Schedule 6, Finance Act 2010, provides a definition of “charity” for tax purposes. Charities and their donors are entitled to claim UK charitable tax reliefs if they meet certain conditions. These are, broadly:
- the jurisdiction condition (ie whether the charity is subject to the control of the courts of the UK, an EU Member State, Iceland, or Norway)
- the registration condition (ie the organisation must be registered by the Charity Commission for England & Wales, or satisfy equivalent requirements if required under the jurisdiction of another territory)
- the management condition (ie that the managers of the charity are fit and proper persons)
HMRC proposes, in a discussion paper published on 12 March 2014, to amend the definition of charity to explicitly exclude charities where the main, or one of the main, purposes of establishing the charity is to facilitate tax avoidance arrangements. HMRC is trying to find a legislative solution that would prove effective against extreme cases of abuse without risking concern to genuine charities. Two suggested approaches are outlined in the paper.
Feedback on the paper is requested by 11 April 2014.
To read the discussion paper click here.