It’s common practice for businesses leaders and employees to maintain yearly charitable calendars that encourage employee participation, often in the form of monetary donations or community volunteering. While this is good practice, it can result in ad hoc charitable strategies, which for many companies is simply not enough.
It is for this reason that many businesses set up their own charitable foundations to formalise philanthropic programs and create unity behind a single good cause. Here are some of the other key reasons why you may want to consider establishing your own charitable foundation:
1. Tax Reliefs
There are common misconceptions around tax benefits gained from charitable giving, so here is a quick guide to how your business could benefit from establishing a foundation.
Reduction in taxable profits
If and when your company donates a percentage of its’ profits to the foundation, the amount given is then deductible from its total profits when calculating Corporation Tax.
Put into practice, suppose your company contributes £100,000 to the foundation every quarter, but your latest quarter has been particularly profitable. One of the ways you can bypass paying more tax is by giving some, or all of that profit to the foundation, thereby reducing your taxable income.
This gives business leaders an opportunity to predict and regulate the finances of both the company and its foundation by pre-funding charitable giving in highly profitable years, and down-spending in less profitable periods.
Tax relief through asset donations
Another method your company can gain tax benefits from a foundation is through the donation of appreciated assets such as land, property and qualifying shares.
In some cases, gifts can be deductible at fair market value. If the fair market value is more than the cost basis, the company can reduce their taxable income by the higher amount. For example, if a company paid £10,000 for a publicly traded stock that is now worth £30,000, they can donate the stock and reduce their taxable income by the higher amount.
2. PR & Branding
Because charitable foundations have historically been expensive to set up and maintain, only the largest reach the public eye thanks to the reputation of their founding company. The James Dyson Foundation, Ford Foundation and Robert Bosch Foundation are excellent examples.
This can be used to a company’s advantage. If consumers see that your company has its own associated foundation, they will perceive it as having strong governance, be well stewarded and have well-aligned and expressed values.
Trust and Empathy
It’s not just the perception of your company governance that’s impacted by a foundation, it’s also your personality.
More and more, consumers buying habits are dictated by the ethics of a company’s practices/products rather than more traditional factors such as functionality or cost. Therefore, it’s in business leaders’ interests to enhance their brand by creating a foundation that supports causes/charities their consumers can empathise with.
3. Structure & Measurement
A formal structure around philanthropy helps to prevent ad hoc, non-strategic giving. In the absence of this structure, donations may be made by various departments and from multiple budgets. The mere existence of a foundation also tends to encourage the development of goals and metrics that can be used to evaluate whether or not the philanthropy program is having its intended effect.
4. Ready to start your foundation?
GivingWorks provides the umbrella support that enables businesses of any shape or size to establish their own charitable foundation with minimal cost or hassle. Our team gives you an end-to-end administrative, legal, financial and reporting service that lets you focus on what’s important, the charitable activity.
Our extensive portfolio of client foundations and trusts enables you to easily connect with fellow philanthropists and hear their experiences, learn what foundation strategies work best and share your own goals with a group of likeminded business leaders.
Contact us today and we’ll help you establish your very own charitable foundation.
Disclaimer: Tax law and the basis of tax can change. You may need to seek advice from a tax adviser on tax-related matters. We can help suggest a suitable adviser if that is helpful. Please contact us for details.