Gifts of endowment funds

Endowment funds are capital in nature and are gifted to charity to be retained as such and invested to generate an income for use at the charity’s discretion.
Gifts of investment assets may be made in-specie. Under current legislation, the deemed disposal is exempt from Capital Gains Tax in the hands of the tax-payer and the value is deductible from the individual’s gross income of that tax year. This is usually claimed by including details of the gift on the self-assessment Tax Return. This can be very useful for investors with large capital gains who are also making gifts from cash. By switching the gift to an investment, cash remains untouched and can be used for any purpose.

In order to qualify for Capital Gains Tax relief, the gift must be of approved charitable investments which include:

  • an investment in a charity common investment fund, common deposit fund or similar scheme

  • an interest in land, other than an interest held as security for a debt

  • shares or securities of companies listed on a recognised stock exchange, including AIM

  • units in an Authorised Unit Trust Scheme

  • shares in an Open-Ended Investment Company

A charity may ask a donor to sell the gifted investment on its behalf and the individual may still claim tax relief. Where this happens, the charity must make the request in writing to enable the donor to retain evidential records which may be presented to HMRC on request.

Furthermore, gifts to charities are exempt from and therefore immediately effective for Inheritance Tax planning purposes. It is important that records of all capital gifts are kept for future reference.

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