Charities: Related Party Transactions

What is a Related Party?

Parties are considered to be related if one of the parties has the ability to control or significantly influence the other when making financial or operative decisions.

What individuals are considered a Related Party?


  • Charity Trustees
  • Officers, agents or employees who have responsibility for directing, controlling significant activities or resources


  • Members of a primary related party’s close family: their parents, grandparents, siblings domestic partners, children and grand-children
  • The domestic partner(s) of any of the above
  • The children of their domestic partner
  • Business partner of a primary related party
  • Other people who are financially dependent on a related party or have influence or control over the related party

What types of charities and other businesses are considered a Related Party?

  • Immediate and ultimate parent charities
  • Wholly-owned subsidiaries
  • Other organisations which are controlled by the charity or its trustees
  • Associates and joint ventures
  • Businesses that related parties control or exert significant influence over
  • Charities or businesses under common control or influence where the same person, group of people or organisation have control of two or more charities or businesses
  • Pension funds for the benefit of the charity employees

What type of transactions need to be recorded?

  • Purchase and sales of goods or services
  • Donations of money or other assets
  • Provision of loans and guarantees
  • Gifts or services in kind
  • Reimbursement of expenses

Does a charity have to disclose all related party transactions?

Disclosure of some related party transactions is not required so long as terms are not unusual or discriminatory or the amount of the transaction is not material. For example, as a general rule, staff salaries paid to employees do not need to be disclosed, neither do pension contributions paid in respect of employees into a pension fund. Similarly, donations to the charity by a related party would not need to be individually disclosed unless there were unusual restrictions or conditions.

How does a charity ensure terms are not unusual or discriminatory?

The charity should have policies and procedures for declaring and recording conflicts of interest to ensure that all transactions are made with some distinction and for the benefit of the charity.

How does a charity decide what is and what is not a material?

What is or is not material will depend on the circumstances of each charity but in general, an amount is considered material where its disclosure might influence the decisions made by a user of the accounts.

Materiality is not a fixed amount but will vary year on year depending on the figures in the year-end accounts and the nature of the transaction. The charity’s auditors have to state within their report if material related party transactions are not disclosed. This is a conversation the charity and auditor will need to have before the accounts are prepared.

Can company charities take advantage of the reduced reporting under FRS102 Section 1A?

Unfortunately not. Charities have to follow the Charity SORP and that requires full disclosure.

Next steps for charity trustees

  • Identify and maintain a register of all related parties
  • Have a system in place that identifies and records all transactions with related parties
  • Disclose related party transactions in the accounts

Some of this information will be held on public record but personal information will need to be provided by the trustees. Some related party information may be personal or sensitive. The charity will need to incorporate safeguards to ensure that sensitive information is protected in order to get full disclosure.

Useful links

The Charity Commission has extensive guidance on identifying and managing conflicts of interest; links to model policies and procedures.

The glossary of terms in Appendix1 of the Charity SORP lists the related party criteria in detail