UK: Extending UK Tax Concessions to Foreign Charities – Breaking New Ground

Last Updated: 30 November 2010
Article by Jonathan Brinsden

New provisions introduced in finance legislation in 2010 stand to have a dramatic effect on the UK system for assessing entitlement to charity tax reliefs and exemptions, removing traditional domestic boundaries and opening up new opportunities for international philanthropic giving and cross-border activities by charities established outside the UK.

The evolution of the new provisions - the EU dimension

The new provisions were introduced in the Finance Act in April 2010. There was no prior consultation, but some changes to the tax system had been expected following a long line of developments in EU law.

Decisions of the Court of Justice of the European Communities (CJEC) have been upholding treaty principles of free movement of capital between member states of the EU, leading to a gradual erosion of restrictions on national charity tax concessions which had traditionally been defined according to domestic borders. These decisions have run alongside threatened infringement proceedings by the EU Commission, including a formal request to the UK Government in 2006 that it desist from similar discriminatory practices.

In January 2009, a decision of the CJEC in the case of Persche (C-318/07) made it clear that the principle of free movement of capital extended to removing undue restrictions on donor relief where a gift of goods was made across national borders to an organisation which would qualify as a charity had it been established within the donor's member state. The changes introduced in the Finance Act 2010 were designed to implement the Persche and earlier decisions into UK tax law.

The new provisions - Schedule 6, Finance Act 2010

When brought fully into force, the provisions will change the meaning of "charity" for most tax purposes under UK law so that a "charity" for these purposes will no longer be limited to organisations established within the UK, but can also extend to qualifying organisations across the EU and, at present, Norway and Iceland (but see further below).

This means that UK taxpayers can claim tax relief on donations to qualifying organisations and those qualifying organisations can claim equivalent tax reliefs and exemptions within the UK to those currently available to UK charities.

To qualify under the new provisions, an organisation, whether or not established within the UK, must satisfy 4 conditions:

  • it must be established for exclusively charitable purposes (as defined in English law);
  • it must meet the jurisdiction condition, i.e. be subject to the control of a UK court in the exercise of its jurisdiction with respect to charities, or the equivalent under the law of a relevant territory;
  • it must meet the registration condition by complying with any requirement to be registered as a charity in the relevant territory; and
  • it must satisfy the management condition, which requires that its managers are fit and proper persons.

    Fit and proper persons

    The management condition is a new requirement for UK charities and has attracted a significant level of controversy since the provisions were published. The introduction of this new condition seems to stem from concerns of HM Revenue and Customs (HMRC) over the potential for abuse in administering claims for a substantially enlarged group of potential claimants for tax reliefs. This seems to have led to the novel approach of determining the tax status of an organisation according to the propriety or otherwise of one or more individuals associated with that organisation. This is a complete departure from usual principles and is perhaps symptomatic of the price which may have to be paid for greater cross-border charitable activity while retaining valuable tax concessions.

There are further difficulties with the new legislation, e.g. what makes a person "fit and proper" is not defined in the provisions, thereby leaving it to the discretion of HMRC, whose interpretation has attracted much heated debate. Similarly, HMRC has taken a wide view of who within a charity is a "manager" for this purpose. This is important as just one "manager" being considered not "fit and proper" can jeopardise a charity's entitlement to tax reliefs and exemptions and hence, potentially, the charity's continued viability.

Applying to be recognised by HMRC

A foreign organisation wishing to take advantage of UK tax concessions can now apply to HMRC to be "recognised" as a "charity" for UK tax purposes. This involves completion of new forms (currently being revised) available on HMRC's website together with provision of relevant documents (such as the organisation's constitution) designed to enable HMRC to determine whether the 4 conditions are satisfied. Successful applicants will be able to qualify for UK tax concessions and gifts by UK taxpayers to such organisations can then qualify for gift aid relief. HMRC have indicated that they will publish a list of all successful applicants for easy reference by potential donors.

Does Schedule 6 go far enough? - Wider opportunities ahead

The new provisions are designed to comply with the principles established in Persche, but doubts have been expressed whether they go far enough to comply with the underlying treaty principles. For example, a formal request has been made to the Netherlands regarding its requirement that organisations must register in the Netherlands to qualify for charity tax reliefs. This is said to be discriminatory because the Netherlands law does not make provision for a donor to demonstrate that a recipient of his or her donation which has not sought to register nevertheless would qualify as a charity in the Netherlands. It is not clear, at present, whether the new UK regime would pass such a test.

But that is not the only doubt over whether the new test complies with EU treaty principles. Those principles prohibit not only restrictions on the movement of capital between member states, but also restrictions between members states and third countries, i.e. countries outside the EU. There is an argument, therefore, that the Schedule 6 provisions should be read to comply with treaty principles, so as to enable recognition of organisations established beyond the borders of the EU, Norway and Iceland. It seems it should be only a matter of time before that barrier is also toppled. In the meantime, the UK charities regime continues to provide a robust legislative framework for international organisations looking for a base within Europe.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.