Cash and Gift Aid
- Cash, usually in the form of a cheque, is an easy and convenient way for clients to support worthy causes in the community. Gifts of cash from individuals are eligible for Gift Aid.
- Using Gift Aid means that for every pound donated, the community foundation gets an extra 28%. Until April 2011 this includes transitional relief to compensate for the fall in the basic tax rate in April 2008.
- Gift Aid covers any donation from an individual UK taxpayer, so long as a simple Gift Aid declaration is completed. 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.
Companies simply pay the community foundation the full donation and claim full tax relief when calculating their profits for corporation tax.
See also HM Revenue & Customs.
Shares
Giving shares and securities to charity has long been a useful way of unlocking capital and passing it on to good causes. Since April 2000, giving made in this way 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.
Please note, while no capital gains tax will apply, where shares have fallen in value, the loss cannot be used to offset a CGT liability.
There are many reasons why giving shares might appeal to donors. They might hold windfall shares that make little difference to them, but could make a big difference to a hard-pressed local cause. Or they may have inherited some shares which generate more paperwork than income. These could be turned into something of real value to others by donating the shares to a community foundation.
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, the donor is entitled to claim relief for the full market value of the property donated.
Trust transfers
Occasionally, a fund can be built by the transfer of a charitable trust into a fund at a community foundation. This can occur when clients become overwhelmed by the administrative burden of their trust, or simply find it difficult to find the right kind of projects to support. Equally, the UK has many dormant or ineffective trusts, which have become inactive over the years, as a new generation of trustee has not been appointed.
To date, community foundations in the UK have taken on the management of over £10.5 million in trust transfers with another £10 million in the pipeline.
Community foundations work with the client/trustees, the professional advisers to the client/trust, and the Charity Commission to ensure the proper steps occur when transferring the trust to the foundation.
They set up a named fund, usually with the same name as the former charitable trust, amend or retain the charitable objects of the trust for grant making, and involve one or more former trustees as advisers to the new fund. The public face of the trust carries on as before but without the additional work caused by separate investment, administration and reporting.