Residential property
03 Jul 2018 News

A New Trend in Pilanthropy?

The latest report by Charities Aid Foundation shows that there has been more than a 50% annual rise in donations to charity with over £1 billion being given in Scotland.

It’s not all good news though as the statistics show that slightly fewer people donated to charities, however, those who did, gave more. 

This reflects a trend that we have been seeing in relation to wealthy individuals looking to give something back to the community and ensure that their hard work and good fortune can make a difference to the lives of others too. 

If you are considering a sizeable donation to charity there are a few questions that you may want to ask yourself:

  • Is there an existing charity which is providing services and activities that you would like to support on a large scale? If not, you may prefer to set up your own charity which will provide greater control and involvement with the charitable causes that you decide to support.
  • How best to donate? Depending on your assets this can be an important question as the consequences in relation to tax and the reliefs available to charities can be substantial.  Do you want to provide the donation personally and allow the charity (your own or another) to claim Gift Aid? Would you like to donate directly from your company (or other corporate structure) which may save corporation tax? Or do you have assets, for example a shareholding, that you are about to sell? In the latter case it may be best to transfer it to the charity prior to sale which could save capital gains tax.

If you do decide to set up your own charity it is important to fully understand the requirements of the Office of the Scottish Charity Regulator, affectionately known as Oscar (OSCR).  In Scotland the registration process to become a charity is two-fold: first you must register the organisation with OSCR who will ensure that your charitable purposes and activities provide a true public benefit.  Once OSCR has approved the formation of the charity, then registration is also required with HMRC in order to ensure that it also qualifies for the tax reliefs and exemptions available.

The good causes which charities can support are defined in legislation as charitable purposes the wide-ranging list includes assisting those in poverty, ill health, promotion of religion, education, sports, arts, culture, animal welfare and a variety of other things. It is important to check that your charity’s purpose falls under one of the defined causes and also to consider how the charity will benefit the public.

In addition to people giving more, at Gillespie Macandrew we are also seeing an increasing trend of charities looking to use their funds in more imaginative ways than ever before.  Traditionally, grant giving charities would provide funding for projects, however, some charities now prefer to provide loans, provide seed funding or social impact investment where they think that the particular investment, albeit commercial, may assist in furthering their charitable purposes.  This may be the influence of donors who have corporate experience and are commercially sophisticated. It can be a complex area to get right, but where it works it can pay literal and social dividends for the charity.

The fact that Scotland has donated £1 billion in a year is a real credit to the country.  In times of austerity the need out there is great so it is essential to ensure that any donations are as tax efficient and as targeted as possible, allowing the funds to make a greater impact at the coalface. 

It is a good idea to explore your options with a professional, experienced in the area of philanthropy and setting up a charity, prior to making any decisions.  There is a whole host of options and the associated benefits can be great, however, the benefits often come with restrictions and it is important to get this balance right. The complexities of the sector should not put you off if you are considering a substantial donation meaning it is important to get the right advice before embarking on the process.

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