CONTENTS IN DETAIL
Disclaimer i
Preface ii
Table of Abbreviations iv
Contents in Brief vi
Contents in Detail vii
Table of Cases xx
Table of Statutes xxiv
Table of Statutory Instruments xxxi
Table of Extra-Statutory Concessions xxxii
Table of HMRC Manuals and Charity Commission Publications xxxiii
CHAPTER 1
Definitions of “Charity”
Introduction 1.1
English charities 1.2
Charitable purposes 1.3
Scottish charities 1.4
Northern Ireland 1.5
UK tax definitions 1.6
Subjective intention of settlor irrelevant 1.7
Classification of charities for tax purposes 1.8
Temporary charities 1.9
Mixed charitable institutions 1.10
Foreign charitable objects of UK charity 1.11
Foreign charities 1.12
EU charities 1.13
Registration of charities and tax relief 1.14
Dispute over charitable status 1.15
Brief history of charity tax controversies 1.16
Policy reasons for reliefs for charities and donors to charity 1.17
CHAPTER 2
Taxation of Charity Income
Meaning of “income” 2.1
What income of a charity is taxable 2.2
Rate of tax on income if no relief applies 2.3
Tax exemption: claims and appeal procedure 2.4
Dividends, interest, etc: general conditions for relief 2.5
Dividends and other distributions 2.6
Interest, deeply discounted securities and unauthorised unit trusts 2.7
Annual payments and royalties 2.8
Property income 2.9
Industrial buildings 2.10
Life policies, annuities and capital redemption policies 2.11
Offshore funds 2.12
Trading income 2.13
Exemption from s.1016 ITA and Sch D Case VI income 2.14
Miscellaneous minor exemptions 2.15
Guaranteed returns on futures and options 2.16
Swaps 2.17
Public revenue dividends 2.18
Application for charitable purposes only 2.19
Accumulated income 2.20
Income invested in breach of trust 2.21
Tax avoidance motive 2.22
When must income be applied for charitable purposes? 2.23
Properly invested income later applied for non-charitable purposes 2.24
Which funds must be applied for charitable purposes? 2.25
Deemed income 2.26
Deduction at source 2.27
Registered Social Landlords 2.28
Proposal to give ESC B10 legislative effect 2.29
CHAPTER 3
Taxation of Charity Capital Gains
CGT relief for charity 3.1
Meaning of “charity” for CGT 3.2
Sale of property held by charity subject to mortgage to non-charity 3.3
Identifying the gain 3.4
When must gain be applied for charitable purposes? 3.5
Deemed gains 3.6
Section 13 TCGA 3.7
Property ceasing to be subject to charitable trusts 3.8
Allowable losses 3.9
Rate of tax on gains if no relief applies 3.10
CHAPTER 4
Charitable Expenditure and Substantial Donor Rules
Introduction 4.1
Charitable expenditure rules 4.2
Non-exempt amount 4.3
Attributable/relievable income and gains 4.4
“Non-charitable” expenditure 4.5
“Expenditure” 4.6
Payment to a foreign body 4.7
Approved charitable investments and loans 4.8
Investment 4.9
Meaning of “approved charitable investments” or “qualifying 4.10
Type 1 4.11
Other investments: IT Type 12 4.12
Meaning of “approved charitable loan” 4.13
Trading losses of primary purpose trade 4.14
Trading losses of non-primary purpose trade: charitable companies 4.15
Trading losses: charitable trusts 4.16
Timing of expenditure 4.17
Clearance procedure 4.18
Attribution to non-exempt amount 4.19
Non-charitable expenditure: the carry-back rule 4.20
“Substantial Donor” 4.21
“Relievable” gifts 4.22
Substantial donor transactions 4.23
Exceptions to “substantial donor transactions” 4.24
“If an officer of Revenue & Customs determines” 4.25
Operation of substantial donor provisions 4.26
Prohibited payment rule 4.27
Non-beneficial transaction rule 4.28
Position of substantial donor 4.29
Remuneration to substantial donor 4.30
Connected charity rule 4.31
Connected donor rule 4.32
Transactions before 22 March 2006 4.33
Commentary 4.34
CHAPTER 5
Value Added Tax and Fundraising
Scope of Chapter 5.1
Fundraising events 5.2
Meaning of “event” 5.3
Meaning of “charity” 5.4
“Primary purpose is the raising of money” 5.5
Exclusion of exemption if more than 15 events 5.6
Exclusion of exemption where accommodation provided 5.7
Exception for competitors 5.8
Extent of exemption 5.9
Avoiding exemption 5.10
Interaction with zero-rating provisions 5.11
Minimum charge and voluntary donation 5.12
No charge and a voluntary donation 5.13
VAT on admission charges 5.14
CHAPTER 6
Stamp Duties
Stamp duty land tax 6.1
The form of the relief 6.2
Eligibility for the relief 6.3
The conditions for relief 6.4
Withdrawal of relief 6.5
Stamp duty reserve tax 6.6
Non-charitable subsidiary of charity 6.7
CHAPTER 7
Trading by Charities
Trade carried on by charity 7.1
What is a trade? 7.2
Power to trade 7.3
Ascertaining the profits of a charity trade 7.4
Tax exemptions for trading income: summary 7.5
Primary purpose trade 7.6
Beneficiary worker trade 7.7
Lotteries 7.8
Application for purposes of the charity 7.9
Post-cessation receipts 7.10
Fundraising event 7.11
Small-scale trade 7.12
Tax planning for non-exempt trades: summary 7.13
Minimum charge and voluntary donation 7.14
Converting trading income into annual payments: use of trading 7.15
Franchising 7.16
Commentary: let’s extend the charity trading exemption 7.17
CHAPTER 8
Trading Companies Held by Charities
Trading companies - Introduction 8.1
VAT 8.2
Extracting profits by Gift Aid 8.3
Carry-back relief 8.4
Accounting records and accounting date 8.5
Estimated donation 8.6
Maximum permitted donation 8.7
Donation exceeding distributable profits 8.8
Furniss v Dawson 8.9
Financing the trading company 8.10
Returning Gift Aid payments to the company - circular
arrangements 8.11
Transfer pricing 8.12
CHAPTER 9
Business Sponsorship and Advertising
Introduction 9.1
When is business sponsorship a trade? 9.2
Primary purpose exemption for sponsorship income 9.3
VAT 9.4
Other points 9.5
CHAPTER 10
Corporate Charities: Special Topics
Corporate charity: group relief 10.1
Definition of close company 10.2
When is a charitable company close? 10.3
When is a subsidiary of a charity close? 10.4
Significance of charity being a close company 10.5
Charity a close investment-holding company (“CIC”) 10.6
Loan relationships 10.7
CHAPTER 11
Taxation of Employees & Beneficiaries of Charities
Taxation of employees of charities 11.1
PAYE and charities 11.2
Taxation of volunteers 11.3
Taxation of beneficiary of charity 11.4
CHAPTER 12
Extracting Value From Companies
Scope of chapter 12.1
Extraction of profits 12.2
Loans 12.3
Pre-acquisition profits 12.4
Extraction of assets from company: liquidation 12.5
Capital asset – no liquidation 12.6
Distribution of trading stock 12.7
CHAPTER 13
Acquisition of Companies
Scope of chapter 13.1
Charitable expenditure rules 13.2
Transactions in securities 13.3
“Income tax advantage” 13.4
The escape clause 13.5
The prescribed circumstances 13.6
Circumstance A 13.7
Circumstance B 13.8
Circumstance C 13.9
Circumstance D 13.10
Circumstance E 13.11
Acquisition of all capital assets – purchase and liquidation 13.12
Acquisition of part of company’s capital assets 13.13
Capital assets – extraction by dividend in specie 13.14
Extraction of capital asset – sale at book value 13.15
Asset held as trading stock 13.16
CHAPTER 14
Double Taxation Treaties
Introduction 14.1
Charities as “residents” of a contracting state 14.2
Charity as beneficial owner 14.3
OECD Model exemptions 14.4
“Subject to tax” 14.5
Dual qualified charity 14.6
CHAPTER 15
Cash Gifts From Individual to Charity (Gift Aid)
History of IT reliefs for cash gifts to charity 15.1
Gift “to a charity” 15.2
Qualifying donation 15.3
Payment (Gift Aid condition A) 15.4
“A sum of money” 15.5
Gift by will 15.6
Loan to charity 15.7
Release of debt owed to individual by charity 15.8
Charity pays sum to donor: circular payments 15.9
Volunteers’ expenses 15.10
Repayment rule (Gift Aid condition B) 15.11
“Gift” 15.12
Benefit rule (gift Aid condition F) 15.13
Meaning of “benefit” 15.14
Acknowledgement 15.15
Benefit “in consequence” of the gift 15.16
Contract to provide benefit 15.17
No contract to provide benefit 15.18
Gifts from parents to schools 15.19
Gift to support charity workers 15.20
Adventure fundraising events 15.21
Membership subscriptions 15.22
Benefit received by connected person 15.23
Split payment or gift with benefit? 15.24
Small benefits 15.25
Valuation of benefits 15.26
Charity auctions 15.27
Planning for benefits of uncertain value 15.28
Annualisation 15.29
Right of admission 15.30
Goods sold by charity as agent 15.31
Acquisition of property by charity (Gift Aid condition E) 15.32
Non-resident donor (Gift Aid condition G) 15.33
The minimum and maximum amount 15.34
Interaction of Gift Aid and VAT 15.35
Operation of Gift Aid relief 15.36
Donor paying insufficient tax 15.37
Gift to charity by remittance basis taxpayer 15.38
Position of recipient charity 15.39
Transitional Gift Aid Supplement 15.40
Payment to charity to pass on to another charity 15.41
Operation of Gift Aid relief: commentary 15.42
Payment deductible in computing income 15.43
Carry back of donor’s higher rate relief 15.44
Giving through the self-assessment return 15.45
Deposited donations (carry forward of relief) 15.46
Gift Aid declaration 15.47
Gift from joint bank account 15.48
Sponsored events 15.49
Interaction with payroll deduction scheme (Gift Aid condition C) 15.50
Record keeping and evidence of payment 15.51
Using envelopes to collect cash donations 15.52
Procedure for reclaiming tax 15.53
CHAPTER 16
Payroll Deduction Scheme
History 16.1
Operation of payroll deduction scheme 16.2
The agency 16.3
Conditions for relief 16.4
Benefit for donors 16.5
Interaction with other income tax reliefs 16.6
Employer’s administrative expenses 16.7
Comparison with Gift Aid 16.8
CHAPTER 17
Interest-Free Loans to Charities
Introduction 17.1
IT settlement provisions 17.2
Transactions associated with loans or credit 17.3
Capital gains tax liability of lender 17.4
Inheritance tax position of lender 17.5
Position of charity 17.6
CHAPTER 18
Cash Donations From Companies to Charity
Introduction 18.1
Relief for charges on income 18.2
Meaning of “charges on income” 18.3
Payment deductible in computing profits 18.4
Qualifying donation 18.5
Charitable company donor 18.6
Distributions 18.7
Record keeping 18.8
Position of charity receiving gift 18.9
CHAPTER 19
Giving by Businesses to Charity
Introduction 19.1
Gift to charity: deductible trading expense 19.2
Interaction of trading deduction relief and Gift Aid 19.3
Simple gifts v Gift Aid 19.4
Gift Aid from partnerships 19.5
Gift of services to charity 19.6
Secondment of employees 19.7
Gift of trading stock, plant and machinery 19.8
Lease to charity at undervalue 19.9
Gift of goods and services: VAT 19.10
Payroll deduction scheme 19.11
Sponsorship/advertising 19.12
CHAPTER 20
Income Tax Relief for Gift of Shares, Securities and Land to Charity
Introduction 20.1
Property law issues 20.2
The conditions for relief 20.3
The whole of the beneficial interest 20.4
Meaning of “qualifying investment” 20.5
Further provisions for gift of land 20.6
Anti-avoidance for gift of land: “disqualifying events” 20.7
Land in joint ownership 20.8
Amount of relief 20.9
Benefits deducted from the “relievable” or “relevant” amount 20.10
Incidental costs of making disposal 20.11
Net benefit to charity 20.12
Valuation 20.13
Disposal-related liabilities 20.14
QIDR position of donor 20.15
CGT relief for donor 20.16
QIDR: Position of the charity 20.17
Gift of investments v. gift of cash of same value 20.18
Gift of investments v. sale of investments and gift
out of proceeds 20.19
“Sharegift” services for uneconomic shareholdings 20.20
IT relief for gift of non-qualifying assets to charity via QIDR 20.21
QIDR solution to St Dunstan’s v Major 20.22
Record keeping 20.23
Commentary: Extension of QIDR to other assets 20.24
CHAPTER 21
Capital Gains Tax Relief on Disposals to Charity
The CGT background 21.1
CGT charity relief 21.2
Meaning of “charity” 21.3
CGT charity relief: position of donor 21.4
Meaning of “consideration” 21.5
CGT charity relief: position of the charity 21.6
Transfer from company in liquidation to charity 21.7
Disposal of qualifying corporate bond to charity 21.8
Planning: selection of assets 21.9
Gift followed by sale by charity 21.10
Gift of assets v. sale & gift of cash 21.11
Assets with inherent losses 21.12
Disposal from non-charitable trust to charity 21.13
CHAPTER 22
Inheritance Tax Reliefs on Transfers to Charity
Introduction 22.1
Promise to make transfer to charity 22.2
Dispositions allowable for income tax 22.3
Normal expenditure out of income 22.4
Brief history of IHT charity exemption 22.5
The IHT charity exemption 22.6
Meaning of “charity” 22.7
Foreign charities 22.8
Selection trusts 22.9
Date for determining charitable status 22.10
“Given to charities” 22.11
Anti-avoidance provisions: introduction 22.12
Application for charitable purposes rule 22.13
Postponed gift rule 22.14
Conditional gift rule 22.15
How to make a conditional gift to charity 22.16
Defeasible gift rule 22.17
Limited period rule 22.18
Retained interest rule (land) 22.19
Retained interest rule (non-land) 22.20
Entire interest rule 22.21
Gift to charity with gift over to another charity 22.22
Acquisition of reversionary interest or “settlement power”
From a charity 22.23
IHT charity exemption on termination of interest in
possession 22.24
Gift of interest in possession to a charity 22.25
Purchase of equitable interest by a charity 22.26
Meaning of “acquired for consideration” 22.27
Acquisition for consideration: transitional rules 22.28
Loans and use of property 22.29
Providing a home for dependant for life, remainder to charity 22.30
Providing fund for dependant for life, remainder to charity 22.31
Gift with reservation of benefit (“GWR”) 22.32
Charity transfers asset to disappointed beneficiary under
Moral obligation 22.33
IHT charity relief on transfer of value by close company 22.34
Deferred shares 22.35
Inheritance tax on charities and their members 22.36
CHAPTER 23
Will Drafting
Obtaining IT and IHT relief on gifts by Will 23.1
Residue to charity with provision for surviving spouse 23.2
Residue to charity with provision for surviving relative or 23.3
Estate including agricultural property or business property 23.4
Specific gifts of business property 23.5
Property subject to foreign IHT 23.6
Pecuniary legacy out of part business estate 23.7
Residuary gift to charity out of part business estate 23.8
Pecuniary legacy to charity out of part business
estates: the solution 23.9
Pecuniary legacies to avoid fragmentation of business
assets 23.10
Interaction of excluded property rules and charity
exemption 23.11
Cost of administration 23.12
CHAPTER 24
Charitable Gift of Share Residue: Benham Issues
The problem 24.1
An impermissible form 24.2
Terminology: gross v. net division 24.3
An express grossing up clause 24.4
Is an express grossing up clause wise? 24.5
The common form 24.6
Analysis of common form 24.7
Case law 24.8
What should executors and charities do? 24.9
The HMRC view 24.10
Moral for the Will drafter 24.11
CHAPTER 25
Obtaining IT and IHT Reliefs on Gifts by Will or IoV
Obtaining IT and IHT reliefs on gift by IOV 25.
Arrangements using Gift Aid 25.
QIDR 25.
Obtaining IHT and IT reliefs on gifts by will 25.
Gift of a non-cash asset to charity by Will 25.
Importance of correct Will drafting 25.
CHAPTER 26
Variation of Wills
Introduction 26.1
Meaning of “varied” 26.2
Absolute gift by will to individual: variation in favour
of charity 26.3
Will Trust to L for life, remainder to charity: variation of
life interest in favour of charity 26.4
Will Trust to L for life, remainder to R (not a charity):
variation in favour of charity 26.5
Variation after death of life tenant: conclusion 26.6
IoV when gift made to foreign charity 26.7
Capital gains tax and IoV 26.8
CHAPTER 27
Benefits for Donors
Scope of chapter 27.1
To gift or not to gift? 27.2
Sale of asset for periodic payments 27.3
Sale of asset for instalments of capital 27.4
Gift of home subject to right of residence 27.5
Provision for relatives and dependants: lifetime inheritance
tax 27.6
CHAPTER 28
Trusts with Some Charitable Element
Types of trust 28.1
Partly charitable trusts 28.2
Temporary charitable trust 28.3
Mixed charitable trusts 28.4
Settlor-interested trust 28.5
Trust income paid to minor children of settlor 28.6
CGT planning on sale of trust asset to charity 28.7
CHAPTER 29
Payments to Charity From Non-resident Trusts
Distribution to UK charity from non-resident trust 29.1
“Capital payment” 29.2
Is a charitable trust “a beneficiary” within s.87? 29.3
Does the charity exemption offer a defence to s.87? 29.4
Defence for foreign domiciled charities 29.5
Does a capital payment to charity reduce s.2(2) amounts of the
non-resident trust? 29.6
Schedule 4C gains 29.7
Does a capital payment fall within section 731 ITA? 29.8
Payment to foreign charity from non-resident trust 29.9
CHAPTER 30
Community Amateur Sports Clubs
Introduction 30.1
Definition of a CASC 30.2
Registration of a CASC 30.3
Exemptions for registered CASCs 30.4
Reliefs for donors 30.5
Commentary: let’s abolish the CASC regime 30.6
The VAT treatment of CASCs 30.7
CHAPTER 31
Rating Relief
Introduction 31.1
Terminology 31.2
Charity rating relief 31.3
The mandatory relief 31.4
Discretionary relief 31.5
Rating relief for places of public religious worship 31.6
Rating relief in Northern Ireland 31.7
Rating relief in Scotland 31.8
CHAPTER 32
Estates of Deceased Persons: CGT
Succession law background 31.1
Acquisition by PRs 31.2
Transfer from PRs to beneficiaries 31.3
CGT planning for PRs 31.4
CGT planning by IoV 31.5
Claims against charities 31.6
Claims under the Inheritance (Provision for Family and
Dependants) Act 1975 31.7
Claim against charity: Will of disputed validity 31.8
Claim against estate: proprietary estoppel 31.9
CGT allowable loss 31.10
CHAPTER 33
Estates of Deceased Persons: Income Tax
Introduction 33.1
Pecuniary legacy to charity 33.2
Income from specific legacy 33.3
Income from residuary estate 33.4
Absolute/limited/discretionary interest in residue 33.5
Payment 33.6
Charge on estate income 33.7
Estate income 33.8
Amount of estate income 33.9
Person liable 33.10
“Basic amount of estate income” 33.11
Assumed income entitlement 33.12
Charity exemption for estate income 33.13
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