Those with a philanthropic intent can use some simple planning techniques to dramatically increase the amount of funds available to go to a charitable cause as well as reducing the overall effective personal cost of making the charitable donation.
The client’s challenge
Many clients through poor advice may make charitable contributions which not only do not achieve any tax relief but furthermore could even trigger additional tax e.g. when offshore funds are deemed remitted to the UK.
The Deloitte approach
The US/UK High Net Worth (USHNW) team has extensive experience in advising on all aspects of charitable tax planning.
We will review a client’s portfolio and look to understand their charitable intent before modelling and agreeing with them an optimum gifting strategy.
Examples of the types of planning undertaken are listed below;
- Using offshore income and gains to fund UK deductible charitable gifts without causing a taxable remittance
- Gifting shares standing a gain, rather than cash, to avoid gain recognition but still achieve full income tax relief
- Making gifts through an intermediary public charity known as a ‘Donor Advised Fund’. This will often be qualified in both the US and UK allowing tax relief in both locations. The total tax relief in some circumstances can be almost doubled. Certain individuals may be able to obtain tax relief of around 80% on their net contribution. That is, for a net cash outlay of $100, they may be able to receive a total of $80 back from the US/UK governments in the form of tax relief and as a result of the way the UK gift aid scheme works, the charity is able to receive $125.
- Establishing a dual qualified charitable foundation to be run by the client and/or their family.
- Obtaining tax relief in other jurisdictions within the EU and not just the UK.
- Reviewing charitable bequests as part of an estate plan to ensure that UK IHT or US Estate tax is not unintentionally triggered.
Who can benefit from our services?
The above services, especially the use of a US/UK dual qualified charitable structure, should not just be considered by US citizens but anyone who has large US and/or UK tax liabilities. This might include remittance basis taxpayers with US effectively connected income, UK resident taxpayers with US effectively income received through an LLC/S-Corp, and/or UK resident taxpayers with US effectively connected income in high tax States such as California and New York. Even if there is not an immediate additional saving a dual qualified structure may provide an effective means for an individual to obtain UK tax relief while ensuring that the funds ultimately go to benefit a cherished cause in the US which might not otherwise qualify for relief.
Should you have any questions regarding the benefits of charitable tax planning, please consult with one of the US/UK High Net Worth team.