It has been a busy week.Governance Codes (Scotland and Ireland) as well as guidance for charities with investments have been launched. We will be blogging on these. But we have also been reading HMRC's consultation on the taxation of trusts. We look here at one comment in that paper that applies to charities. We will be updating on the wider aspects of the consultation in a separate blog on our personal law blog stream.
In the consultation paper HMRC says:-
"There are many circumstances throughout UK society in which trusts play a valuable role... Many charities are set up in the form of a trust, ensuring that funds and property can be protected and utilised for the benefit of a good cause."
The part in bold has historical truth. But for new Scottish charities, trusts are heading towards sharing characteristics with the dodo and, as have we blogged on before, Pluto (the former planet and now dwarf planet). Extinct (just about)and downgraded (probably should be).
We compile statistics each month on new charity legal vehicle choice. Here is a stark image of the 'unpopularity' of trusts. Of the 200 or socharities set up in the period 1 August to 31 October only 10 were trusts (and some might have been existing English trusts dual registering).
We struggle to see any advantage in selecting a trust as the preferred legal vehicle for a new charity. There are also a significant number ofexisting trusts'converting' to incorporated status (usually to become Scottish CharitableIncorporated Organisations (aka SCIOs)). Existing trusts should at leastconsider escaping the trust regime and becoming e.g.a SCIO.
Brodies charities team is top (band 1) ranked in independent legal directory Legal500 and singled out in Chambers High Net Worth as "renowned for charity law".
P.S. Trusts can be great in other (non-charities)situations where individuals, a family business or family wealthneed protection or retained within the control of a family. The benefits of a trust have (despite what some might think)little, if anything at all, to do with tax. Trusts areabout careful stewardship.
