4 February 2021
Money contributed to donor advised funds (DAFs) such as CAF has had UK tax relief, and often Gift Aid, claimed on it and as such has to remain compliant with UK charity law and HMRC guidance that govern how charitable funds may be used.
In short, DAFs can support non-UK charities however, the DAF provider has to carry out due diligence on every payment and the consequences of doing this incorrectly can be severe. The HMRC guidance can be found in Annex ii (see section 9) of their detailed guidance notes for charities.
Many people assume that it is acceptable to make payments to beneficiaries that are registered as charities in their home country, however HMRC states:
“It’s not sufficient for the charity [DAF] to simply establish that the overseas body is a charity under the domestic law of the host country. Nor is it enough to keep records of how things are spent. These are important but for overseas payments trustees must do more”.
One of the big advantages of managing your giving through a DAF is that it is the DAF’s trustees who carry the responsibility of complying with charitable law and regulatory requirements and many DAFs like CAF employ specialist teams to carry out this work.