Charity Commission’s Guidance on use of Reserves

The Charity Commission has confirmed that charities can use their reserves to help them to cope with the Covid-19 situation.  The pandemic has highlighted the requirement for charities to have an appropriate Reserves Policy and where necessary, to draw upon their reserves to bring them through challenging times.

Significant numbers of charities are facing substantial reduction to their income as a result of the pandemic, but the demand for their services by those affected by the situation has increased and will continue to do so.

Practical measures which charities can take are to review the terms on which the charity’s assets are held and consider whether and how any funds or other assets that are subject to restrictions upon their use might be freed up to meet an income deficit or support people in need.

Designated Funds

If a charity’s funds have been designated by the trustees to be used for a specific purpose, these are designated funds.  Provided these funds were available for the charity’s general purposes prior to being designated for a specific propose by the charity’s trustees, then the trustees may re-categorise them as general funds and spend them for the charity’s wider purposes.

Restricted Funds

Restricted funds are those which a charity must apply for specific purposes within the charity’s wider objects.  For example, a donor may specify terms that restrict how a charity may use an asset, or a charity may have grant funding that must be used for a particular purpose pursuant to a grant agreement.

Restricted funds must be separately accounted for and noted in the charity’s accounts and used in accordance with the restrictions that are applied to them.  However, in some situations charity trustees might be able to change the purposes of a restricted fund, or if it is permanent endowment fund release the restrictions on the use of capital by using specific statutory powers or, if available, express powers in the governing document of the restricted fund. In particular, smaller charities may be able to take advantages of statutory processes to spend permanent endowment.

Professional advice should be taken if charity trustees are considering changing the purposes of a restricted fund or spending permanent endowment as part of a carefully considered financial strategy. 

For further information please contact Gerry Morrison on

Posted on: 27/04/2020

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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