An organisation cannot be a charity if it exists for private benefit. Charities must be for the public benefit, which means that they must benefit the general community.
Private benefit is a significant issue for charities, and is where the resources of the charity are used for the benefit of those close to or related to the charity, rather than for the charity’s beneficiaries, and for its charitable purpose. Private benefit does not just refer to money – it could involve goods or services or anything else a charity has or provides.
Private benefit is also directly linked to the concept of related party transactions.
Charities need to be aware of the Governance Standards required of them, and be aware of the problems of private benefit. Charities should implement policies and procedures to prevent and manage them.
See our guidance about related party transactions, and the requirement for charities to be for the public benefit.