Extending another helping hand

Written by: Chris Menon Posted: 26/07/2018

BL57_philanthropyThe Channel Islands have a long track record in philanthropy, but will the creation of a Charities Register in Jersey take that one step further?

For many high-net-worth families across the globe, deciding whether and how to engage with philanthropy is an important and highly personal matter. For some, it’s enough to donate time and money to established and well-known charities such as Oxfam, whereas others prefer to establish new structures.

It’s an area of interest that’s growing rapidly. According to UBS’s Global Philanthropy Report released earlier this year, almost three-quarters of identified foundations have been established in the past 25 years.

It also cites a total of $1.5trn in global philanthropic assets and $150bn in annual philanthropic expenditures. By anyone’s reckoning, that’s a considerable amount of money going to worthy causes.

For those interested in establishing their own structure, the Channel Islands have long had a presence in philanthropy, mainly through trusts and foundations. 

As Zillah Howard, Partner at law firm Bedell Cristin, explains: “Trusts and foundations can be established for purposes that are technically charitable or for purposes more broadly philanthropic. This is important, as it means that a philanthropist can set up a structure to support causes he or she is passionate about, whatever they might be.”

Both trusts and foundations offer a measure of flexibility, which means individual philanthropists from wherever they are in the world can create structures on a bespoke basis, tailored to support particular causes that they are passionate about. They can choose the option that best suits their requirements, including the amount of control they want to retain over where the money goes. 

As you’d expect, the projects supported vary both in scope and focus. Howard cites the example of an international entrepreneur who established a Jersey law trust to provide donations to selected charities across the globe.

Natasha Kapp, a Partner in Carey Olsen’s Trusts and Private Wealth group in Guernsey, says: “The island attracts philanthropists who want to set up private structures, mainly aimed at social impact and social development projects. These are often worldwide projects or a number of projects in various areas. The Guernsey foundation and other structures sit underneath it to serve specific charities or projects set up in various countries.”

Kapp’s clients come from all around the world, including Bermuda, the US, South Africa and China. What’s more, the sums involved can be huge – there’s in excess of US$2bn in one single structure alone.

Reaping the rewards

Kapp is clear on the main benefits of using Jersey or Guernsey. “Both islands are highly experienced in administering high-value and complex structures,” she explains. “This same wealth of experience in the commercial and for-profit sector is what the clients desire to be applied in administrating charitable and philanthropic structures.” 
 
She adds that the relative ease of setting up a structure from regulatory and tax perspectives is also attractive. According to the Jersey Financial Services Commission (JFSC): ‘Jersey provides a tax-neutral environment for running philanthropic structures. Certain structures are exempt from income tax and goods and services tax (GST) in Jersey, provided they meet the requirements that have been set out in the Charities (Jersey) Law 2014.’

Political stability, a well-respected and independent judicial system, not to mention a central time zone and close proximity to London are further factors making the Channel Islands attractive jurisdictions.

Exact figures for the number of philanthropic structures set up in the Channel Islands aren’t easy to come by, but the JFSC says the number of foundation structures registered in Jersey grew by nine per cent to 269 in 2017. Moreover, its spokesperson adds: “Anecdotally, the finance industry estimates that around two-thirds of these foundations are established with a philanthropic purpose.”

Jersey has £400bn in trusts established by private individuals, according to figures from Capital Economics – and while it’s unclear how much of this will be for philanthropic purposes, some of that money will be used for good causes. 

Charitable causes

On 1 May, Jersey introduced a Charities Register, which stipulates that to be considered a ‘charity’, a philanthropic venture must also deliver a public or community benefit (see boxout).

There’s been much talk about how the register will increase the amount of philanthropic work in Jersey. Understandably, the JFSC is upbeat, saying: ‘The introduction of a Charities Register is part of a series of innovative legislative enhancements which will bolster our jurisdiction’s reputation for globally focused philanthropy and cement our position as a forward-thinking centre for private wealth management.’

Certainly, Carey Olsen’s Natasha Kapp believes that it will make a difference. “Charities and philanthropies often want a public profile and legitimacy associated with a register,” she says.

Jo Le Poidevin, Executive Director at the Lloyds Bank Foundation for the Channel Islands, reckons the register will enable the general public to give to charities knowing where and how their money is being spent, but she does have some worries. 

“There’s concern among some small, local charities about the amount of work involved with the Charities Register,” she explains. “This won’t be an issue for larger foundations and trusts that have the capacity to deal with the registration and other requirements. But small charities may need support so they can successfully register and continue to fundraise to deliver the vital services and support to some of our islands’ most vulnerable, disadvantaged and excluded groups.”

Perhaps it’s too early to know how great a difference the register will make. As Howard notes, it’s essentially just another option for benefactors to use. 

“The registration system introduced by the Charities Law is just one part of Jersey’s offering in relation to philanthropy, complementing the Trusts Law and the Foundations Law. It’s offering additional choice for philanthropists, enabling them to make the difference they want to make, in the way they want to make it,” she says.

And where exactly does this leave Guernsey? Well, it already has a register, with an option for Guernsey non-profit organisations and charities to be registered – they have to be registered if they’re not administered by a local licensee. Moreover, Kapp states: “Guernsey will certainly be looking at whether there’s a desirability to amend its legislation and extend the concept of charity to make it more attractive for charities and philanthropies to be established in the island.”

Clearly, the Channel Islands are already a very attractive option for high-net-worth families seeking to set up philanthropic entities, whether they qualify as charities or not. The hope is that the introduction of Jersey’s Charity Register will enhance this reputation.

Jersey Charities Register

BL57_philanthropy_AceofClubsFollowing reforms that had taken place in Scotland and England, Jersey made the decision in 2008 to examine how best to update its charity law. Consequently, under the Charities (Jersey) Law 2014, provision was made for a public register of charities and a ‘charity test’ as a condition of registration.
   As a result, from May this year, any entity must seek registration if it wishes to be called a ‘charity’ and enjoy, or continue to enjoy, the current tax exemptions. In order to meet the ‘charity test’, any entity must show that it has only charitable purposes and demonstrate how it intends to provide public benefit in giving effect to them.
   John Mills, Charity Commissioner for Jersey, explains: “It’s important and good to promote Jersey as a centre for philanthropic structures, but I want to be cautious about promotional linkage between that goal and the Charities Law if such structures aren’t in fact going to be registered under the law and may not meet the charity test. The corollary is that I would urge those responsible for such things to seek registration, which would put any possible concerns to rest.”
   Mills adds: “I’m somewhat nervous at the casual use of one word or the other – charity, philanthropy – seemingly interchangeably. What’s charitable may well be or usually also be philanthropic, but the reverse may well not obtain. They are different, or can be so, and philanthropic structures in Jersey for which charity registration may be sought will succeed in that only if their purposes are wholly charitable.”
   Nevertheless, he is still convinced that the Charities Law is “another strong weapon in Jersey’s armoury of global regulation, which is the best way to attract the widest possible range of international business”.

 


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