The term ‘permanent endowment is generally applied to any land, investment or other asset which trustees cannot spend because of a restriction in the charity’s governing document.
Sometimes a restriction exists, until a particular situation happens, that enables the trustees to sell permanent endowment and use the proceeds without distinguishing between capital and income. A common example is where land and buildings are held for a particular purpose, with a condition that if it is no longer needed for that purpose it can be sold and the proceeds spent on other charitable purposes.
Often, though, the restriction will apply permanently. For example, a charity might be established with capital which is to be held for ever and invested in order to produce income to be used for a charitable purpose.
The law allows many charities to spend all or part of their permanent endowment. However, the power can only be used if the trustees decide that by using their charity’s permanent endowment, as well as any income, it will be able to carry out its purposes more effectively.
Examples of situations when trustees may need to make such a decision are where:
- the charity’s income is now very small, and the trustees cannot achieve its purposes, so bringing the charity to an end by spending its permanent endowment, and any other assets, is the most effective action they can take
- a larger charity may need to use permanent endowment for an expensive, but necessary project, such as improving or refurbishing its buildings
If you want to spend your charity’s permanent endowment please consider the guidance at the following link which opens into an online form.
See also: