Lianne Lodge offers tips to anyone looking to follow in the footsteps of JK Rowling (above) and set up their own charity
Despite cartoon caricatures depicting Scots as Scrooge-like with moths in their wallets where daylight rarely penetrates, the truth is that the average Scot is extremely warm-hearted, hospitable and generous.
This is borne out by the latest set of statistics on Scotland’s Rich List which shows that Scottish philanthropists gave almost £230m to charity last year.
Many of those who donate on a large scale do so through setting up their own charities or foundations, for example JK Rowling gave an incredible £10.3m through her two charities in the past year
I note this in my work and believe that it is a reflection of our evolving society. With corporate social responsibility becoming ever more important for businesses, and individuals more aware of the great work that charities do, increasing numbers of people are looking to share their financial achievements with society as a whole by setting up charitable foundations.
While this is an admirable intent and can make big differences to peoples’ lives in Scotland and further afield it is worth making sure the practicalities are covered prior to taking that step.
Increasing numbers of people are looking to share their financial achievements with society
Lianne Lodge
It is important to note that without registration with the Office of the Scottish Charity Regulator (OSCR) you cannot operate or refer to yourself as a charity in Scotland. Registration with HRMC is also required to allow the charity to benefit from the tax reliefs and exemptions available to charities. Such benefits can include no income tax or capital gains tax, reduced or no VAT in certain circumstances and, of course, the ability to reclaim gift aid.
In order to register with OSCR the charity must be established to benefit one of the charitable purposes defined in legislation. The list of these is wide-reaching including assisting those in poverty, ill health or promoting religion, education, sports, arts, environmental protection, culture, or animal welfare amongst other things. In addition, the proposed charity must be seen to provide a direct benefit to the public.
Interestingly, charities and funders are becoming more strategic about social impact and many now look for a figure for every £1 spend in terms of social return on investment.
OSCR Regulations are much more structured than the rules pre-2005 when the Charities and Trustee Investment (Scotland) Act was passed. While individuals can make whatever donations they want, charities cannot, as they must adhere to their constitution.
The charity should be set up in such a way to provide flexibility going forward. However, it must also be seen to be fair and objective within its charitable purpose. Equalities legislation means that any discrimination must be provided for in the charity’s founding documents. While on the face of it, it may seem unlikely that charities discriminate, consider if your charity is set up to help the elderly - you are discriminating against anybody below a certain age and unless your constitution specifically provides for that you will be falling foul of the equalities legislation.
It is a good idea to explore your options with a professional with experience in the area if you are considering setting up a charity as there are a host of options and associated benefits, although some options are more restrictive than others. None of the complexities should put you off as long as you obtain the right advice before embarking on the process.
Lastly, we should all be proud of the fact that Scots are demonstrating such a positive approach to helping others.
Lianne Lodge is associate at Gillespie Macandrew.
