UK: Charity Tax Update

Last Updated: 11 January 2011
Article by Nick Osler and Mark Wingate


Charity matters have been in the news lately as a result of both:

  • the conclusion of consultations begun under the previous Government:
  • the submission (13 October 2010) to the Economic Secretary to the Treasury of the report from the Gift Aid Forum and her response (dated 3 December 2010)
  • report and response available to view at ;
  • the publication (see ) of draft legislation (to be enacted in Finance Act 2011) reforming the much criticised substantial donor rules to:
    • target the legislation such that it only bites where there is a tax avoidance purpose (the current rules being too widely drafted such that innocent transactions can be caught); and
    • adjust the balance such that where the rules are breached the penalty will mostly fall on the donor rather than (as is currently the case) on the charity.
  • David Cameron's emphasis on the Big Society and the role the third sector and the development of a culture of philanthropy will play in this strategy (for a recent speech by the Culture Secretary Jeremy Hunt on boosting philanthropy see ).
  • The Office of Tax Simplification work on tax reliefs which will consider a number of charitable reliefs.

It should also be noted that charities are still coming to terms with the legislation passed in Finance Act 2010 which (without prior consultation or proper Parliamentary scrutiny) saw the introduction of a new definition of charity for tax purposes. To be eligible for charity tax reliefs, an entity must:

  • be established for charitable purposes only;
  • meet the jurisdiction condition - UK and EU charities and any other territory specified in regulations made by the Commissioners for HMRC (we know that it is intended that Iceland and Norway will be specified territories);
  • meet the registration condition; and
  • meet the management condition - the managers are fit and proper persons to be managers of the body or trust, with HMRC given discretion to deem that the condition has been met should it consider that (i) any failure has not been prejudicial to the charitable purposes of the body or trust, or that (ii) it is just and reasonable in all the circumstances for the condition to be treated as having been met throughout the period.

The management condition is highly controversial given the discretionary power it gives HMRC, and the fact that the regulation of charities should (for England and Wales) be within the remit of the Charity Commission. HMRC has issued guidance on the 'fit and proper person' test. There is a basic guide for charity managers available at and more detailed guidance available at .

Replacement of the anti-avoidance legislation which can apply where there are substantial donations to charities – Finance Bill 2011 draft legislation


Generally substantial donations to charities are a good thing and encouraged by the tax system. However, in 2006 the Government was concerned that improper advantage was being taken of the charity tax relief provisions. As such the onerous Substantial Donors Rules were introduced. Applying to transactions occurring on or after 22 March 2006 the rules were supposed to target charities controlled by a donor where:

  • the charity was used as a personal money box; and
  • the actions of the charity and the donor are in effect the same.

The actual legislation enacted, however, is far wider than this and has been described as 'ill thought through' and 'overly complicated' and can catch wholly innocent transactions. Where triggered, the Substantial Donor Rules impact on the tax position of the charity (restricting the usual reliefs from income tax and capital gains tax). Given self-assessment this means that bona fide charities cannot safely ignore the Substantial Donor Rules and the legislation has, therefore, increased the administrative burden on charities. Concern over the rules also has the potential to deter bona fide large donations to charity.

Overview of the Substantial Donor Rules

The Substantial Donor Rules work by classifying certain transactions between a charity and a donor as substantial donor transactions and penalising the charity where there are such transactions. The provisions are complex but, broadly any benefit received by the donor from the transaction will result in a restriction of the charity's income and gains eligible for tax relief by £1 for every £1 of benefit received by the substantial donor where:

  • there is a relevant transaction (defined on page 3);
  • the benefit deemed to arise to the substantial donor does not fall within the de minimis conditions such that it can be ignored; and
  • HMRC cannot be satisfied that the 'commercial reasons' defence applies (such that the transaction is classified as an exception).

For there to be a substantial donor transaction there must be a substantial donor and a relevant transaction. An individual, a trust or a company is a substantial donor in connection with a specific charity if their donations to the charity meet specified conditions or if the donation of anyone connected with them meets either of the specified conditions.

The specified conditions are relievable gifts to a charity of (i) £25,000 or more in any twelve-month period, or (ii) £150,000 (prior to 23 April 2009 the figure was £100,000) or more over a six-year period. The donor will be a substantial donor for the chargeable period in which these limits are exceeded and the following five chargeable periods. Note that in the first year the donor is caught, one has to consider transactions between the donor and the charity at any point in the tax year and not just from the time that the donor came within the substantial donor definition.

There are eight categories of relevant transaction:

  1. The sale or letting of property (not confined to land) by a charity to a substantial donor;
  2. The sale or letting of property (not confined to land) to a charity by a substantial donor.
  3. The provision of services by a charity to a substantial donor;
  4. The provision of services to a charity by a substantial donor (remuneration paid to a substantial donor is treated as non-charitable expenditure unless it is remuneration for services as a trustee which is approved by either the appropriate statutory UK charity regulatory bodies or a court).
  5. The exchange of property between a charity and a substantial donor;
  6. The provision of financial assistance by a charity to a substantial donor (and for these purposes financial assistance includes the provision of any loan, guarantee or indemnity).
  7. The provision of financial assistance to a charity by a substantial donor (and for these purposes financial assistance includes the provision of any loan, guarantee or indemnity).
  8. The investment by a charity in the business of a substantial donor (although not if the business is listed on a recognised Stock Exchange).

The review

A limited review of these rules was announced in 2008. The majority of responses to the 2008 consultation on these rules were 'critical of the current regime, stating that it is complex, insufficiently targeted, places a significant administrative burden on charities, prevents certain transactions from taking place and does not help foster an environment of giving between charities and their major donors'.

In the light of the highly critical responses received as a result of this consultation exercise it was announced, at Budget 2009, that there would be further informal consultation with charities based around amending the current legislation so as to introduce in Finance Bill 2010 an effective anti-avoidance purpose test. However, although a number of announcements were made at Budget 2010 relating to charity taxation, nothing substantive was said in respect of these changes, the HMRC website stating:

Informal consultation with stakeholders will continue on the proposed rules that will replace the substantial donors to charities legislation in the light of the extension of charitable tax reliefs to certain European organisations.

Whilst we have had three Finance Acts in 2010 the legislation replacing the Substantial Donors Rules will be enacted in Finance Bill 2011 with the draft clauses having been published on 9 December 2010 as part of the Finance Bill 2011 consultation process (responses due by 9 February 2011 with Finance Bill 2011 due to be published on 31 March 2011).

The draft Finance Bill 2011 legislation


The proposed draft legislation (referred to as the Tainted Charity Donations Rules) only applies where the donation is made on or after 1 April 2011. As drafted currently the legislation does not repeal the Substantial Donor Rules but rather disapplies them for donations made on or after 1 April 2011.

The Substantial Donor Rules are modified where an individual was a substantial donor prior to 1 April 2011 and on or after 1 April 2011 (i) he or she receives a payment from the charity; or (ii) any other payment is made by the charity which would be caught as a substantial donor transaction in connection with the pre 1 April 2011 substantial donor donation. The rules which currently would disallow the charitable expenditure are disapplied such that the charity will not suffer any detriment (the transaction not being deemed to have been tainted) where it is reasonable to assume that the charitable donation and the arrangement resulting in the payment are independent of each other.

There are a number of differences between the current Substantial Donor Rules (in point where donations are made on or before 31 March 2011) and the Tainted Charity Donations Rules:

  • The rules as set down within the draft legislation apply potentially to all donations such that there will be no new "substantial donors" after 31 March 2011. This means that there is no de minimis limit and a donation of any size can be a tainted donation.
  • At the core of the new provisions is a new anti-avoidance rule which is used to determine whether the donation is a tainted donation.
  • Where the Tainted Charity Donations Rules are triggered the primary burden falls on the donor.

The legislation itself is complex and will have to be studied in depth to ensure that it works as intended. In principle, however, the new rules should be more favourable than the current Substantial Donor Rules in that the purpose test should ensure that "innocent transactions" are not caught. As such where a bona fide substantial donation to a charity is contemplated which it is thought will fall foul of the current legislation waiting to make the donation until after 31 March 2011should be considered.

The following notes provide a brief introduction to the draft provisions.

The new anti-avoidance rule

The Tainted Charity Donations Rules will only apply where there is a tainted donation and there can only be a tainted donation where all three anti-avoidance rule conditions are met. The three conditions which must be met are:

  • Condition A: it is reasonable to assume that there is a connection between the donation made by a donor and arrangements (whether those arrangement were made , or made and implemented, before, after or on 1 April 2011) entered into between a linked person in connection with the donor and the charity which received the donation (or a connected charity). Put another way it is reasonable to assume that the donation would not have been made and the arrangements would not have been entered into independently of each other.
  • Condition B: receiving an advantage from the charity (whether the advantage is received directly or indirectly) for one or more linked person in connection with the donor was:
  • the reason for the linked person in connection with the donor entering into the arrangement; or
  • one of the main reasons for the linked person in connection with the donor entering into the arrangement.
  • Condition C: the donor is not a qualifying charity-owned company.

Condition A

For the purposes of condition A "linked person" is defined as (i) the donor; or (ii) any person who is connected with the donor at the relevant time.

Where the donor is an individual acting in a personal capacity the following individuals are connected with the donor:

  1. the individual's spouse or civil partner*;
  2. a relative of the individual;
  3. the spouse or civil partner* of a relative of the individual;
  4. a relative of the individual's spouse or civil partner;
  5. the spouse or civil partner* or a relative of the individual's spouse or civil partner
  6. the settlor in relation to a settlement of which the individual is a beneficiary;
  7. a person in his or her capacity as trustee where:
  • the individual is a settlor in relation to the settlement;
  • the individual is a beneficiary in relation to the settlement;
  • an individual with whom the settlor is connected is the settlor of the settlement;
  1. any partner in a partnership of which the individual is a partner;
  2. the spouse or civil partner* of any individual who is partner in a partnership of which the individual is a partner;
  3. a relative of any individual who is a partner in a partnership of which the individual is a partner;
  4. a company where the individual has control over the company or the individual together with persons connected with him or her has control over the company
  5. any person with whom the individual acts to control a company;
  6. any person acting on the directions of the individual or anyone in (l) to secure or exercise control over the company.

(*For the purposes of this legislation individuals living together as "common law" spouses or civil partners are treated as husbands and wives/civil partners.)

There are also specific definitions of connected person where the person is a corporate entity with the standard connected person definition being modified slightly by the Tainted Charity Donation legislation.

The "relevant time" refers to a period of time beginning with the earliest of three specified events and ending with the latest of the same three events. The three events being:

  • The time when the arrangements are entered into.
  • The time when the relievable charity donation is made.
  • The time when the arrangements are first materially implemented.

A charity is considered to be connected to another charity where there is a connection between the charities in relation to the structure, administration or control of either charity.

Condition B

Condition B will apply whenever it would be reasonable to suppose that the donation would not have been made if there was not also an arrangement which would result in one or more linked persons in connection with the donor receiving an advantage. For the purposes of the legislation the linked individuals who the arrangement will benefit are referred to as potentially advantaged persons.

Whilst not limiting the application of condition B it is stated that it will apply where an advantage will be received by a linked person in connection with the donor if:

  • The linked person entered into a transaction with the charity (or a connected charity) and the terms are (i) less beneficial to the charity; (ii) more beneficial to the linked person; or (iii) the terms are both less beneficial to the charity and more beneficial to the linked person.
  • The transaction is not of a kind that the charity would be expected to enter into if it were dealing at arm's length.

Transaction includes: (a) the sale or letting or property; (b) the provision of services; (c) the exchange of property; (d) the provision of a loan or any other form of financial assistance; and (e) investment in a business.

An advantage received by a linked person in connection with the donor will be ignored if:

  • The advantage does not breach the allowable benefit de minimis rules within the Gift Aid legislation applicable to individuals.
  • The benefit received does not breach the allowable benefit de minimis rules within the charitable donations relief legislation applicable to companies.

Condition C

For the purposes of condition C "qualifying charity-owned company" in relation to a relievable charity donation means a company which:

  1. is wholly owned by one or more charities, at least one of which is the charity to which the donation is made or a connected charity; and
  2. has not previously been under the control of, and does not carry out a trade or business previously carried on by, one or more of the following:
  • a potentially advantaged person;
  • a person who, at any time within the period of four years ending with the day on which bullet (1) was first satisfied, was connected with a person who is a potentially advantaged person.

Triggering of the Tainted Donation Rules

The two main criticisms of the Substantial Donor Rules were:

  1. That they could catch innocent donations that provided no real benefit to the donor.
  2. The substantial donor rules impacted on the tax position of the charity (restricting the usual reliefs from income tax and capital gains tax), not the donor (with a donor being able to benefit in full from income tax and/or capital gains tax relief).

As discussed above the first criticism is felt to be addressed by the new anti-avoidance rule which is designed such that it should only apply where the donation would not have occurred without there being arrangements designed to confer an advantage on a linked person in connection with the donor.

The second criticism is felt to be met by the new provisions shifting the burden such that where there is a tainted donation (or an associated donation – see below) the primary burden falls on the donor who is deprived of all income tax and capital gains tax reliefs (where the donor is a charity corporation tax benefits are forfeited). It is important to realise that the donor cannot benefit in any way from the tainted payment. Where income tax is in point this means that relief cannot be claimed on the gift and it cannot reduce the donor's adjusted net income for calculations such as the personal allowance claw back (or total withdrawal) where adjusted net income is in excess of £100,000)

The concept of an associated donation is touched on above. The legislation prohibits relief in respect of an associated donation in relation to a tainted donation in the same way as it does for tainted donations. An associated donation in relation to a tainted donation is defined as a relievable charity donation which is both:

  • made in accordance with the related arrangement (that is the arrangement without which it is reasonable to suppose the tainted donation would not have been made);
  • not made by a qualifying charity-owned company in relation to that relievable charity donation.

Where the donation is made by an individual under Gift Aid an income tax charge is triggered equivalent to the relief the charity would be entitled to claim (whether or not the charity claims the relief). The liability for this charge is joint and several as between:

  • The donor in respect of the Gift Aid donation (that is a donation associated with the tainted donation).
  • If different the donor in respect of the tainted donation.
  • Each potentially advantaged person under the relevant arrangements linked to the tainted donation.
  • Any charity to which the Gift Aid donation or (if different) the tainted donation is made or any connected charity where:
  • the charity is or was party to the relevant arrangements relating to the tainted donation; and
  • an officer of Revenue and Customs is satisfied that the charity was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements such that condition B would be met.
  • Where there is a payment of trust income to charity* any trust beneficiary who is party to the relevant arrangements relating to the tainted donation.
  • Where there is a payment of trust income to charity* and the trust is settlor-interested the settlor where he or she was not subject to income tax on the income paid to the charity.

*Where a charity is the beneficiary of a UK trust and is entitled to income under the terms of the settlement this is regarded as a charitable donation for the purposes of the Tainted Charity Donations rules.

There is a specific provision disapplying this tax charge where the repayment the charity can claim as a result of the tainted donation is made to HMRC under any other provisions of the Tax Acts (for example, if the charity is charged to tax on non charitable expenditure as a result of the donation).

Tainted donation means loss of tax reliefs for donor but not charity

As explained above a tainted donation (or an associated donation) will not qualify for tax relief in the hands of the donor. It will, however, qualify for relief in the hands of the charity for the purposes of specified reliefs such as Gift Aid, gifts under the payroll deduction scheme and the special rules with respect to the taxation of charitable trusts and companies.

Consequently where an individual makes a donation under the Gift Aid rules he or she must for the relevant tax year have paid income tax and/or capital gains tax equating to the basic rate of tax (currently 20%) on the gross aggregate amount of all gifts made by him/her under Gift Aid in that year.

This means that if the total amount of income tax and capital gains tax to which the donor is charged for the tax year is insufficient then regardless of whether the donation is tainted or not provisions are triggered to increase the donor's tax liability such that sufficient tax is paid to frank the charitable donation made. The first set of provisions seeks to increase the donor's tax liability for the year by withdrawing various personal income tax reliefs (such as the personal allowance). Where this is not enough to mean that the donor pays sufficient tax to frank the Gift Aid payments made in the tax year (that is there is still an insufficiency) the second set of provisions is triggered. This results in the donor's income tax liability for the year being increased by an amount equal to the insufficiency. For example a donor who had no income or gains in the tax year and made a £100,000 donation to charity which was caught by the Tainted Charity Donations rules would be seen as having made a gross gift to charity of £125,000. Since the individual would not have paid any tax in the year (having no income or gains) he or she would have to pay £25,000 to HMRC to frank the payment

The Gift Aid Forum Report

Report overview

The main thrust of Peter Fanning's Report was that Gift Aid was a success and that the success needed to be celebrated and built upon. There were a number of recommendations asking for Government campaigns or joint initiatives to celebrate Gift Aid and encourage charitable donations generally (the slogan 'giving is good; giving through Gift Aid gives more' being suggested) and a general call for more support for smaller charities.

Various requests for simplifications and improvements were also made. Specific requests were made for the following legislative changes:

  • couples to be allowed Gift Aid relief when only one of them donates;
  • Gift Aid relief to be extended to donations of goods or expenses; and
  • for payroll giving to be brought within the scheme.

The expiry date for transitional relief (the supplement given to charities to compensate for the drop in the basic rate of tax) was noted. The resulting drop in the income charities will receive was said to be equivalent to a cut of over 10% in the income charities received from HMRC through Gift Aid. This figure was qualified by going on to state that the amount was only around 2% of the cash flowing through Gift Aid. No recommendation was made to extend the relief though a number of representative bodies have called for such an extension.

A number of points were made with respect to simplifying the administration of the Gift Aid system with a call for the publication by the Government of a "work programme including a timetable for examining and ideally implementing the long list of reforms to the administration of the Gift Aid". It was suggested that the work programme should be published before the next budget and that the contents should be informed by advice from the Office of Tax Simplification (OTS), charities, fundraisers and professionals advising charities.

The following markers were laid down for the work programme:

  • the work programme should not consider proposals that will cause Gift Aid as a whole to be reclassified as public expenditure;
  • the work programme should give priority to reforms which remove the requirement for mandatory paper declarations, through for example, creating a standard Gift Aid database, ideally available to charities as a free download from the internet. This would remove paper from the system and will be of particular benefit to smaller charities;
  • the work programme should give priority to proposals for enabling higher rate taxpayers to redirect the relief on their donations to charities, thereby increasing the value of donors' gifts and their incentives to give; and
  • the work programme should schedule the start of work on arrangements to digitise Gift Aid including enabling charities to submit Gift Aid claims online and donors to make gifts using mobile phones.

The report also called for the disbandment of the Gift Aid Forum with a request for Ministers to consult with the tax profession to explore how tax professionals might donate their skills and time to help charities comply with and benefit from the Gift Aid system.

The report rejected the various proposals to modify Gift Aid relief by having charities reclaim the tax paid at a composite rate or tiered composite rate which would be higher than the basic rate (funded either through abolishing higher rate relief for donors or by government support) stating that "it is difficult to see how they would bring materially more money into the charities sector unless government pays more. However they will bring additional risks and costs".

Response overview

In her letter to Peter Fanning (available to view on the Treasury website) the Economic Secretary to the Treasury welcomed the report stating that: "There is much in your report that can be taken forward and I am keen to ensure that progress is made." However, the recommendations for reform to the Gift Aid legislation were all rejected.

The promotion of Gift Aid to both donors and charities and how best that could be done was something the Minister expressed herself as being keen to explore. She referred to a useful discussion she had with forum members and that she wanted to give some thought as to how to harness the positive suggestions made. She stated in her response that she was particularly interested in the proposals to explore how tax professionals might donate skills and time to help charities benefit from Gift Aid and wishes to discuss how best she could encourage firms to become involved.

There was also a more positive response to the suggestions for administrative reform. The Minister announced the creation by HMRC of a new Charity Tax Forum which is to have a wider membership and remit than the Gift Aid Forum and would play a useful role in progressing some of the recommendations in the report. I

n her response the Minister promised quick progress with respect to recommendations where guidance could be improved or clarified such as oral Gift Aid declarations, split payments and sponsored events. A general commitment was given that HMRC would engage with charities over how Gift Aid relief should operate where charities embrace the advancements in technology to develop new ways of enabling donors to give.

The Ministers response makes it clear that progress in areas such as online filing will be subject to HMRC resource constraints. Whilst falling short of online filing the availability in the New Year of "intelligent forms" for charities was trailed. With respect to the Gift Aid Database idea the following comment was made:

"There is strong support for a Gift Aid database which would have real advantages for charities. While HMRC is unable to fund the creation of a database it will be able to work with the sector to ensure any database created meets the legislative and audit requirements. I understand the Charity Tax Group is already exploring the development of a database."

On the issue of enabling higher rate taxpayers to redirect the relief on their donations to charities the Minister said that she had given instructions to HMRC to progress the matter as part of its work with the new HMRC Charity Tax Forum.

Whilst the report did not recommend the extension of the Gift Aid payment transitional relief the Minister addressed the issue as she had received other representations. She made it clear that there was no intention to extend the relief and that it will end on 5 April 2011. In explaining this decision she stated:

"Transitional relief was introduced to address a particular problem resulting from the change in the basic rate of tax and was always intended to be temporary. I recognise that many charities are finding it hard in the current climate but I don't think that extending transitional relief targets support effectively. At the Spending Review the Chancellor announced help to the voluntary sector though the £100m Transitional Fund. We believe this initiative will better target those charities in most need."


The Culture Secretary Jeremy Hunt gave a speech on 8 December 2010 to the European Association for Philanthropy and Giving Conference. The speech is instructive with respect to the Government's attitude to funding of the arts and philanthropy in general. The following key points were made:

  • The Government's emphasis on philanthropy is not about replacing state funding with private support but rather it is about a highly ambitious aim to combine the best of US style philanthropic support with the best of European-style public support.
  • The best model for financing the arts was one in which cultural institutions can count on a plurality and diversity of funding sources.
  • Philanthropy benefits the donor as much as the recipient:
  • Paying tribute to those with incomes of less than £26,000 who make up three-fifths of Britain's biggest donors.
  • Expressing a particular desire to see an increase in the proportion of their income which the wealthiest donate. In the speech he makes a comparison between giving in the US by those with incomes in excess of £150,000 and those in the UK and states that those in the US give eight times more.
  • He is introducing a brand new match-funding scheme to help different types of organisation (broadly £80 million of funding from the Lottery and the Department for Culture, Media and Sport to be used to match private donations with the aim that the combined level of arts funding resulting will be at least £160 million over four years and the hope that Gift Aid and smart targeting will result in even more being raised. The long term objective being that this scheme should lay down the foundations for what will eventually (a hundred year timeframe being mooted) grow into multi-billion pound endowments.
  • The Government was reviewing what it could do to have an impact on the whole spectrum of cultural philanthropy with a major new approach to be unveiled in the spring in a plan which would set down a cross-government strategy. Currently consideration was being given to ways in which the Government could:
  • Encourage philanthropy in every way possible such as:
    • Developing fundraising skills and capacity across the culture.
    • Removing barriers to giving.
    • Promoting and increasing planned giving, including legacy giving - with an ambition for the UK to become the first country in the world in which it becomes the norm to leave 10 per cent or more of one's legacy to charity.
    • Supporting the long-term development of endowments. Harnessing digital technology to boost philanthropy, building on the innovative work already done by many bodies. – Increasing giving from international donors.
  • Where donors are willing recognise and celebrate them as role models and in particular look at how the honours system can better recognise sustained giving at every level (not only amongst the wealthy).
  • Bolster corporate support for giving with it already having been decided that 2011 should be designated the year of Corporate Support for Giving (with a series of events planned).
  • Target assistance to organisations such that appropriate help is provided for the smallest organisations as well as the largest and for regional organisations as well as those in London.
  • Strengthening links between culture and other sectors which are supported through philanthropy, such as charities, community groups or social enterprises.

The work of the office of tax simplification

The Office of Tax Simplification (OTS) was launched on 20 July 2010 to provide the Government with independent advice on simplifying the UK tax system. The Chancellor asked the OTS to carry out two initial reviews – a review of all tax reliefs, and a review of small business taxation. The review of reliefs covers the following:

  • A specific deduction set out in legislation from taxable income or profits - for example, specific deductions from trading or employment income.
  • An allowance or a tax-free amount of income or gains – for example, the personal allowance for income tax or the inheritance tax threshold.
  • An exemption from the scope of tax – for example, cars are not subject to capital gains tax.
  • A reduction in tax due – for example double taxation relief.
  • A tax credit – for example research and development tax credits for small or medium companies.
  • Zero rates – for example talking books for the blind
  • Reduced rates – for example on domestic fuel and power.

In November 2010 the OTS published a list of 1,042 reliefs, allowances and exemptions, applying to both businesses and individuals, within the taxes and duties administered by HMRC. The list of reliefs can be accessed at" . This list includes the various reliefs with respect to charities and charitable giving.

An initial interim report was published on 13 December 2010. The report considers 13 reliefs in detail and produces tables setting out:

  • The 74 reliefs that it is planned will definitely be reviewed in the final report.
  • The 75 reliefs that will be considered if time allows.
  • The 883 reliefs which will not be considered in any detail (note this includes two reliefs considered in the interim report in order to explain the evaluation criteria).

Of the 13 reliefs considered in detail in the interim report one is the general Gift Aid relief (the OTS concluding that this relief could potentially be simplified) and the other Millennium Gift Aid (the recommendation being that this relief be abolished).

In terms of the general Gift Aid relief the report focussed on the administrative burden to charities caused by the need to generate and retain donor records in order for charities to reclaim tax. The burden on HMRC resulting from having to police the system is also considered (twenty HMRC staff being dedicated to processing Gift Aid repayment claims). The suggestion is made that relief for charities should be automatic dependent only on evidence of donations. It is, however, recognised that this would mark "a major policy shift involving considerations of public expenditure categorisation".

Reference in the OTS report is also made to the suggestions made in the report arising from the work of the Gift Aid Forum (considered earlier in this briefing) and the commitment made by the Economic Secretary to The Treasury to act on a number of the recommendation and explore others. It is stated that the OTS will feed its comments into that process.

Millennium Gift Aid was introduced in FA 1998 to encourage charitable giving ahead of the millennium. At the time (as prior to FA 2000 Gift Aid relief could only be claimed on one off payments of at least £250) it widened the scope of donations that qualified for Gift Aid such that between 31 July 1998 and 31 December 2000 UK resident individuals could claim Millennium Gift Aid Relief on cash donations of £100 of more (which could be paid by instalments) to participating charities for use in education and antipoverty projects in the world's poorest countries.

Whilst the OTS recognises the valid policy objective behind Millennium Gift Aid relief it is suggested that the relief be abolished on the basis that

  • the relief expired in 2000; and
  • in FA 2000 Gift Aid relief was extended generally so that there is no minimum donation necessary to qualify for relief meaning the need for the special relief no longer exists.

In terms of the 74 reliefs the OTS intends to consider in its final report the following reliefs concern charity taxation and reliefs for charitable giving:

Tax or duty

Relief Title

Statutory Reference

Income tax

Charities – transitional relief on distributions

F(2)A 1997 s 35

Income tax

Payroll giving 10% supplement

FA 2000 s38

In terms of the 75 reliefs the OTS would like to consider in its final report if it has the time the following reliefs concern charity taxation and reliefs for charitable giving:

Tax or duty

Relief Title

Statutory Reference

Income tax and corporation tax

Gifts of qualifying investments to charities

ITA 2007 Part 8 Chapter 3; CTA 2010 Part 6 Chapter 3

Income tax and corporation tax

Gifts of trading stock to charity

ITTOIA 2005 s 108; CTA 2009 s 105

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.

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  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions