Can a charity registered in England and Wales make a substantial donation to a charitable organisation based overseas?
Charity trustees occasionally need to consider whether it is within their powers to make a substantial donation to an organisation based outside of their jurisdiction. The first step in the decision-making process must be to ensure that the purpose of the donation fits within the objects of their charity.
Generally, in a donation to a charity regulated by the Charity Commission (those subject to the laws of England and Wales), the obligation on the donor charity is merely to ensure that the donation has been paid to and received by the donee charity. The recipient charity is obligated to ensure that the grant is properly applied.
The same is not true where the charity makes a donation to an organisation based overseas. When donating to an organisation based overseas, the onus is on the English trustees to ensure that the funds are applied as intended. The trustees would be expected to carry out due diligence on the overseas organisation, its history, its directors/trustees and to understand the legal and regulatory regime in which the overseas organisation operates.
In addition, the trustees would be expected to put in place contractual obligations with the overseas organisation to ensure that the funds are applied solely for purposes that would be charitable in the UK. A degree of subsequent monitoring and supervision by the donor charity would also be expected to ensure the donation was properly applied.
Charitable expenditure is subject to monitoring by HMRC and evidence of rigorous controls on expenditure is essential to protect the charity from potential future tax liabilities should HMRC raise an enquiry into the charity’s expenditure.
In cases where it is not clear that the donation would be considered to be charitable, HMRC will help the trustees, on the basis that it is made fully aware of all the facts.
There is no formal requirement to secure clearance from either the Charity Commission or HMRC before making a donation to an organisation based offshore. However, such a clearance can be useful.
For more information, please contact Leo Joyce.