Give and take

AS CHAIRMAN OF the European Association for Philanthropy and Giving (EAPG), I was fortunate to be present at the recent launch of the Department for Culture, Media and Sports’ philanthropy strategy by culture secretary Jeremy Hunt, which was coupled with a debate – ‘Philanthropy: balancing need and a desire with reality’.

Hunt’s keynote announcement centred on the planned investment of £80m in a series of schemes on a matched funding basis, designed to boost philanthropic giving in the UK by £160m. In the debate that followed, however, it was suggested that, to a large extent, this £80m investment amounted to a little more than a rebranding of funds already allocated to the sector as part of the £470m support announced in the comprehensive spending review.

I firmly believe that, in order to achieve significant growth in giving in the UK, we need more tools with which to play in the form of tax incentives that mirror those currently available in the USA. In particular, I see scope for the following:

Lifetime legacies

The increased adoption of lifetime legacies could make a dramatic difference in the current economic climate. Unless they are ultra-high-net-worth, people find it difficult to go in for large-scale philanthropy when they are trying to tighten belts elsewhere. Lifetime legacies offer an attractive option to the donor, as they enable the donor to retain an interest in the asset. They are also attractive to charities, as they would not be relying solely on wills, which can change at any time, and they could provide security for loans.

A charitable remainder trust entitles a donor to receive a tax break during their lifetime. Tax breaks are based on the discounted value of the asset being offset against income, an income tax relief mirroring those currently available for gifts of quoted shares and land to charities.

Charitable lead trusts are favoured by wealthier philanthropists. They mirror charitable remainder trusts in that the charity receives income on the asset during the donor’s lifetime and then the capital asset passes to the donor’s heirs on their death.

Income tax relief for chattels

If income tax reliefs were introduced for outright gifts of chattels (moveable personal property), which mirrored the reliefs available for gifts of quoted securities and land, we would see a sharp increase in donations of works of art. This is what happens in the US and would involve a simple expansion of the existing UK regime to include a further class of assets.

Extension of gifts in lieu regime

A gift in lieu involves making a gift of a valuable chattel to the nation after the death of the owner. The gift is given via HMRC to a museum or gallery and the donor’s estate is credited the relevant value as a discharge of inheritance tax due on the estate. This is a system that could be extended to gifts during the owner’s lifetime on the lines proposed by Sir Nicholas Goodison in 2002/03.

Simon Weil is private wealth partner at law firm Bircham Dyson Bell

Related reading