Cross-border philanthropy

Philanthropy is a key element of the wealth plan of many ultra-high-net-worth individuals (UHNWIs) and their families. The methods used to further an individual’s charitable goals can vary from cash donations to establishing and running their own charitable organisation. In many cases, such activities may take in more than one jurisdiction, facilitated in part by new payment technologies, crowdfunding and new transaction structures.

This sub-topic aims to highlight some of the issues faced by UHNWIs with a UK connection in engaging in cross-border charitable and philanthropic activities, such as the regulation of charities, the UK taxation of charities and charitable donors, and money laundering and financial crime. In doing so, it draws together cross-border content from the Charity and philanthropy, UK taxes for Private Client and International topics in Private Client—see Practice Note: Cross-border philanthropy—summary for more information.

Guidance on cross-border issues in general for private clients is available in the sub-topics: Cross-border planning (and private client), Cross-border estates and Charities in Scotland.

UK as a centre for cross-border philanthropy

The UK offers several advantages as a base for charities operating both within and outside its borders.

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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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