Government decides against charities anti-avoidance legislation
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.