Part 13Tax avoidance
F1CHAPTER 8Tainted charity donations
Removal of reliefs and imposition of charge to tax
809ZMRemoval of income tax relief in respect of tainted donations etc
1
This section applies where a tainted donation is made by a person.
2
Where (ignoring this Chapter) income tax relief would be available in respect of the tainted donation, that relief is not available.
3
Where—
a
(ignoring this Chapter) income tax relief would be available in respect of an associated donation, and
b
entitlement to that relief is not withdrawn by subsection (2),
that relief is not available.
4
In this section—
“associated donation”, in relation to a tainted donation, means a relievable charity donation made—
- a
in accordance with the relevant arrangements, and
- b
by a person, other than—
- i
a qualifying charity-owned company in relation to that relievable charity donation, or
- ii
a relevant housing provider linked (within the meaning of section 809ZJ(7)) with the charity to which that donation is made;
- i
- a
“income tax relief” means relief under—
- a
section 63(2)(a), (aa) or (ab) of CAA 2001 (gifts of plant and machinery), so far as it applies in relation to income tax,
- b
Part 12 of ITEPA 2003 (payroll giving),
- c
section 108 of ITTOIA 2005 (gifts of trading stock),
- d
Chapter 2 of Part 8 of this Act (gift aid), or
- e
Chapter 3 of that Part (gifts of shares etc);
- a
“qualifying charity-owned company” has the meaning given by section 809ZJ(8) (except that paragraph (b) of that definition does not apply);
“relevant housing provider” has the meaning given by section 809ZJ(8);
“the relevant arrangements”, in relation to a tainted donation, means the arrangements by reference to which Conditions A and B in section 809ZJ are met.
5
Where entitlement to relief is withdrawn under this section in respect of a donation—
a
subsections (6) and (7) apply if the relief is under Chapter 2 of Part 8 (gift aid), and
b
subsection (8) applies if the relief is under Part 12 of ITEPA 2003 (payroll giving).
6
For the purposes of Step 2 in section 58(1), the donation is not a qualifying donation for the purposes of Chapter 2 of Part 8.
7
But—
a
the donation remains a qualifying donation for the purposes of—
i
Part 10 (special rules about charitable trusts etc),
ii
section 899(5) (meaning of “qualifying annual payment”),
iii
Chapter 2 of Part 11 of CTA 2010 (charitable companies: gifts and other payments),
iv
section 664 of that Act (community amateur sports clubs: exemption for interest and gift aid income), and
b
accordingly, section 414(2)(a) (donation treated as made after deduction of basic rate income tax) applies for the purposes of section 520(4) (income tax treated as deducted to be treated as income tax paid by charitable trust).
8
The donation remains a donation for the purposes of Part 12 of ITEPA 2003 for the purposes of—
a
section 521A (gifts under payroll deduction scheme: income tax liability and exemption), and
b
section 472A of CTA 2010 (gifts under payroll reduction scheme: corporation tax liability and exemption).
809ZNIncome tax charge where gift aid is withdrawn
1
Income tax is charged under this section if—
a
a person makes a tainted donation in a tax year,
b
(ignoring this Chapter) relief would have been available under Chapter 2 of Part 8 in respect of the tainted donation or an associated donation (“the gift aid donation”), and
c
the charity to which the gift aid donation is made is entitled to claim a repayment of tax in respect of that donation.
2
The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the gift aid donation (whether or not such a claim is made).
3
Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.
4
The persons are—
a
the donor in respect of the gift aid donation,
b
if different, the donor in respect of the tainted donation,
c
each potentially advantaged person under the relevant arrangements relating to the tainted donation, and
d
any charity to which the gift aid donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).
5
A charity falls within this subsection if the charity—
a
is or was party to the relevant arrangements relating to the tainted donation, and
b
was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.
6
No liability to income tax arises under this section in respect of a repayment of tax, if (and to the extent that) the repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.
7
In this section—
“associated donation” has the same meaning as in section 809ZM;
“linked person” has the same meaning as in section 809ZJ;
“the relevant arrangements” has the same meaning as in section 809ZM.
809ZOIncome tax charge where payment of trust income to charity
1
Income tax is charged under this section if—
a
a person makes a tainted donation in a tax year,
b
the tainted donation or an associated donation is a payment by the trustees of a settlement of income arising under the settlement (“the trust donation”), and
c
the charity to which the trust donation is made is entitled to claim a repayment of tax in respect of that donation.
2
The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the trust donation (whether or not such a claim is made).
3
Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.
4
The persons are—
a
the trustees of the settlement who made the trust donation,
b
if different, the donor in respect of the tainted donation,
c
if section 628 or 630 of ITTOIA 2005 (gifts from settlor-interested trusts etc) applies in relation to the income out of which the trust donation is made, the settlor in relation to the settlement,
d
each potentially advantaged person under the relevant arrangements relating to the tainted donation,
e
any beneficiary of the settlement who is party to those arrangements, and
f
any charity to which the trust donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).
5
A charity falls within this subsection if—
a
the charity is or was party to the relevant arrangements relating to the tainted donation, and
b
the charity was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.
6
No liability to income tax arises under this section in respect of a repayment of tax if that repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.
7
In this section—
“associated donation” has the same meaning as in section 809ZM;
“linked person” has the same meaning as in section 809ZJ;
“the relevant arrangements” has the same meaning as in section 809ZM;
“settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).
Pt. 13 Ch. 8 inserted (19.7.2011) (with effect in accordance with Sch. 3 para. 27 28 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 1