Planning for charitable giving - Donor Advised Funds

Iain Younger:
Phone: +44 (0) 20 7833 3500
Date: Thu, November 16, 2017

Both the US and UK currently have long established tax reliefs for charitable giving but as you may expect the two systems are very different, and therefore planning ahead is vital.

In very general terms, a direct contribution to a US charity would not qualify for UK gift aid relief, nor would a direct contribution to a UK charity qualify for a US income tax deduction.

Ultimately, you want any contribution to benefit your chosen charity, but from a global tax perspective relief should be obtained in the jurisdiction on which a higher tax rate is suffered.

If you are caught within both tax systems, in order to benefit your chosen charity and obtain effective tax relief, it is possible to make a contribution to a dual US & UK qualified charity, which are established as a Donor Advised Fund (DAF).

The DAF itself is considered to be the receiving charity, which has been structured in such a way as to be considered compliant for both US and UK tax relief.

The contributed funds can subsequently be distributed to the chosen charity, as advised by the donor.  As the contribution to the DAF is the qualifying transaction for tax relief purposes, the ultimate recipient charity does not in itself need to qualify for tax relief, which may lead to a wider variety of options for your giving.

If you are considering charitable giving, now is a good time to consider any opportunities for pre-year end planning.  Please contact your usual Frank Hirth advisor who would be delighted to discuss this further.

Further guidance on other year-end tax planning considerations will be posted on our website.

This article has been written for the general interest of our clients and contacts to stimulate further thought and enquiry. It does not contain answers to specific situations and it is therefore essential to treat it as a prompt to take specific advice on any real and particular issues. We believe that the facts as summarised in this article are correct as at the time of going to press in November 2017. If we discover that the article might be read in a way that conveys a misleading impression (whether by tone, content, error or omission) we will make the necessary changes and draw attention to what has been changed once we become aware of the need to do so. We will not be responsible for any action taken by a reader who relies on the article but does not seek further advice to answer any specific query.

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