Act of giving has practical as well as emotional aspects
It used to be said that giving was 80 per cent emotion and 20 per cent rational. I wonder how those percentages might have changed as society copes with the pandemic. When we talk about ‘rational‘ and ‘money’ together, however, it invariably still revolves around tax planning.
The charity sector has been devastatedby the turmoil surrounding people’ s personal finances and their ability to give. Furlough may have spared many from desperate money worries, but the true impact of the pandemic won’t be realised until everyone stand son their own financial feet again. the impact on fundraising is going to have far-reaching repercussions. The current position may concentrate minds on how best to donate, both in your lifetime and through your Will.
Cancer Research UK highlighted figures from the Institute of Public Policy Research, showing the UK could lose almost £8 billion of investment in life-saving research by 2027, attributablemainly to lost charity income. the impact on smaller charities is colossal and estimates suggest that 40 per cent of charities have just six months of reserves, with a further nine percent having no cash reserves or not enough to last a month.
This heightens the focus on the emotional and rational reasons behind charitable giving. Obviously, there are altruistic motives in giving, but there are practical considerations too–in its simplest form, tax planning.
As ever, when it comes to tax, nothing is simple and expert advice is needed to ensure your wishes and desired outcomes are achieved. We’ll all be famil
With personal tax, nothing is ever simple and expert
advice is often needed, says Andrew Paterson
iar with ticking the Gift Aid box as we sponsor friends and family to allow charities to reclaim tax on donations, but charitable giving and planning is considerably more complicated.
One practical issue revolves around inheritance tax (IHT) and carefully planned giving can reduce or even eliminateyourihtliability.anygiftto a charity doesn’t form part of the taxable value of your estate and if you leave 10percentormoreofyournetestateto charity, the IHT rate on the rest of your estate(ifyouarestillliable)dropsfrom 40 to 36 per cent.
There are numerous ways of achieving this and your Will needs a clarity of purpose to ensure your wishes are met. It is also worth remembering the issue of Legal Rights, which affects what is classed as ‘moveable estate’ in Scotland and includes bank accounts, shareportfolios,cars,furniture,jewellery and more. This offers protection from being disinherited to a spouse, civilpartnerandchildrensointentions of charitable giving could be contested.adisinheritedspouse/civilpartner or children, are entitled to claim onethirdorone-halfofthemoveableestate dependingwhosurvivesthedeceased. Thebest-laidplansofcharitablegiving could be thwarted.
Rational considerations also come into play for lifetime gifts, as relief is available on both income tax and capital gains tax. It is important to balance the reasons and benefits of any donation. I suspect few professional advisers would repeat Mother Theresa’s advice to ‘give until it hurts’, but they have a duty to ensure you are aware of the tax implicationsandbenefitsofgiving. Many small charities may survive because of that.
Andrew Paterson, Partner, Murray Beith Murray