Although the idea of increasing philanthropic giving is an important vision, at the moment there are not enough tax incentives to enable this vision to be realised
Culture Secretary Jeremy Hunt announced yesterday that £80 million is to be invested in a series of schemes in an attempt to boost philanthropic giving in the UK by £160m.
Simon Weil, Chair of the European Association for Philanthropic Giving (EAPG) and Private Wealth Partner at law firm Bircham Dyson Bell, comments:
“Although the idea of increasing philanthropic giving is an important vision, at the moment there are not enough tax incentives to enable this vision to be realised. In order effectively to promote planned giving, we need more tools to play with and tax incentives therefore need to be brought into the 21st century.”
Increased adoption of 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, that 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 art works
“If income tax reliefs were introduced for outright gifts of art works, which mirrored the reliefs available for gifts of quoted securities and land, we would see a sharp increase in donations of artwork. 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 2002/3.”