MARKET COMMENT
Red Nose Day: Giving Shares To Charity

By Cliff D'Arcy
March 13, 2003

Tomorrow is a truly momentous day. It's the anniversary of Albert Einstein's birth in 1879 and the 58th birthday of Brummie comedian Jasper Carrott. Unhappily, it's also the day when I move up into the "35 to 44" age band on those annoying market research questionnaires!

Okay, turning to more important comic matters, tomorrow is Comic Relief's Red Nose Day, which the Fool is supporting. I'd urge you to "do your bit for charidee" by buying a "Big Hair Do Nose" from Sainsbury's or Oxfam, as well as fundraising in your local area or workplace.

In recent years, the Treasury has greatly improved the tax treatment of charitable gifts. In fact, the UK is now the most liberal environment for charitable giving in the world, which is great news for generous Brits.

What's more, those of you who are investors in shares can reward good causes in a fantastically tax-efficient way by giving stocks, shares and other investments to charity. When you give investments to charity, not only do you avoid paying Capital Gains Tax on any gain, you can also reduce your taxable income by the amount of the gift. Pukka!

For example, say you give shares worth £1,000 to Comic Relief. This reduces your tax bill by £400 if you pay higher-rate tax (£220 if you pay standard-rate tax). Also, if your shares carried a capital gain of £500, you could save a further £200 in CGT (£110 for a basic-rate taxpayer). So, in this example, a gift of £1,000 could cost you as little as £400. Here's another practical example.

So, if one of your shareholdings has done well, you could give some of it away, pay less tax and get a warm glow of contentment. Result!

Alternatively, if you've got a few howlers in your portfolio (and many of us do!), you may find their values have fallen so far that they're no longer worth selling. In this situation, you can give your shares to ShareGift, which will roll up your shares with those from other donors before selling them (commission-free) and forwarding the money to charity.

Here are four easy ways to give shares to charity:

1. Open a Charity Account with the Charities Aid Foundation (CAF) and gift your shares to CAF. CAF then sells your shares and puts the proceeds into your Charity Account, allowing you to make donations to charities of your choice. This saves you paying a stockbroker's commission if you sold gift shares yourself.

2. Donate shares to CAF, naming the charity that you wish to benefit from the proceeds. For example, you could give your ailing Abbey National (LSE: ANL) or ICI (LSE: ICI) shares to Comic Relief via CAF at no cost to you.

3. Sell your shares to CAF at less than their market value. CAF is happy to buy quoted investments from you, so long as the proceeds less the purchase cost paid to you (i.e. the gift) is at least £250. Also, the market value must be at least 25% higher than the purchase figure agreed with you. Essentially, you split the value of your shares with CAF in whatever proportion you choose, keeping from 0% to 80% for yourself.

4. You could open a CAF Charitable Trust, which allows you to give long-term (even beyond your death). Normally, this requires a fund of £10,000 or more, so it's aimed at affluent generous types. Still, if you fancy yourself as a philanthropic fat cat (maybe the next Andrew Carnegie), your name could live on in history...

So, if you've made or lost a fortune on shares, or just have a few spare shares lying around, you can save tax and help others by handing them over to charity. You can donate shares that are held in a nominee account or in certificate form - and even if you've lost your certificate(s)!

So, please take a close look at your portfolio and decide what you no longer need or want. Who knows, those yellowing share certificates could make a big difference to vulnerable people at home or abroad.

Learn more: More charitable giving advice from the Fool | Charity Fools discussion board | All about giving shares | Order a share giving brochure from CAF