UK: Pride And Prejudice - How Charities Can Generate New Funds

Last Updated: 8 November 2007

Article by Susan Diamond

It is a truth universally acknowledged, that a person in possession of a good fortune, must be in want of a charity…

Susan Diamond, head of fundraising for the National Galleries of Scotland, explains how both charities and donors can benefit from tax breaks on donations.

In the US, philanthropists have never been afraid of giving or talking about charitable donations – think Bill Gates and Warren Buffet. In the UK, donors are usually far more reticent, afraid that it appears like showing off. But times are changing and more high-profile donors have started talking about their giving. It seems it is not just to raise their profile but to encourage others to do the same. Tom Hunter’s pledge to give £1bn to charitable causes over his lifetime is a recent example.

Scotland is blessed with one of the finest national art collections in the world – unquestionably something to be proud of and enjoy. We not only acquire and care for these treasures on behalf of the nation, but also ensure that they are available to as many people to enjoy and engage with as possible.

The National Galleries of Scotland relies on donations and legacies to enhance this excellent work. We want to do more in the areas of education, conservation, acquisition of works and exhibitions. The permanent collections are free to all and we would love more people to enjoy the collections, either by visiting in person or online. Our talks, lectures and courses are either free or subsidised, thanks to our donors.

The truth is that you don’t have to be a billionaire to help good causes, and the best news is that there are some tax-efficient ways to do it.

Gift Aid has provided a real boost to charities since its inception in the 2000 Budget. It has proved very popular with both donors and charities, as it increases the value of individual gifts at no extra expense to the donor, and claws back money from the tax man. Gift Aid allows a charity to claim back the basic-rate tax paid by the donor, amounting to just over 28p for every £1 given. It is even cheaper for higher-rate tax payers to give, as they can personally claim back the additional 18% on their grossed-up gift.

If you are a higher-rate tax payer you should reclaim the additional tax relief on your donations over the year, not only to deprive the Chancellor, but also to encourage you to donate your rebate back to the charity of your choice. It is now possible to donate all or part of your tax rebate to charity on your self-assessment form and add Gift Aid. All you need to do is add the relevant charity code to the form and HM Revenue & Customs will do the rest. You can remain anonymous if you wish. For example, the National Galleries of Scotland’s code is NAC11EG.

Changes in the 2000 Budget introduced tax benefits for the gift of land or buildings, shares and securities to charities. Under this scheme, a donor can claim relief on the market value of the qualifying investment at the date of the transfer, plus any incidental costs (for example, brokers’ fees or legal fees). This is particularly useful for shares with a large capital gain because the disposal to a charity does not incur any charge to CGT. The value at the date of transfer (not the book value) and costs are then deducted from the donor’s income calculations at the end of the year.

Smith & Williamson works with the National Galleries of Scotland to make sure that both we and our donors benefit fully from this way of giving.

For further information on any part of our work, or to support us by becoming a Friend of the National Galleries of Scotland, please get in contact.

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.

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