TAX PLANNING AND FUNDRAISING FOR CHARITIES - 1st Edn.
Review by Mark H Robson
In recent years, much attention has fallen on charities in the United Kingdom, for various reasons. As the role of the public sector has declined, "contract culture" and competition between voluntary organisations (mostly charities) has resulted in a much more businesslike approach to raising funds. At the same time there has been increasing concern that the wide definition of "charity" under United Kingdom law is open to abuse, both from the point of view of tax law (resulting in the Finance Act 1986 changes) and of trust law (leading to the 1987 Woodfield Committee Report and 1989 White Paper). to add a third tier of complication, with the decline in rates of income, corporation and inheritance taxes, incentives to charitable giving through the tax system have declined in value: but correspondingly, new reliefs, most noticeably "payroll giving" donations by non-close companies and now "gift aid" have been introduced to compensate. Each new relief has its own complications.
In this rapidly and radically changing environment, it is essential that trustees and their professional advisers are aware of developments. For the Charity Commissioners themselves have indicated (in their 1988 report) that trustees - who must not receive any remuneration or other benefit from their efforts - may nevertheless be held personally liable for tax liabilities unnecessarily incurred, through failure to organise the affairs of a charity in the most tax efficient manner.
This is an esoteric world, but one to which Venables and Kessler have produced a remarkable gazetteer. The 15 chapters in the original volume are organised rather arbitrarily into three main parts, entitled "The Tax Background", "Fundraising" and "Tax-efficient Management of Charity". The supplement deals with Finance Acts 1989 and 1990, as well as updating and correcting the earlier material. Reading the work from cover to cover gives the impression of a systematic and exhaustive approach, with little repetition. The contents list is longer than the index, but with a full table of cases and statutes, this should serve as an excellent reference tool. It is however very much a barristers' book, and emphasises the particular interests of the authors. The theoretical consequences of Part XV for interest free loans are dealt with at what seems inordinate length, while the payroll giving scheme merits a single page. Several peripheral cases concerning non-charitable trusts are discussed, while (bizarrely) Morley-Clarke v. Jones is unmentioned. the discussion of what constitutes "expenditure" by way of background to section 506(4) is confused, and would have benefited from an accountant's contribution. But these are minor quibbles. From a personal point of view (not all would agree), the great merit of this work is the extent to which it provokes the reader to question. The authors are not afraid to state their opinions on particular points or cases, leaving the reader to fill in the steps from discussion to statute. For example, they state baldly in respect of Essex County Council v. Ellam: "It was held, perhaps surprisingly, that the sums paid were not annual payments." No doubt they credit their audience with a thorough reading of British Tax Review. Their livelihood does, after all, depend on not giving all away, and the book does not contain explicit tax planning suggestions - with one parenthetical exception. A delightful note from one co-author to the other has "[Not for publication: ... Could this also be the basis of a good scheme for giving the 'lender' a capital loss?]"!
All round, this is a challenging and magisterial book, which cannot be recommended too highly to practitioners having any dealings with United Kingdom charities. Value Added Tax is beyond its scope, but it is understood that the same authors hope to produce a companion volume on VAT and charities before long.
British Tax Review
(Sweet & Maxwell)
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