Charitable vehicles & tax-efficient giving

Under Gift Aid, for every pound your client gives, the charity can claim another 25p tax back from HMRC. Because the amount given is deemed to have had basic rate tax deduced from it, higher-rate taxpayers can then claim the difference between the basic rate and the higher rate on their deemed £1.25 donation. Payments (of any size) can be made by cash, cheque, postal order, direct debit, standing order, debit or credit card or even in a foreign currency. For more information on Gift Aid, visit Philanthropy UK's A Guide to Giving.

A charitable vehicle provides a framework for planning your client’s charitable giving in a systematic and thoughtful way. They are registered charities and can take the form of companies or trusts. A charitable vehicle offers many tax benefits. Apart from the tax relief on your client’s own donations to the trust, it will not pay tax on its investment income or capital gains tax. It also will not pay inheritance tax. For more information on charitable trusts, visit Philanthropy UK's A Guide to Giving.

Donor advised funds are structured in a similar way to charitable vehicles, but because they are operated centrally by others, they remove the need for a client to find his or her own trustees or deal with administrative aspects. Like bespoke charitable vehicles, they are a tax-efficient way of giving to charity, as they can claim back the tax on Gift Aid donations and add it to the amount in your account.  Examples include named funds at community foundations and charity accounts at intermediaries such as Charities Aid Foundation and Stewardship. Your client decides how much to give and pays it into the fund. They can also fund the account through payroll giving or by gifts of shares. The host organisation offers grant-making expertise and monitoring and reporting processes, and deals with the administration and distribution of funds. For more information on donor advised funds, visit Philanthropy UK's A Guide to Giving.

Individuals and companies can claim tax relief when giving certain assets, such as shares and land, to a UK charity. Outright gifts are also free of inheritance tax.  Unlike cash donations under Gift Aid, all the tax relief is claimed by the donor. The amount of tax relief you are eligible for involves two elements: Capital Gains tax relief and Income tax/Corporation tax relief. Qualifying investments include: shares and securities listed or dealt in on the UK or another recognised stock exchange; units in an authorised unit trust (AUT); shares in a UK open-ended investment company (OEIC); holdings in certain foreign collective investment schemes; and a qualifying interest in land and buildings in the UK. For more information on gifts of shares and land, visit Philanthropy UK's A Guide to Giving.

Gifts made to UK charities in your client’s will are tax-free. Their charitable vehicle can be a beneficiary of their will, and no inheritance tax will be due on the amount given to the trust. They can also set up a ‘Legacy account’ with a donor advisory organisation, such as a community foundation.  If your client has already made a will, they can still add another legacy by drafting a codicil. This is a separate legal document which adds to or amends the will they have already made. For more information on legacies, visit Philanthropy UK's A Guide to Giving.

CITR is a tax incentive to investors in community development finance institutions (CDFIs), which lend and invest in deprived areas that cannot access mainstream finance. CITR is available to any individual or company with a UK tax liability investing in an accredited CDFI where the investment is held for at least five years. The investment must be either in shares, securities, or a loan. The investor receives a relief to offset against their income or corporation tax liability of 5% of the amount invested in the year the investment is made, and a further 5% in each of the subsequent four years. The total relief is worth up to 25% of the value of the investment. This tax relief is in addition to any interest or dividend paid by the CDFI. For more information on CITR, visit Philanthropy UK's A Guide to Giving.

Payroll giving is a way of giving money each week or month direct from your pay. It is a tax-efficient way for employees, non-executive directors and those receiving a company pension to give a regular amount to one or more charities, or to make a one-off gift. The donation is made from gross salary (before tax has been taken off). For more information on payroll giving, visit Philanthropy UK's A Guide to Giving.