UK: Giving Green Paper - Response To Consultation From Withers LLP

Withers is a global law firm representing a significant number of the wealthiest individuals and families in the US, Europe and Asia. In the UK alone we act for nearly a quarter of the Sunday Times Rich List. In addition to having many high net worth individuals who establish and fund charities, Withers LLP acts for a substantial number of charities, many of which are 'household names'. We are in the unique position amongst legal advisers to charities and philanthropists in that we advise on both sides of the Atlantic.

The head of our Charities and Philanthropy Team is Alison Paines, Chair of the Charity Law Association and member Society of Trust and Estate Practitioners (STEP) Charities Special Interest Group. Clive Cutbill leads our philanthropy practice and chairs the STEP England and Wales Philanthropy Advisors Group and the Community Foundation Network Professional Advisor Council, as well as being a member of the Philanthropy 'Steering Group' and the Charity Law Association Standing Committee on Taxation. Richard Cassell is joint head of our global Wealth Planning practice and admitted to practise in Washington DC as well as in England and Wales. Richard is a member of the American Bar Association, the STEP International Committee and a trustee of the European Association for Philanthropy and Giving.

The Paper is wide-ranging in scope and we appreciate that it is intended to start discussions across a many aspects. We do not respond in detail below to each consultation point raised, as there will be others in the sector able to speak more effectively to, say, mobile giving and internet volunteering.

Philanthropy's role in a culture of giving

We applaud the concepts underpinning the Giving Green Paper, in particular the need and desirability of fostering a culture of giving in the UK. To us, this must sensibly include both a greater number of gifts of significant value as well as a greater number of gifts of modest value, and should foster both philanthropic attempts to deal with systemic societal problems as well as responsive ad-hoc charitable giving. As a general comment then, the Giving Green Paper is to us too heavily focussed on encouraging low-value charitable giving and does not attend adequately to the great potential of encouraging high-value philanthropic giving.

ATM giving and 'cost-free' giving mechanisms such as 'everyclick' should certainly be taken forward by government, including the necessary facilitation in respect of Gift Aid declarations. However, we suspect that the nature of such systems will tend to channel many small donations to a limited number of established charities and may therefore be largely irrelevant for those who have large sums to give, particularly those donors looking not to top up the funds of a large established charity, but to make their own impact.

Tax Incentives

The Giving Green Paper seeks response on the government's role in entrenching social norms for giving and what generally government can do to support and increase giving. We understand that the Cabinet office is looking at the role of tax incentives and working closely with Treasury in this area.

We wish to preface our comments on this point by emphasising that in our collective experience in the US and the UK: donors and philanthropists do not give in order to obtain tax relief; no system of charitable tax incentive that we have come across has the effect of putting the donor in a better net financial position after the donation; and at the end of the transaction, the donor may have benefitted from some relief, but she or he has still parted with the donation itself. Instead, donors tend to be genuinely interested in making the donation - at their own net loss - because they want to put their assets to work for something they believe in. The more the donor can benefit the charitable project (or the lower the net loss to the donor), the better.

With that preface, it is our view that the single most significant thing the government could do to foster a culture of giving in the UK is to introduce (and subsequently publicise) additional giving incentives to increase the 'portfolio' of giving alternatives. We consider that the following reliefs should be seriously considered:

(a) Works of Art
The discrepancy between the treatment of a gift of a work of art on death and one made during lifetime should be eradicated and relief in relation to income and capital taxes should be made available on lifetime gifts.

To this end, we would strongly support an extension of the existing charitable tax relief available in respect of land and qualifying securities to works of art. We do not accept that issues around the valuation of art should be prohibitive, considering the mature market for valuation and the mechanism already available in relation to transfers on death such as acceptance in lieu of tax scheme .

(b) Lifetime Legacies
Together with the European Association for Philanthropy and Giving and others, we have been involved over the years in raising awareness about the advantages to introducing a tax-efficient means of creating Lifetime Legacies (or 'Charitable Remainder Trusts') in the UK.

In simple terms a Charitable Remainder Trust (CRT) is a means of making an irrevocable gift to charity of a capital sum, while providing an income stream to the donor during his or her lifetime.

This type of Trust is a common and effective planned giving mechanism in the US and tends to be taken up primarily amongst those donors who might be described as 'mass affluent', that is comfortably off (often as asset rich but cash-poor) and not in a position to give up the income which would be lost by making the capital gift outright at the time the CRT is set up.

It is clearly within the spirit of the Giving Green Paper to encourage and facilitate giving by this 'mass affluent' demographic, and it is our view that a relief in this form would encourage both new donors and generate increased levels of giving from some existing donors. We urge the government, Treasury and HMRC to consider seriously the sensible proposals and relevant evidence which is available on this issue.

'Foundation' giving

We note that the Giving Green Paper raises for discussion the possibility that 'foundations' might be required to make a minimum annual payout as is the case in some other countries. We understand that the government has not made a proposal of this nature, but is instead seeking to encourage conversation on the subject.

In our view, a minimum payout is both unnecessary in and unsuitable to the legal, fiscal and regulatory landscape in England and Wales for various reasons, including:

(a) Unlike jurisdictions such as the United States (US), which at the federal level requires a 5% annual minimum spend, the whole of the UK now has specialist charities regulators which already police the accumulation of reserves. In England and Wales for example, the Charity Commission has given clear guidance on reserves policies and trustees are expected to justify their positions by reference to the needs of their own charities not a formulaic rule.

(b) More fundamentally, the UK does not have a legal, regulatory or fiscal concept of a 'foundation', let alone the concept of a 'private foundation' as there is in the US. Therefore, imposing a minimum spend in the UK would mean either a radical departure from existing charity law and regulation to create a new form of 'private foundation' (requiring government expenditure far out of line with any savings) or else imposing it across the board on all charities, with 'operating' charities having to report on a minimum spend they will have vastly exceeded because the requirement is completely inappropriate to their operations and expenditure.

(c) If the minimum spend figure is set too high, there would clearly be capital erosion over time, even for permanently endowed funds, so the principle of perpetuity of charitable funds could be abrogated. (In the US, it is worth noting that the Federal law which requires minimum expenditure overrides the terms of the charitable instrument which are subject to state law and may require the assets to be retained in perpetuity. In England and Wales, we would need to expressly rewrite the whole law relating to permanent endowment);

(d) If a minimum payout is considered, it should be noted that the US allows for certain types of expenditure to count as qualified distribution and there are some circumstances where some functional assets can be carved out of the total asset value. It is possible that many UK foundations which might otherwise be seen as paying out too little already 'distribute' at or above a 5% level if they were able to account for their expenditure according to the US rules. If this were to be the case, a new requirement of this sort would just add another onerous obligation without an increase in actual grant-making.

(e) In broad terms, a restriction of this sort is unnecessarily prescriptive for the UK and takes the discretion in relation to balancing the needs of current and future beneficiaries out of the hands of the trustees (where it belongs).

Technology

There is a strong emphasis in the Giving Green Paper on the opportunities which technology in its many guises may bring to giving. We broadly agree that technology offers an exciting range of possibilities and our clients are interested in ways of giving online, via mobile phone and the impact of social networking on fundraising. For this reason, it is imperative that HMRC examine the requirements of the Gift Aid system in light of changing technological possibilities.

Honouring Giving

We were pleasantly surprised to see the prominence afforded to asking, thanking and honouring in the Giving Green Paper. We leave the substantive response on this consultation point to fundraising sector bodies and charities, but merely point out from our perspective that honouring giving is about more than ministerial thank you letters or a national philanthropy day. The cynical distrust of those who give away large sums of money is encouraged, we think, by an attitude that sees tax reliefs on charitable donations as some sort of a 'reward' to the donor, at best, and a vehicle for fraud or tax evasion at worst. Whilst acknowledging the real threat of charitable fraud, we urge government, HMRC and Treasury to move away from this 'reward' perspective and instead consider - and publicise - charitable tax reliefs as being redirection of the tax on the donor's hard-earned income (which available because the donation itself has been given away).

A similar point can be made in relation to the Lifetime Legacies proposal; a cynical view of the donor's retained lifetime interest will certainly not encourage giving or honour the very generous impulse to give an ultimate gift on death of the capital sum.

This links in to the consultation point raise in the Giving Green Paper concerning how the government might relate to media to facilitate and encourage giving. The government cannot of course control cynicism in the media concerning philanthropy (nor should it), but it can ensure that charitable reliefs are well-publicised in a manner that respects the generosity of the donor.

Philanthropy Ambassadors

One of our colleagues recently attended a Global Philanthropy conference in New York at one of the major academic centres for fundraising and philanthropy in the US. The conference attendees widely represented the best of US fundraising and philanthropy, from universities and museums to major corporate foundations. The keynote speaker was Dame Stephanie Shirley.

In our view this sort of presence and profile matters in the world of global philanthropy. It matters that the UK was visible and that Dame Stephanie was able to share and receive wisdom on giving and asking. We would urge the government to retain the position of (at least one) ambassador for philanthropy. We also consider that an ambassador for philanthropy has an encouraging effect closer to home on fledgling philanthropists.

Corporate Philanthropy

Corporate giving is incredibly important to the giving culture as a whole. We are not clear what concrete steps are or may be proposed to increase this sort of giving, however. We would encourage the government to promote corporate giving in all its guises amongst small to medium size businesses in particular and to consider how to encourage consumers to engage with and evaluate the philanthropic efforts of the businesses they patronise.

Conclusion

We welcome the opportunity to contribute to the discussion around giving that is currently taking place. We too are optimistic about the capacity for society to give - we regularly see individuals and businesses looking to make a real impact at significant giving levels. However our optimism is tempered by realism; without further incentives and a shift away from a culture of that tax relief is a 'reward' for the donor, we fear the giving culture to which the government aspires will prove elusive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.