Making Sure Giving Doesn’t Mean The Taxman Receives
Wealthy individuals and corporations in the UK looking to make generous donations to charity are being urged to seek tax advice to maximise the value of their donation – and stop the tax man grabbing an unnecessary share.
Chartered Accountants Chiene + Tait said that while an increasing number of wealthy philanthropists are keen to follow the likes of Microsoft founder Bill Gates, they often do not consider their options and are unaware that there is a donation method to suit all which can benefit the beneficiary and donator.
Chartered tax advisor, Helen Mackenzie, said there are a range of ways to donate including - simple cash gifts, donating shares, donating assets, leaving a legacy, venture philanthropy, social enterprise or setting up a charitable trust.
She said: “In a time of economic uncertainty those who are in the fortunate position of having more money than they need for themselves and their families are increasingly seeing that giving to others reaps a multitude of rewards.
“Wealthy individuals can share their success, benefiting local communities and worthy causes. The long term legacy may have hugely significant, beneficial consequences for disadvantaged individuals in our society.
“Advice should be sought by companies and individuals considering a charitable gift to ensure that the tax benefits are maximised not only for the beneficiaries but also for the donor.”
Chiene + Tait recommend considering the financial circumstances of each client before coming to an agreement on the most suitable donation plan.
Helen added: “We’ve worked with many individuals and corporations who have donated to charity by different methods.
“Cash donations remain the most frequently used method of giving, with almost half of all donors using this method in 2010/11. In theory this method is fairly straight forward they can benefit from using the Gift Aid scheme which is for gifts of money made by individuals who pay UK tax.
“If you pay higher rate tax and make a donation through Gift Aid they can receive higher tax relief through Self Assessment tax return and the charity also benefits as they receive an extra 25 pence for every pound donated.
“When it comes to donating shares, a lot of people believe that the best way is to sell the shares and donate their proceeds to their chosen charity, however, what they don’t realise is that it’s often more beneficial to donate shares directly, which saves Capital Gains Tax and in some cases affords better income tax relief than a cash donation.”
From 1994 to present, the Bill Gates Foundation has handed out $26,194,000,000 in total across different programme areas and non-programme grants.
A recent report published by the National Council for Voluntary Organisations and Charities Aid Foundation estimated that a total of £11.0 billion was donated between 2010/11.
Higher tax level donors remain a small percentage (7%) of the total who donate, however, Chiene +Tait are conscious of making sure that those who are donating larger sums are aware of the benefits they can gain from seeking advice prior to making an arrangement with the charity.
Edinburgh-based Chiene + Tait has more than 125 years experience of providing tax planning and accountancy services for clients in Scotland.
More information can be found on the website www.chiene.co.uk or by contacting 0131 558 5800 or emailing Tax Partner Helen Mackenzie at helen.mackenzie@chiene.co.uk
Note to Editors: The VAT Tribunal relates to the case of AD and J Forster v HMRC [2011] UKFTT 469 (TC01319).
The National Council for Voluntary Organisations and Charities Aid Foundation report can be found on http://www.ncvo-vol.org.uk/sites/default/files/clickable_UK_Giving_2011.pdf
ENDS
Issued on behalf of Chiene + Tait Chartered Accountants by the Holyrood Partnership. For more information, contact 0131 561 2244 or info@holyroodpr.co.uk