Giving to overseas charities is an important part of the UK philanthropy landscape. We know many donors care deeply about causes in other countries and that supporting charities based overseas can be a direct and meaningful way to make a difference in the world.
However, donors making large gifts directly to overseas charities may miss out on tax benefits, have to deal with burdensome administration and need to undertake onerous due diligence processes themselves. In these circumstances a Donor Advised Fund (DAF) can help.
What is a Donor Advised Fund (DAF)?
A DAF is a philanthropic fund held by a registered charity such as The Charity Service which allows major donors to make a charitable donation, receive immediate tax relief and then recommend grants over a period of time (typically several years). Donors may choose to make further donations into their DAF to support their long term giving strategies. DAFs are a growing vehicle for charitable support in the UK due to the low administrative burden, immediate tax relief and flexibility they offer.
DAFs can be considered as a more straightforward alternative to establishing a charitable trust.
Can DAFs be used to make grants to overseas charities?
Yes. Many major donors use DAFs to facilitate their overseas donations. One advantage of this approach is that is allows donors to receive a tax benefit on their donation which may not be possible when making a donation directly to an overseas charity.
The donor also benefits from reduced administration as The Charity Service will liaise directly with the overseas charity including arranging appropriate bank transfers (there may be additional fees for overseas bank transfers). As with all grants made from a DAF the donor may choose to remain anonymous if they prefer.
The Charity Service also carries out due diligence on all grant recipients including those based overseas. This is part of our legal duty to ensure that funds held by The Charity Service are granted wholly for charitable purposes. Donors also benefit from this process as they have peace of mind knowing that grants made from their DAF will be used appropriately. Carrying out due diligence on charities based overseas can be challenging but The Charity Service has years of experience including working with charities based in regions experiencing conflict.[1]
Some of the overseas charities who have received grants from The Charity Service DAFs in recent years include The Acid Survivors Foundation who are based in Bangladesh and work to eradicate acid and burn violence and empower survivors, and the Applied Environmental Research Foundation, a biodiversity conservation charity based in India.
How does the process work?
Once a donor has opened a DAF and made their initial donation we will ask for their grant recommendations including any to overseas charities. At this stage The Charity Service undertakes thorough due diligence checks and should no concerns be uncovered we will arrange for the grant payments to be made. We will pass on any feedback from charity recipients to the donor. All DAF holders are allocated a relationship manager who will provide tailored reports and updates.
Occasionally we are unable to facilitate a grant to an overseas charity. This may happen should the due diligence process show that the grant may not be wholly used for charitable purposes (as defined in UK law). We may also be unable to make a grant payment if other serious concerns are raised during the due diligence process or if we are unable to make a payment due to banking regulations, for example if sanctions are in place. In these cases we will discuss options with the donor and may ask the donor to recommend an alternative charity to support.
The Charity Service also offers a philanthropy advice service where we can help donors to develop their giving strategy and identify potential charities to support, both in the UK and overseas.
For more information about opening a DAF with The Charity Service you can contact Rachel Tomlins, Head of Philanthropy at [email protected] or call our enquiries line on 0330 1330 780. We would recommend discussing your giving strategy including any initial intended overseas grants with us prior to opening a DAF.
[1] There is an additional due diligence fee for each grant made to overseas charities to reflect the increased workload
