Transatlantic Gifting in the UK

By Jeff Hedges, Partner and Financial Advisor

 

In these difficult times, charities are struggling to raise funds and we want to do what we can to help them through donations and by other means.

Americans have a long history of philanthropy and in 2019 individuals and corporations donated over $449.64 billion1.  As expatriates we continue to support our colleges, schools and favourite charities in the US as well as UK based organizations.

How can American expatriates maximize their trans-Atlantic gifting?

Firstly, anyone paying income tax in the UK qualifies for Gift Aid Reclaim on gifts to qualified UK charities.  This increases the value of a gift by 25%.  In addition, donors paying UK taxes at the Higher (40%) or Additional rate (45%) can reclaim the amount of the tax paid above the basic 20% rate on their UK tax declaration.  Unfortunately, as Americans are taxed on their worldwide income, the IRS does not recognize gifts made to overseas charities as tax deductible.  Therefore, a donor needs to use a dual qualified UK-US charity to obtain the tax benefits in both jurisdictions.

 

Second, the mirror problem exists for American residents who may want to continue supporting UK charities with whom they developed a relationship during a stay here.  American residents can give directly to a non-US charity but do not receive a tax deduction.  Others who may have Donor Advised Funds (DAFs), for example, with Fidelity or Vanguard, are normally not allowed to recommend gifts to non-US registered charities.  Once again, a dual qualified charity can be of assistance.

Finally, two often overlooked gifting techniques are to apply for corporate matching gifts and gifting through salary sacrifice if one’s employer is amenable.

65% of Fortune 500 companies match charitable gifts and this can represent an uplift of as much as $3 billion annually.   General Electric (US) was the first company to match donations in 1954.  Microsoft will match up to $25,000 annually.  During the pandemic, some firms have made their programmes more generous than usual.

Some firms will allow the employee to make a salary sacrifice and make a donation directly to a charity of their choice. The benefit to the firm is that it is not charged National Insurance (NI) on the amount sacrificed.  The employee reduces his taxable income and does not pay his share of NI.  This is a similar principle to making pension contributions.

Tanager works with the the Anglo-American Charity, a dual qualified UK-US charity (of which our partners, Alex Eichhorn and Jeff Hedges are directors), to help facilitate efficient gifting for our clients.  Other dual qualified charities include CAF America and NPT UK.  These charities assist donors in return for an administrative fee deducted from the donation.

If you are interested in additional information, please contact Jeff Hedges at jeff@tanagerwealth.com.

  1. https://givingusa.org/giving-usa-2020-charitable-giving-showed-solid-growth-climbing-to-449-64-billion-in-2019-one-of-the-highest-years-for-giving-on-record/
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