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 non-UK bank account Transfer Charity’s 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 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 Adapt for other jurisdictions which provide for corporate charities limited by shares US Charity (501(c)(3) organisation) UK Charity (company limited by shares) 100% ownership donation

MONITORING UK Tax Reliefs restricted if overseas funding not monitored Organisational issues –Professional assistance from service providers –Funding agreements

Macfarlanes LLP 20 Cursitor Street London EC4A 1LT T +44 (0) F +44 (0) DX 138 Chancery Lane 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 GIBRALTAR PHILANTHROPY FORUM OWEN CLUTTON