Changing the charity definition for tax
purposes - government decision
Autumn Statement 2013 announced that legislation would be brought
forward to prevent charities being set up to avoid tax following
consultation with the sector.
HM Revenue & Customs (HMRC) has developed 2 alternative
legislative approaches to implement the Autumn Statement
announcement. Following informal consultation, HMRC published a
discussion paper seeking feedback to the 2 approaches. Based on
responses to that discussion paper and engagement with the sector,
the Government has decided not to legislate in Finance Bill 2014.
Feedback confirmed that the 2 approaches outlined in the paper would
have a disproportionate and unacceptable effect upon the charity
sector and legitimate donors. Possible damage to innocent charities
and our existing and new controls mean that changing the law is not
justified at this point.
HMRC already has a wide range of tools available to tackle
avoidance and has recently had considerable success in the courts in
challenging certain schemes. Recent changes in powers such as the
General Anti-Abuse Rule and the fit and proper person test for
charities, coupled with our new Accelerated Payments regime, will
provide additional deterrence.
The Government is clear that charity tax reliefs should not be
subject to abuse. HMRC will continue to monitor the situation and
maintain a dialogue with the sector in case there are developments or
new ideas are put forward. The Government will act if it becomes
clear that more controls are needed.