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Community foundations work with a wide variety of donors - individuals,
businesses and charitable trusts, public bodies and government agencies
- as well as with professional
advisers.
They help donors give to their local community in an effective,
easy, flexible and rewarding way. Donors to community foundations
share the characteristics of all those who ‘give’:
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They recognise their own good fortune and have a desire to
share it with others |
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They are sensitive to the overall well being of the community |
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They want to make a difference - sometimes beyond their lifetime |
Using the specialist knowledge of a community foundation means you,
as a donor, can be involved in your local community and its particular
concerns. You can be part of change in an effective and lasting way. Companies can demonstrate effective corporate social responsibility by giving through a community foundation.
Here we explain how community foundations help:
We also recommend that you refer your professional financial adviser
to the professional advisers section.
BENEFITS OF GIVING THROUGH A COMMUNITY FOUNDATION
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Local giving
In our communities, many needs are hidden from view, and often vital work is
undertaken by small, less well-known groups. It can also be difficult to
find out about local charities and projects that need support. Community
foundation staff and trustees are in touch with community needs and by
establishing
clear
priorities for grant-making they ensure these needs are targeted. Their expertise
ensures that gifts made through a community foundation go to effective organisations
and have the maximum long term impact on the community
Case study |
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Long lasting giving
Community foundations are here to stay. By building a substantial,
multipurpose endowment fund, community foundations tackle
today’s priorities and can
also meet the needs of future generations. If you are considering a legacy
to your local community, giving through a community foundation means your
charitable wishes are honoured for generations to come
Case study |
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Accountable giving
All community foundations are governed by an active board of trustees who know
the community well. Community foundations have established comprehensive grant-making
policies, to make sure requests for funds are dealt with efficiently and assessed
carefully. Community foundations offer a range of services such as site visits
and newsletters to donors who wish to be actively involved in giving
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Simple and flexible giving
A fund with a community foundation is much simpler to set up than a family trust
or private foundation. You can establish a fund with a simple agreement in
just one meeting. You can support a specific charity or designate an area where
you wish your gifts to go. Using the specialist knowledge of a community foundation,
you can direct your gift to a favourite cause, organisation, issue or geographical
area. Alternatively, you can simply give to the general benefit of the community.
Even the smallest donation is welcome.
Case study |
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Convenient giving
Community foundations achieve efficiency by pooling funds for
investment. Larger donors have all the benefits of their own ‘trust’ without
the burden of management. The foundation takes care of legal
and tax requirements, as well as grant administration - cheque
writing, tracking recipients and keeping records
Case study |
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Tax effective giving
Community foundations help you give in a tax effective way |
ESTABLISHING A FUND
A fund within a community foundation works just like a charitable
trust. It means you can support issues and areas of your choosing,
but without the trouble of appointing trustees, handling investments
and dealing with correspondence.
Funds are normally set up through an agreed series of donations,
often over several years, or by gift in a will. Normally a minimum
target is suggested; sufficient to be invested within the community
foundation’s portfolio and credited quarterly. Annual costs
for investment management, grant-making and administration are low,
between 1%-2% of the market value of the fund.
Case study
TYPES OF FUNDS
When
a community foundation allocates the income from your fund, it
will do so in line with your personal wishes. You may already
know which charities you wish to benefit from your endowment
or you may be happy for the foundation to offer advice on suitable
recipients.
There are a number of options for setting up a fund for you to choose,
or indeed, you can ‘mix and match’ for maximum impact:
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You may designate specific charities to receive all or part
of the available distribution (either a percentage allocation
or a fixed sum) |
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You may wish to specify a time period |
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You may restrict distribution to charities that operate in
a particular geographical location within your community foundation’s
area |
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You may wish to nominate a particular purpose or purposes for
support, such as young people, community safety or the environment.
Community foundations use their own networks and advisers to
find projects or organisations which meet your interests. Suitable
projects are assessed and approved before being referred to you
for final approval |
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Alternatively, you may choose to give full discretion to the
community foundation to approve grants distribution and report
to you in their choice |
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The grant will be paid out in the name of your fund, or if
you prefer, you may choose to remain anonymous |
TAX EFFECTIVE GIVING
To boost giving to charity, in April 2000 the government
introduced a range of new measures for UK taxpayers, making it simpler
and
more tax effective. Further measures were introduced in April
2002. Providing
you are a UK taxpayer, you can increase your charitable donations
simply by giving in a tax effective way.
Here we provide some general information. Further information is
available from:
There are five main ways to give tax effectively:
The taxation rules applying to community foundations are the same
as those that apply to all charities.
Gift Aid
for individuals and companies
Gift Aid covers any donation
from an individual UK taxpayer, so long as a simple Gift Aid declaration
is completed. The value
of individual
donations, large or small, is increased by 28% (at no cost to
the donor) by the Inland Revenue. Higher rate taxpayers can reclaim
the difference between standard and higher rate tax in their
annual
tax return - and this applies to donations made in the
previous tax year and the current year. All you need to do is
complete a
Gift Aid form and send it off to the community foundation.
Case Study
From April 2004 people who complete a Self Assessment tax return will be able to nominate a charity to receive all or part of any repayment due to them.
Companies simply pay the charity the full donation and claim full
tax relief when calculating their profits for corporation tax.
Share giving
Since
April 2000, giving shares to charity has become even more attractive.
Individuals who give shares to charity are entitled
to claim back
full tax relief against the value of those shares. So, a gift
of shares worth £1,000 will only cost a higher rate taxpayer £600,
or £780 for lower rate taxpayers. Furthermore, no capital
gains tax will apply.
There are many reasons why giving shares might appeal
to you. You might hold windfall shares that make little difference
to you,
but could make a big difference to a charity. Or you may have
inherited some shares which generate more paperwork than income.
These could
be turned into something of real value to others by donating
these shares to a community foundation.
Case study
Tax relief will apply where:
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An individual or a company disposes of the whole of the beneficial
interest in any shares or securities listed on a recognised stock
exchange in the UK or elsewhere, or the whole interest in an
freehold or leasehold property |
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To a charity |
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Either by way of gift |
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Or by way of a sale at undervalue |
You can also claim a deduction in calculating your income or, in
the case of a company, your profits, for the tax year in which the
disposal took place. The amount you can deduct will be:
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The full market value of the shares, securities or property
on the date of disposal |
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Plus any incidental costs of disposing of the shares (broker’s
fees, etc) |
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Less any consideration given in return for disposing of the
shares, securities or property and the value of any other benefits
received by the donor, or a person connected with the donor,
in consequence of disposing of the shares, securities or property |
In all cases you need to show that the charity is
prepared to accept the gifts.
Gifts
of land and property
Tax relief is possible for gifts of land and property and donors
receive full tax relief from income and capital gains tax. As
with share giving, you are entitled to claim relief for the full
market
value of the property donated.
Legacies
A
bequest to a community foundation is a way you can leave something
to your local area that will benefit people for generations to
come. Charitable legacies are exempt from inheritance tax, and
this reduces the total amount of tax paid on a donors’ estate.
Depending on the size of the legacy, a charitable fund can be
set up through a community foundation in your memory, which takes
into
account your charitable interests.
Case study
We advise you to contact your local solicitor or a will writing
service or visit Remember
a Charity.
Payroll giving
Setting
up a payroll giving scheme at a company is straightforward and tax-efficient
for employees, who can authorise their employer
to deduct charitable donations from their pay before calculating
Pay As You Earn tax. This way the employee automatically gets
tax relief on the value of donations at his or her top rate of
tax.
There is no limit on the amount that can be given under the scheme
tax free, upto an employee’s maximum taxable earnings.
The deduction must be processed through a payroll-giving agent approved
by the Inland Revenue such as Give as You Earn. The agency will distribute
the money to the community foundation. (Give as You Earn, operated
by Charities Aid Foundation charges a 4% administrative fee for this
service). Fuller details, case studies and forms can be found at
The Giving
Campaign.
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