UK charity tax reliefs are being extended to certain organisations which are equivalent to charities and Community Amateur Sports Clubs (CASCs) in the EU and in the European Economic Area (EEA) countries of Norway and Iceland, following a judgment in the European Court of Justice (ECJ) in January 2009.
A number of changes to the law and processes are being introduced at the same time. These will:
The document below aims to help answer the questions you may have about these changes from the perspective of a charity or CASC or a donor. If you have any queries not covered by this briefing, you can contact the HMRC Charities team
Legislation will be introduced to exempt trustees of certain trusts from Capital Gains Tax, Inheritance Tax and Income Tax. The trusts that will benefit are those set up on or before 23 March 2010 as part of an arrangement made by a company with its creditors and specifically to pay compensation to, or in respect of, individuals with asbestos related conditions. These changes apply from 6 April 2006.
New rules are being introduced to block tax avoidance schemes that exploit the rules for tax relief on gifts of qualifying investments to charities, effective from 15 December 2009. Qualifying investments consist of certain shares, securities and land.
Work will be undertaken over the summer of 2010 to examine how Inheritance Tax can be brought within the regime for the Disclosure of Tax Avoidance Schemes (DOTAS).
Amongst other things, this will examine whether appropriate descriptions (known as hallmarks) that govern what must be disclosed can be developed in an Inheritance Tax context. The Government recognises that any DOTAS regime would need to address avoidance in a way that works efficiently for all concerned.
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 (see the announcement Extending UK charity tax reliefs to certain organisations in Europe ).
The Government announced today that it would defer, to the autumn, its response to the 2009 consultation on charity pooled funds to consider how to better regulate them whilst preserving existing tax reliefs. They are currently authorised and regulated by the Charity Commission (CC).
The Income Tax adjustment mechanism for those who are taxed on the income arising to a trust they have set up (settlor-interested trusts) will be amended from 6 April 2010. The adjustment mechanism ensures that the same income is not taxed twice and that the settlor neither gains nor suffers a loss. In relation to the trust income, the settlor is entitled to recover from the trustees the amount of any extra tax he need pay and must pay over to them any repayment received in respect of an allowance or relief above that which he could otherwise have obtained. Legislation will be introduced as soon as possible in the next Parliament to extend this to all repayments of tax obtained by a settlor in relation to trust income; for example, where he is liable to Income Tax at a lower rate (say 40 per cent) than the trustees (50 per cent from 2010-11).
