drawbacks:

• No limited liability.Trustees personally sign every contract; if the charity defaults, trustees pay personally. Trust indemnity helps but doesn't displace the underlying liability
• Trustee turnover is painful. Each new trustee must be added to the bank mandate, registered at the Land Registry for any property, named on every ongoing contract. CIO form sidesteps all of this
• No member structure. Decisions sit with trustees alone; no AGM, no member voting. Fine for grant makers; awkward for membership organisations
• No statutory conversion to CIO— only the “new CIO + transfer assets + wind up old trust” route, with all the contract-novation work that involves

For most active operational charities, a CIO (Foundation for trustee-controlled work; Association for membership charities) is materially cleaner. The classic recommendation: trust form for capital holding and grant-making; CIO for active operations.

Trustees of a charitable trust have three layers of duty:

1. The trust's terms. Whatever the trust deed says about how the trust is to be administered. Trustees must act within these powers
2. Trustee duties under the Trustee Act 2000. Statutory duty of care, powers of investment (subject to suitability and diversification), delegation rules, agents and nominees
3. Charity trustee duties under Charities Act 2011 (per CC3 The essential trustee). The six core duties — purposes, governing document, best interests, resources, care and skill, accountability

Where these conflict, charity law and trust law generally prevail over the trust deed's detail. The trust deed cannot override mandatory statutory provisions.

Charitable trusts enjoy the full set of charity tax reliefs — corporation tax exemption on income applied to charitable purposes, Gift Aid, 80% mandatory business rates relief on premises used wholly or mainly for charitable purposes, SDLT charity relief on freehold or leasehold acquisitions, the charity-specific VAT reliefs.

Accounts: non-company trusts may use receipts and payments accounts up to £250,000 income (rising to £500,000 from 1 October 2026). Above that, accruals accounts to the Charities SORP. Independent examination required from £25,000 (rising to £40,000 from 1 October 2026); audit at £1m income / £3.26m assets (rising to £1.5m / £5m).

Voluntary dissolution of a charitable trust follows the mechanism in the trust deed. Remaining assets transfer to another charity with similar purposes (the “cy-près” principle if no specific destination is named in the deed); the trust applies to the Commission for removal from the register.

Many small dormant trusts have been encouraged to dissolve and transfer assets to active charities under the Charity Commission's Revitalising Trusts programme, which partners with community foundations to put dormant funds back to use.

Where the trust is moving to a more active form, the typical route is: establish a new CIO with overlapping purposes; transfer trust assets to the CIO by deed of gift; wind up the old trust; register the merger on the Commission's Register of Mergers under Charities Act 2011 s.305 to preserve future legacy entitlement.

• UK community group legal structures compared →

  The full seven-structure comparison on one page.

• CIO explained →

  The usual modern destination for trustees moving from a charitable trust to an active operational form.

• Charity vs CIC vs CIO →

  The wider three-way comparison.

• Unincorporated association explained →

  The other unincorporated charity form, with member-based governance.

• Trustee indemnity insurance — do you really need it? →

  Especially relevant for trustees of unincorporated charities, who carry personal liability.

• Charities Act 2011 ss.3 (purposes), 4 (public benefit), 30 (registration), Part 9 (trustees), 280A (Phase 3 amendments)
• Charities Act 2022 — substantially in force; Phase 4 (s.331A) commenced 27 November 2025
• Trustee Act 2000 — statutory powers and duty of care
• Perpetuities and Accumulations Act 2009
• Charity Commission CC3 The essential trustee
• Charity Commission CC22 Choosing the right structure
• Charity Commission model trust deed for charitable trust
• HMRC charity tax recognition (form ChA1)