Charitable Trusts and Foundations

Our charity team specialises in helping individuals, businesses and charitable organisations set up trusts and foundations to ensure that funds are handled efficiently, in compliance with charity regulations and to maximise on taxation exemptions.

Who can set up a charitable trust or foundation?

Many individuals are surprised to learn that setting up of a charitable trust or foundation does not require a substantial amount of assets and will help their donations go further.

Companies who wish to help charities or worthy causes as part of their social responsibility remit find that foundations are an effective way of making tax efficient donations, whilst some charities use a trust to ring-fence a pot of money or fundraising campaign to help a specific project.

When establishing a trust or foundation, the main requirement is that the funds are set aside for a charitable purpose, which means it must be for public benefit and within the list of the twelve specific categories (e.g. relief of poverty and enhancement of education).

The initial endowment might be assets arising from an inheritance, the sale of shares or some other lump sum. The endowment can then be added to, in the form of regular payments or donations if required. There must be a minimum of £5,000 to create a registered charity.

What are the financial benefits?

As the trust or foundation is classed as a charity, certain tax benefits apply to funds. For example, it can receive money through Gift Aid, Payroll Giving or Gift of Shares, all of which attract tax reliefs.

Trusts are not liable for Corporation Tax, Inheritance Tax, Capital Gains Tax or Income Tax and, in most cases will not have to register for VAT. There also tax advantages for higher rate tax payers who can claim back tax relief on any donations they make.

Is a trust or foundation easy to set up?

A charitable trust or foundation is a legal entity, so it is important to seek specialist legal advice to ensure it is set up correctly and is able to properly fulfil its purpose.

You will need to appoint trustees. In some cases this can be family members, work colleagues or you may wish to appoint an external trustee, for example a solicitor, to help oversee its smooth running.

As a charitable trust or foundation, you will need to register with the Charity Commission. Once a year, you will then need to publish a formal report and accounts, including details of organisations or individuals who have received funds from your trust or foundation.

For advice and practical support on setting up and running a charitable trust or foundation, please contact our charity team.