Creating and running a charity

There are a number of methods of creating a charity from the large incorporated company to a local trust, perhaps set up under a will or to further a specific community aim. After the charity has been created, there are obligations that it must comply with emanating from charity law, company law and common law as well as from their own governing document.

Setting up a charity

Charities are established for a number of reasons—some for a one-off purpose and others for a long term project, possibly to fulfil a charitable need that is perceived to exist or to have missed by existing charities.

The following points will need to be considered when setting up a charity:

  1. objects—what is/are the purposes(s) of the proposed charity? Unless an institution is established for charitable purposes only, it will not be a charity. See: Charitable purposes—quick guide for further information about charitable purposes

  2. structure—there are a number of structures that are available. See Overview: Charitable and community companies for information about charitable companies, unincorporated associations, community interest companies, unregistered companies, co-operative and community benefit societies

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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