Jurisdiction(s):
United Kingdom

Key definition

Restricted Fund definition

What does Restricted Fund mean? Funds given to or held by a charity that must be applied only for a stated purpose or in a stated way, rather than for the charity’s general charitable purposes/objects. In practice across the UK and Ireland, “restricted fund” is a descriptive term used in trust law and charity accounting (explained in the Charities SORP (FRS 102) and regulator guidance), not a definition found in primary legislation. Restrictions are typically donor‑imposed or arise under a trust, will or legal process, creating a binding purpose trust. Charity trustees must ring‑fence, account for and spend the fund strictly in line with its terms;...

Scottish charities’ restricted, designated and endowment funds: donor conditions, OSCR reorganisation schemes for large, small and very small funds, cy-près, and 2024 legislative updates

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Practice notes

Unrestricted funds—general use of assets

The overarching rule for applying a Charity’s assets is that, unless a specific restriction applies, both income and capital should be used to further the charity’s purposes and to deliver public benefit. Even where funds are classed as unrestricted, there may still be constraints on spending income and capital on the charity’s assets, typically set out in the charity’s constitution. Constitutions may impose conditions on distributing income, on carrying income forward for use in later years, or on accumulating it and converting it into capital. Limits on distributing capital may likewise be specified in the constitution. Where the constitution is silent, the usual expectation is that trustees will, as a minimum, distribute income and have discretion to distribute capital. Funds that are not unrestricted generally fall into three main types:

designated funds (which are truly a subset of unrestricted funds)
restricted funds (which, generally speaking, include the misnamed category of expendable endowments)
endowments (sometimes also referred to as permanent, non-expendable or income-only endowments)

Designated funds...

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Gavin McEwan

Turcan Connell

Gavin McEwan is a Partner and Head of Charities at Turcan Connell working principally in the fields of charity law, succession, trusts and tax. He is the Head of Turcan Connell's Charities Legal Team, is accredited by the Law Society of Scotland as a specialist in charity law and chairs the Law Society of Scotland’s panel on specialist accreditation in charity law. He is a member of the Charity Law Reform Committee of the Law Society of Scotland and the Charity Law Association Executive Committee and Standing Tax Committee.Gavin's work in the area of charity law includes the establishment and reorganisation of charities, from Royal Charter bodies and major public trusts to smaller active and grant-making charities. He also advises a number of national institutions, arts bodies and historic houses.Gavin is a graduate of the University of Strathclyde and trained at W & J...

Web page updated on 21/05/2026

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