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The Charity Tax Group raise concerns about proposed Laws relating to ‘tax-avoidance charities’…
17th March 2014
The Charity Tax Group (CTG) has suggested that there could be ‘unintended negative implications” for the wider charity sector of the proposed changes to the law to prevent charities being established to avoid tax.
HMRC propose to prevent charities from being recognised by HMRC if the primary purpose or result of its creation is to secure a ‘tax advantage’.
On the surface this is a reasonable proposal, but on closer examination the CTG have suggested:
“There were concerns that the scope of purpose in this approach, which could create doubt about the recognition by HMRC of private charitable foundations and corporate charitable foundations,” the paper said. “They felt this because, in these cases, it is arguable that one of the main purposes of establishing a foundation is the obtaining of a tax advantage, specifically gift aid and other reliefs on donations.”
“When consulted by HMRC on the draft legislation, CTG highlighted that a ‘tax advantage’ test could catch a charity established to seek money from donors and to claim repayments under gift aid to help fund its activities”.
“The draft legislation also failed to address a situation where a charity was established for genuinely wholly charitable purposes and then taken over with a motive to abuse the tax system.”
The deadline for responses to HMRC’s consultation is 11 April 2014. You will find the discussion paper here.
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