Fewer donors, larger gifts: trends in philanthropy and successfully navigating major giving

The most recent CAF UK Giving Report, published in March this year, had mixed messages for the fundraising community. While private donations were up in value terms (£15.4 billion in 2024), the total number of donors was down (nearly 4 million fewer than 2019), with particularly low numbers among younger people. In a wider context of declining public sector funding and surging demand for services, the need to leverage private support and to be attentive to donor motivations and preferences takes on particular importance.

Successfully navigating major giving has always had its challenges, as older benefactions often show. Those willing and able to make substantial donations will often have a clear sense of how their money should be spent and how their relationship with the benefiting charity should operate. The modern context can throw up some specific challenges, particularly where donors are increasingly international and may have shaped their expectations in other philanthropic environments and cultures.

This article looks at some of the common themes we are seeing when advising charities on major giving.

Recognition and reputation

It is common, and very natural, for a charity receiving a major donation to want to publicly acknowledge a donor’s generosity. A classic example is where a building is to be named after a donor in recognition of a significant contribution to meeting its costs.

While these arrangements are relatively common, it is important to remain alert to the reputational and tax risks associated with naming, and to ensure clear and open communication with donors regarding their wishes and expectations.

Reputational safeguards

The acknowledgement of a major gift will often create a public and longstanding association between a donor and a charity, putting both parties’ reputations at risk should the other (or those associated with them) become embroiled in public controversy.

In recent years, there have been several high-profile instances of charities seeking to distance themselves from donors who have been the subject of significant public censure. Donors are also increasingly alive to, and keen to mitigate, risks of this kind. As these relationships will often have been carefully cultivated over many years, these are not situations in which any donor or charity wants to find itself. However, parties navigating rough reputational waters will find it helpful to have a clear understanding of their legal position should such circumstances arise.

To help manage reputational risk, charities will wish to:

• Conduct satisfactory due diligence on the donor (and those closely associated with them), to identify any current or historic issues. Obviously, this cannot guard against new issues arising once the donor relationship has been established.
• Include anti-embarrassment wording in documents, enabling the charity to protect its reputation should serious issues arise.

While such wording is becoming increasingly common, it can be challenging to agree. A major donor will often have a public profile and reputation that they are equally keen to protect and may be concerned about falling victim to activism by the charity’s supporters and stakeholders without a fair and objective process being followed and reciprocal provisions being included. Balancing these interests typically requires careful negotiation and sensitivity to the perspectives of both parties.

Tax pitfalls in high-value giving

Major gifts can give rise to both direct and indirect tax considerations, depending on what a donor may request or be offered in connection with a gift.

• Gift Aid donor benefit rules. These rules place a cap on the combined value of any benefits that can be provided to a donor (or person connected to them) as a token of appreciation for a donation. HMRC guidance notes that naming a building or part of it will not be considered a benefit if the naming does not act as an advertisement or sponsorship for a business. However, it is important to note that other forms of recognition can be treated as benefits, such as providing free tickets to events.
  
  
• Tainted charity donations rules. These rules are based on a purpose test which considers whether arrangements (which are widely defined) associated with a donation were entered into with the main purpose of securing a financial advantage from the charity in receipt of the donation. If a donation falls foul of the rules, the donor will usually lose any tax relief to which they may have been entitled.
  
  
• VAT. Charities should take care to ensure that a major gift does not inadvertently become consideration for a taxable supply for VAT purposes. The VAT treatment of a gift is a complex area on which specialist advice is often required, but it will generally be desirable to emphasise the discretionary nature of any acknowledgement by the recipient charity.

If in any doubt, we recommend seeking professional advice on applying these rules to a major gift proposal at an early stage.

Structuring gifts for clarity and longevity

Increasingly, major gifts come with requests for more complex structuring. It is relatively common for donors with sophisticated personal and business affairs to be able to source funds from different entities, potentially across multiple jurisdictions. It is important to have clarity on which entity or entities are to make the gift, and to carry out suitable due diligence on those entities before funds are received.

The use of different funding entities can create uncertainty as to who is entitled to enforce rights or discharge obligations in relation to a gift. Where rights and obligations are expected to subsist for a significant period of time, charities should think carefully about which entity is involved and how to maintain the relationship with both that entity and the principal donor (noting the possibility that corporate groups may be restructured over the lifetime of a gift).

Rise of Donor Advised Funds (DAFs)

For some high and ultra-high-net-worth (UHNW) individuals, DAFs are an increasingly common part of the picture when it comes to structuring philanthropic giving, and can exist either instead of, or alongside, a separate registered charity.

A DAF in England and Wales will be a registered charity in its own right, and legal responsibility for distributing funds will rest with the DAF’s charity trustees rather than the donor. Donors “advise” as to how they want their donations to be used, and while the DAF controls the funds, a donor’s wishes will almost always be honoured.

The DAF market in the UK is becoming increasingly sophisticated. Where it used to be the case that most donations made via DAFs were unrestricted gifts to registered UK charities, some providers now offer more bespoke services for UHNW clients and may be willing to be involved in bespoke gift arrangements. Where this is the case, careful thought should be given to who the contracting parties are, and who should be able to enforce rights and discharge obligations.

International giving and "Friends of" entities

 Similar considerations may apply where an overseas charity is involved. For example, some UK charities with a significant overseas supporter base have associated overseas charities via which taxpayers in the relevant jurisdiction are able to donate in a tax-efficient way. Again, such organisations will usually need to demonstrate some discretion as to the application of any funds which they receive and consequently some careful thinking is often required.

Giving with conditions: EDI considerations

Donors sometimes request that donations are targeted towards certain categories of individual within a charity’s wider beneficiary class. Often these groups share one of the protected characteristics under the Equality Act 2010 (sex, sexual orientation, age, disability, gender reassignment, race, religion or belief, marriage and civil partnership, and pregnancy and maternity). For example, a gift to a charity to establish a fund to provide grants to further the education of individuals from a particular country or ethnic group, or who share a race or gender.

It is generally unlawful to discriminate on the basis of a protected characteristic, whether directly or indirectly. Such gifts will therefore usually need to satisfy one of the exceptions or justifications under the Act which render such discrimination permissible.

Charities will typically rely upon one of the following:

• The “positive action” exception, which is intended to address particular disadvantage, needs or underrepresentation.
• “Objective justification” where the discrimination is indirect.
• The “charities’ exception”, which permits a charity to limit its benefits to people who share a protected characteristic if certain conditions are met.

As the application of these rules in a major gifts context has not been tested by the courts, it is advisable to seek legal advice on the proposed terms of any major gift which potentially engages equality considerations so that discussions with a donor can be suitably informed.

Governance expectations from major donors

Related to this, in recent years, there has also been an increasing focus on internal governance, with donors keen to ensure that recipient charities have suitable policies in place in areas which are important to them, or which potentially give rise to a higher degree of reputational or regulatory risk. These might include policies on equality, diversity and inclusion (EDI or DEI), environmental, social and governance (ESG), and safeguarding. As these matters are increasingly politically sensitive, there is potential for discussions where they are engaged to require careful handling.

For larger projects where multiple donors are involved, donors may also expect to have some visibility or oversight in relation to other funders, both for reputational reasons and to ensure effective project governance.

Finally, some major funders are more closely scrutinising charities’ use of grants to ensure the effective delivery of public benefit consistent with general principles of charity law. This may read across into the philanthropic context in the form of greater scrutiny by donors of compliance with any terms attached to a gift and may form part of a general trend towards greater accountability and transparency regarding the use of gifted funds.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2025