The Benefits of Donating Shares to a DAF

As the year-end tax deadline approaches in the UK, now is a good time for your clients to consider donating appreciated shares to their donor-advised fund (DAF).

It is one of the most tax-effective ways your clients can be philanthropic. If the donated shares are HMRC qualified, your clients’ taxable income will be reduced by the market value of the qualifying shares in the tax year of the donation. They will also be free of capital gains tax.

There are multiple benefits to setting up and using a DAF:

Capital: Not all charities are able to facilitate gifts of shares, or any assets other than cash donations. However, a DAF Sponsor like NPT UK, can. With a DAF, your clients can donate other types of assets including appreciated shares, tangible assets like property or art, and alternative investments such as private equity and hedge fund interests. Once assets are donated to the DAF, they are liquidated for grantmaking to your clients’ chosen charities. By using a DAF to gift shares, your client can maximise their potential philanthropic capital, especially if the stock has appreciated.

Timing: A DAF can be set up in just a couple of days, with NPT UK taking care of due diligence and any additional administrational work. This may be useful if your clients need a timely structure before a tax deadline for example. For more information on how a DAF can work for your client, visit our What is a DAF page.

Convenience: Your client may like the idea of giving but be unsure about what causes or charities to support. With a DAF, a donor can ringfence capital, contributing shares to the account when it makes most sense from a tax-planning perspective, then deciding which charities to support when it suits them.

The tax incentives associated with donating appreciated shares to a DAF make this an appealing form of giving for many donors, and DAFs offer a convenient structure for making gifts of shares.

For more information about how giving shares can help your clients and their philanthropy, please contact us.

John Canady, CEO of National Philanthropic Trust UK, has 25 years of experience working across the business, nonprofit and government sectors. He specializes in creating and managing philanthropic funds for donors and family offices around the world who wish to base their philanthropy from the UK.

NPT UK does not provide legal or tax advice. This blog post is for informational purposes only and is not intended to be, and shall not be relied upon as, legal or tax advice. The applicability of information contained here may vary depending on individual circumstances.