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.