As the first coverage of our new report on donors making gifts worth \u00a31m or more is hidden behind a paywall, I’ll paste it here – until someone tells me I have to take it down!<\/p>\n
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Donors say: give us more of a break<\/strong><\/p>\n By Elaine Moore<\/p>\n Financial Times, Saturday 10th December 2011 Between the 2009 and 2010 tax years, the number of large donations of more than \u00a31m fell by 15 per cent, according to the latest Million Pound Donors report from Coutts.<\/p>\n This fall \u201cmirrors the general sentiment in the economy and financial markets in the year 2009\/10\u201d, the private bank says\u00a0\u2013\u00a0and matches a similar fall in the US.<\/p>\n As a result, UK charities are facing new challenges. Multimillion pound donations still largely go to the same causes: universities and arts institutions. That leaves charities with less money to compete for, as the value of large donations has also fallen from \u00a31.5bn to \u00a31.3bn in the space of a year. And their funding is running out sooner, as the time that individuals take to make a decision about giving has increased.<\/p>\n To boost the depressed level of donations, the government has confirmed plans to introduce a lower rate of inheritance tax (IHT) for charitable donors.<\/p>\n As of April 6 2012, a new 36 per cent rate of IHT\u00a0\u2013\u00a0down from 40 per cent<\/a>\u00a0\u2013\u00a0will apply to those who leave at least 10 per cent of their estates to charity.<\/p>\n This tax rate will apply to the remainder of their estates\u00a0\u2013\u00a0including jointly-owned property and some trust assets. Some have called for the introduction of \u201ccharitable remainder trusts\u201d in the UK\u00a0\u2013\u00a0a form of tax relief\u00a0available to US donors<\/a>\u00a0who promise to give away an asset to charity after death. So far, there has been no positive response from the government, but advisers believe the possibility remains open.<\/p>\n Philanthropy offices in Britain\u2019s private banks agree that favourable tax treatment alone will not change the culture. Coutts says this is partly due to the tradition of charitable donations, differing tax systems and the sophistication of US fundraising schemes.<\/p>\n Several high-profile individuals are now trying to promote philanthropy in the UK through a campaign titled Legacy 10. \u201cWe think that, in the years directly after the financial crisis, donors were still honouring pledges they had made in the years preceding it,\u201d says Beth Breeze from the Centre for Philanthropy, Humanitarianism and Social Justice at the University of Kent. \u201cNow we see donors approaching things a little differently.\u201d<\/p>\n In straitened times, charities are becoming more imaginative in their approach to fundraising.
\nThe government hopes to encourage greater charitable giving by introducing tax incentives for donors\u00a0\u2013\u00a0but wealth managers are unsure whether lower tax bills will reverse a decline in philanthropy.<\/p>\n
\nHowever, the complexity of implementing the rules could limit its impact, say tax advisers.
\nLaw firm Boodle Hatfield points out that the new inheritance tax rule will apply to just 3 per cent of estates. Other advisers, including PwC, have therefore asked whether there is a simpler way to encourage the wealthiest members of society to increase their giving.<\/p>\n
\nResearch in the government\u2019s philanthropy green paper, published last year, reveals the scale of the gap between levels of UK and US philanthropy. In the UK, individuals give on average 0.5 to 0.8 per cent of their investable assets to charity. In the US, investors give up to 3.5 per cent of their annual assets.<\/p>\n
\nIts aim is to persuade the wealthiest members of society to leave at least 10 per cent of their estates to charity.
\nSuch \u201cclubs\u201d are already established in the US, where mega-donors\u00a0\u2013\u00a0such as billionaire investor Warren Buffett\u00a0\u2013\u00a0encourage their peers to donate half of their wealth in their lifetime. But the impact of the economic slowdown is expected to maintain downward pressure on giving.<\/p>\n
\nSocial impact bonds, already used by public institutions to raise money from private investors, are being utilised by the charity sector to gain revenue.<\/p>\n