UK Law and Practice Contributed by: Roger Gherson, Alfred Gherson, Lisa Uttley and David Tipping, Gherson Solicitors
10. Charitable Planning 10.1 Charitable Giving Gift Aid
legal personality, exposing trustees to personal liabil - ity. CIOs (Charities Act 2011) provide separate legal personality and limited liability with a single Charity Commission regulation, making them the preferred incorporated vehicle for new charities. Charitable companies offer similar protection but suffer from dual regulation (Companies House and Charity Commis - sion), increasing cost and complexity. Donor-advised funds (“DAF”) provide immediate tax relief on contributions with minimal administration – the host charity manages compliance, but the donor has advisory rather than legal control over distribu - tions. They are increasingly popular for donors wanting sim - plicity and privacy. Direct Gift Aid giving is the simplest mechanism but offers no governance, endowment or legacy structure. All structures benefit from full income tax, CGT and IHT exemptions. For family foundations, a charitable trust or CIO provides the strongest governance and intergenerational engagement. For donors prioritising speed and simplicity, a DAF is optimal. The choice depends on the scale of giving, the desire for fam - ily involvement, the need for limited liability and the appetite for administrative responsibility.
Any UK taxpayer can make a Gift Aid declaration in respect of charitable donations they have made. This declaration allows the charity to reclaim the basic rate of tax which was paid on the donation. This means that for every GBP1 donated, the charity receives GBP1.25. Higher- or advanced-rate taxpayers can also claim back any additional tax paid on donations in excess of the basic rate. IHT Charity gifts are exempt from IHT. Further, if a person leaves a sufficiently large donation to charity in their will, the IHT rate is reduced from 40% to 36%. The necessary amount is approximately 10% of the tax - able estate, but this is subject to precise calculations set out in the legislation. 10.2 Common Charitable Structures The most commonly used UK charitable planning structures are charitable trusts, Incorporated chari - ties, donor-advised funds and direct Gift Aid giving. Charitable trusts are simple to establish, offer full tax exemptions and family governance, but lack separate
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