GIBRALTAR PHILANTHROPY FORUM
TAX AND LEGAL ISSUES RELATING TO
INTERNATIONAL GIVING
OWEN CLUTTON
19 NOVEMBER 2013
ISSUES FOR INTERNATIONAL DONORS
• Legal structure
• Flexibility
– Objectives
– Activities
• Taxation benefits for donors
• Taxation benefits for charities
• Monitoring use of funds
NON-UK STRUCTURES
• Pan-European
– European Foundation Statute
• Civil Law Jurisdictions
– Foundations
• Offshore Jurisdictions
– Jersey Foundations
– Purpose Trusts
EUROPEAN INITIATIVES
• European Foundation Statute approved by European Parliament
• Transnational Giving Europe (TGE) Network
• EU legislation
– Free movement of capital
– Freedom of establishment
– Free movement of persons
CHARITIES IN GIBRALTAR
• A charity is an institution which:
– Is established for charitable purposes only (the definition of which is similar
to that under English law)
– Is subject to the jurisdiction of the Supreme Court of Gibraltar
• Tax reliefs
– Income generally exempt if applied for charitable purposes
– Tax reliefs on donations to charities in Gibraltar
ENGLISH DEFINITION OF CHARITY
• A charity means an institution which:
– Is established for charitable purposes only
– Is subject to the jurisdiction of the High Court in the exercise of its jurisdiction
with respect to charities
Section 1(1) Charities Act 2011
UK STRUCTURES FOR CHARITIES
• Corporations
– Companies Limited by Guarantee
– Companies Limited by Shares
– Charitable Incorporated Organisations (CIOs)
– Royal Charter Corporations
• Trusts
• Unincorporated Associations
UK RESTRICTIONS ON CHARITIES
• Charities
– Definition of charity
– Restriction of activities
• Trading
• Political activities
• Conflicts of interest
• Trustee remuneration
• Investment
UK TAX RELIEFS - DONORS
• In the year 2011/12 over £9.3 billion was given to charity, a considerable sum,
however it equates to a drop of 20% when compared to 2010/11
• Successive governments have devised various financial incentives to make
giving to charity more compelling:
– Gift Aid
– Gifts of quoted shares and land
– Inheritance Tax reliefs
– Gifts of pre-eminent objects
EU WIDE TAX RELIEFS
• Persche and Stauffer
– EU Member states not to discriminate against other EU nationals and
charities
– Free movement of capital
– EU Member states required to comply
UK TAX RELIEFS AMENDED TO COMPLY
WITH EU LAW (1)
• UK legislation: Finance Act 2010
• Organisations established outside the UK are entitled to the same tax
reliefs as UK charities if they satisfy the following requirements
• The charitable purposes requirement
– The organisation’s purposes must be exclusively charitable as a matter of
English charity law
• Jurisdiction condition
– The organisation is subject to the jurisdiction of a court exercising a
corresponding jurisdiction under the laws of a relevant territory to that
exercised by the English courts in relation to charities
– A relevant territory is another member state of the EU and Iceland and
Norway
UK TAX RELIEFS AMENDED TO COMPLY
WITH EU LAW (2)
• Registration condition
– The organisation has complied with any requirement under the law of the
territory to be registered in a register corresponding to the English register of
charities
• Management condition
– The managers (trustees) must be fit and proper persons to be managers of
the body or trust
– Managers are defined as persons having general control and management
of the administration of the body or trust
– HMRC consider that any person who can control expenditure of the
organisation is a manager
– HMRC have a wide discretion
NON UK-DOMICILED DONORS (1)
•
Tax on the remittance basis:
•
On UK income and gains; and
•
Non-UK income and gains, but only if remitted
to the UK
NON UK-DOMICILED DONORS (2)
•
Gifts of cash via a non-UK account:
•
Not a remittance provided the donor is not a
member of a corporate charity (including a
CIO). Therefore:
•
No tax on foreign income
•
Still qualifies for Gift Aid – so reduces UK
tax bill
donation
Charity’s UK
bank account
Transfer
Charity’s non-UK
bank account
US DONORS (1)
•
Taxed in the US irrespective of their
place of residence
•
Donations to UK charities do not
qualify for US tax relief
•
Donations to US charities do not
qualify for UK tax relief
US DONORS (2)
•
Dual UK/US qualified structure:
•
US Charity
US charity establishes UK charity as
wholly owned subsidiary
•
UK charity limited by shares
•
UK charity “checks the box” so as to
be treated as transparent
•
Donations to UK charity qualify for
tax relief in both the UK and the US
(501(c)(3) organisation)
100% ownership
donation
UK Charity
(company limited by shares)
•
Adapt for other jurisdictions which
provide for corporate charities limited
by shares
MONITORING
• UK Tax Reliefs restricted if overseas funding not monitored
• Organisational issues
– Professional assistance from service providers
– Funding agreements
GIBRALTAR PHILANTHROPY FORUM
OWEN CLUTTON
Macfarlanes LLP 20 Cursitor Street London EC4A 1LT
T +44 (0)20 7831 9222 F +44 (0)20 7831 9607 DX 138 Chancery Lane www.macfarlanes.com
This presentation is given on behalf of Macfarlanes LLP. Macfarlanes LLP is not authorised under the Financial Services and Markets Act 2000, but it is able
in certain circumstances to offer a limited range of investment services to clients because it is authorised and regulated by the Solicitors Regulation Authority.
It can provide these investment services if they are an incidental part of the professional services it has been engaged to provide. © Macfarlanes LLP 2013