Related party transactions are not new, but under SORP 2026, they have become a litmus test of governance and trust. Recent Charity Commission investigations show what is at stake when relationships go undisclosed and conflicts go unmanaged.
Related party transactions are nothing new. What is new is their elevation under SORP 2026 from technical afterthought to a litmus test of governance and trust.
What’s changed?
SORP 2026 tightens the lens.
The intra group exemption is gone, so transactions with subsidiaries are now firmly in scope. Broad narratives are out and itemised disclosures are in. Completeness is expected, not optional, especially for larger charities.
The question has shifted from “Do we need to disclose this?” to “Can we justify not doing so?”
Why related party disclosures matter
Related party transactions are not inherently problematic. Many are routine and entirely legitimate. But they sit where influence, perception, and risk intersect.
Poor transparency does not just raise questions, it erodes trust.
Regulators have been explicit. The Charity Commission has highlighted that unmanaged conflicts of interest are a recurring factor in cases involving private benefit and financial abuse, and that such cases have risen significantly in recent years. In other words, weak disclosure is no longer a technical flaw, it is a governance risk.
Lessons from practice
Recent investigations tell a consistent story.
The £22m cheque-cashing inquiry (2025)
In May 2025, the Charity Commission launched a statutory inquiry after 105 charities were found to have cashed cheques totalling £22 million through a connected company. See here: Serious concerns over use of £22 million triggers investigation by charity regulator
The regulator is examining:
- how funds were transferred
- whether trustees had proper oversight
- whether transactions were in the charity’s best interests
The headline is striking, but the underlying issue is familiar.
Who was connected to whom, and was that properly understood and disclosed?
Even at this stage, before conclusions are reached, the case illustrates a classic risk. Not necessarily fraud, but opacity in relationships, purpose, and oversight.
A pattern across investigations
Across ongoing Charity Commission work, the themes repeat:
• undisclosed conflicts
• trustee benefit concerns
• weak financial oversight
The Commission itself notes that conflicts involving trustees and their private interests appear repeatedly in compliance cases and present an ongoing risk to public trust.
Importantly, many of these cases are not labelled “related party issues”. But in substance, they are exactly that.
The Captain Tom Foundation inquiry
One of the most high-profile recent examples illustrates how quickly issues escalate when relationships are unclear.
The Charity Commission identified serious governance failings when publishing their inquiry of The Captain Tom Foundation, including:
- failure to properly manage conflicts of interest
- blurred lines between charity, family, and commercial entities
- concerns around private benefit and use of intellectual property
At its core, this was not an unusual structure. It was a failure to clearly separate and disclose interests.
Fraud and governance failure linked to related parties
The takeaway is not that related party transactions are inherently risky. It is that without transparency and control, they become the quickest route to governance failure.
Beyond the charity sector
The same pattern holds in the corporate world.
The collapse of Carillion remains one of the clearest UK examples of governance and disclosure failure. Findings by the Financial Reporting Council show that senior finance leaders acted recklessly and failed to act with integrity in the preparation of accounting information, particularly in relation to major construction contracts, specific transactions, and supply chain finance arrangements that were material to reported performance.
The FRC concluded that these failures affected financial reporting over several years leading up to the collapse, with profit expectations and financial positions presented in ways that did not fully reflect the underlying reality. In some cases, accounting figures were adjusted to give the impression that contracts remained on track, despite growing financial strain.
Parallel audit investigations reinforced the same point. The FRC identified multiple breaches of auditing standards, including:
- failure to obtain sufficient audit evidence
- inadequate challenge of management assumptions
- a lack of professional scepticism
These failings contributed to misinformation about Carillion’s true financial position, despite significant underlying losses. See more: FRC makes final decisions in KPMG's Carillion audit failures
The regulator ultimately described the audit failures as a “textbook failure”, citing the scale, range, and seriousness of deficiencies across multiple years.
More broadly, FRC enforcement activity continues to show consistent themes across UK corporate cases:
- weak challenge and oversight
- insufficient understanding of complex transactions
- failure to reflect substance over form
These issues are not always labelled as related party failures. But they frequently arise where relationships, incentives, and influence are not fully understood or transparently reported.
Different sector, same underlying issue.
A lack of clarity over who is connected to whom, and how those relationships influence decisions.
Practical priorities
In this environment, good governance is deliberate:
- maintain a live related party register, not a year end exercise
- embed conflict management into every board discussion
- track transactions in real time, not retrospectively
- document everything including approvals, agreements, and rationale
- disclose balances and commitments, not just transactions
These are not administrative tasks. They are trust controls.
Final thought
SORP 2026 is not just a disclosure update. It is a mindset shift.
The real question is no longer “Have we complied?”
It is “Would a reader understand the relationships shaping this charity?”
In most cases, the answer is transparency.
Watch UHY's webinar to learn more about related party disclosures
Led by Zaynab Aswat, this short and practical webinar focuses on how the updated related party requirements will apply in practice and what charities should be doing now to prepare. Watch the webinar here.