Top-up payments

1 Top-up payments in respect of small donations made to eligible charities

(1) A charity is entitled to a payment from HMRC (a “top-up payment”) if—

(a) the charity is an eligible charity for a tax year,

(b) 5the charity has made a successful gift aid exemption claim in respect of
gifts made to it in the tax year,

(c) small donations are made to the charity in the tax year, and

(d) the charity makes a claim in respect of small donations made to it in the
tax year.

(2) 10The amount of the top-up payment is—

(3) A charity is not entitled to top-up payments in respect of small donations made
to it in a tax year in excess of the maximum donations limit for the charity for
the tax year.

(4) The “maximum donations limit” for a charity for a tax year is—

(a) 20an amount equal to 10 times the gift aid donations amount for the
charity for the tax year, or

(b) if less, the specified amount for the charity for the tax year.

(5) The “gift aid donations amount” for a charity for a tax year is the amount of the
gifts made to the charity in the tax year and in respect of which it has made
successful gift aid exemption claims.

(6) The “specified amount” for a charity for a tax year is £5,000.

(7) 5This section is subject to sections 4, 6 and 9 (connected charities and charities
running charitable activities in community buildings).

2 Meaning of “eligible charity”

(1) A charity is an eligible charity for a tax year if—

(a) it has made a successful gift aid exemption claim in at least 2 of the
10previous 4 tax years, and

(b) the charity’s start-up period expired before that year.

(2) If a charity did not make any successful gift aid exemption claims in a period
of 2 consecutive tax years, any claim made in an earlier tax year is to be
disregarded for the purposes of subsection (1)(a).

(3) 15A charity on which a penalty has been imposed in connection with a gift aid
exemption claim or top-up claim made by the charity is not an eligible
charity—

(a) for the tax year in which the claim was made, or

(b) for the next tax year,

20(even if the penalty was imposed after the tax year in which the claim was
made).

(4) For the purposes of this section—

(a) a charity’s “start-up period” is the first period of 2 consecutive tax years
during which it is, at all times, a charity (as defined by section 18(1));

(b) 25“penalty” means a penalty under—

(i) Schedule 24 to the Finance Act 2007, or

(ii) regulations under section 11;

(c) a penalty is not to be regarded as having been imposed if all of the
penalty is suspended (or the decision that a penalty is payable is
30cancelled on appeal); but this does not apply to a suspended penalty
that subsequently becomes payable.

3 Meaning of “small donation”

(1) In this Act “small donation” means a gift made to a charity by an individual in
relation to which each of the conditions in the Schedule is met (but does not
35include a membership fee).

(2) But if a small donation made to a charity is applied to purposes other than
charitable purposes, or any part of the donation is applied to purposes other
than charitable purposes, the donation or part is to be treated as if it were not
a small donation.

(3) 40Subsection (2) does not apply to—

(a) the Trustees of the National Heritage Memorial Fund;

(b) the Historic Buildings and Monuments Commission for England;

(c) the Trustees of the British Museum;

(d) the Trustees of the Natural History Museum.

Connected charities and community buildings

4 Connected charities

(1) This section applies if two or more charities—

(a) are connected with one another in a tax year, and

(b) 5are eligible charities for the tax year.

(2) Section 1 applies to each of the charities in relation to the tax year as if
references to small donations made to a charity included small donations made
to any of the charities.

(3) The specified amount for the purposes of section 1(4) for each of the charities
10for the tax year is an amount equal to—

(a) £5,000, divided by

(b) the number of the charities which make a top-up claim in respect of
small donations made in the tax year.

(4) This section does not apply if any of the charities runs charitable activities in a
15community building in the tax year (as to which see section 9).

5 Meaning of “connected”

(1) For the purposes of this Act a charity is connected with another charity in a tax
year if it is connected with that other charity at any time in the tax year (as to
which see subsections (3) to (7)).

(2) 20If—

(a) a charity (“charity A”) is connected with another charity (“charity B”)
(including by virtue of this subsection) in a tax year, and

(b) charity B is connected with a further charity (“charity C”) in the tax
year,

25charity A and charity C are also connected with each other in the tax year for
the purposes of this Act.

(3) Section 993 of the Income Tax Act 2007 applies for determining whether a
charity is connected with another charity at any time for the purposes of this
section.

(4) 30In the application of section 993 for the purposes of subsection (3)—

(a) a charity that is a trust is to be treated as if it were a company (and
accordingly a person), including in this subsection;

(b) a charity that is a trust has “control” of another person if the trustees (in
their capacity as trustees of the trust) have, or any of them has, control
35of the person;

(c) a person (other than a charity regulator) has “control” of a charity that
is a trust if—

(i) the person is a trustee of the charity and some or all of the
powers of the trustees of the charity could be exercised by the
40person acting alone or by the person acting together with any
other persons who are trustees of the charity and who are
connected with the person,

(ii) the person, alone or together with other persons, has power to
appoint or remove a trustee of the charity, or

(iii) the person, alone or together with other persons, has any power
of approval or direction in relation to the carrying out by the
trustees of any of their functions.

(5) A charity that is a trust is also to be regarded as connected with another charity
5that is a trust at a time for the purposes of this section if, at that time, at least
half of the trustees of one of the charities are—

(a) trustees of the other charity,

(b) persons who are connected with persons who are trustees of the other
charity, or

(c) 10a combination of both.

(6) In determining whether a person is connected with another person for the
purposes of subsection (4)(c)(i) or (5)(b), apply section 993 of the Income Tax
Act 2007, with the omission of subsection (3) of that section (and without the
modifications in subsection (4) above).

(7) 15But a charity is not to be regarded as connected with another charity at a time
for the purposes of subsection (1) unless, at that time, the purposes and
activities of the charities are the same or substantially similar.

(8) The Treasury may by order amend this Act so as to change the circumstances
in which a charity is connected with another charity in a tax year for the
20purposes of the Act.

6 Charities running charitable activities in community buildings

(1) This section determines the specified amount for the purposes of section 1(4)
for a charity that runs charitable activities in one or more community buildings
in a tax year (see sections 7 and 8 for the meaning of certain terms used in this
25section).

(2) The specified amount for the charity for the tax year is an amount equal to—

(a) the sum of the amounts which, for each community building in which
the charitable activities are run, is the community building amount,
plus

(b) 30the remaining amount.

(3) The “community building amount”, in relation to a community building,
means—

(a) the sum of the small donations that are made to the charity in the
community building in the tax year by group members while it is
35running charitable activities in the building, or

(b) if less, £5,000.

(4) The “remaining amount” means—

(a) the sum of the remaining donations made to the charity in the tax year,
or

(b) 40if less, £5,000.

(5) “Remaining donations”, in relation to a charity and a tax year, means the small
donations made to the charity in the tax year other than any made to it in
community buildings in the tax year by group members while it is running
charitable activities in the buildings.

(6) “Group member”, in relation to a charitable activity run by a charity in a
community building, means a member of the group of people with whom the
charity is carrying out the activity.

(7) Section 9 modifies this section as it applies to a charity that is connected with
5another eligible charity.

7 Meaning of “running charitable activities in a community building” etc

(1) For the purposes of this Act a charity “runs” charitable activities in a
community building in a tax year if, on 6 or more occasions in the tax year—

(a) it carries out a charitable activity with a group of people in the
10community building, at least 10 of whom are in the class of people for
whose benefit the charitable activity is being carried out,

(b) the activity is of a kind that the charity makes available to the public or
a section of the public, and

(c) none of the group is required to pay to access the building, or the part
15of the building, in which the activity is carried out;

(and references to donations made to a charity “while” it is running charitable
activities in a community building are to be construed accordingly).

(2) For this purpose the people forming the group need not be the same on any
two of the occasions.

(3) 20The Treasury may by order amend the numbers for the time being specified in
subsection (1).

(4) In this Act “charitable activity” means an activity carried out for a charitable
purpose, other than primarily for the purpose of fund-raising.

(5) In this Act a reference to a “charity” that runs charitable activities does not
25include a registered club within the meaning of Chapter 9 of Part 13 of the
Corporation Tax Act 2010 that runs such activities.

8 Meaning of “community building”

(1) In this Act “community building”—

(a) means a building (such as a village hall, town hall or place of worship),
30or those parts of it, to which the public or a section of the public have
access at some or all times, but

(b) does not include any parts of a building excluded by subsection (2) or
(3).

(2) Any parts of a building that are used wholly or mainly for residential purposes
35or the sale or supply of goods are excluded.

(3) Any parts of a building that are used wholly or mainly for other commercial
purposes are excluded, except at any times when—

(a) a charity is carrying out a charitable activity in those parts, and

(b) the parts are available for use exclusively by the charity in carrying out
40the activity.

(4) Where a person holds a freehold or leasehold interest in land, any two or more
buildings on the land, or on any adjoining land in which the person holds such
an interest, are to be treated as a single building for the purposes of this Act.

(5) The Treasury may by order—

(a) provide for cases in which a building, or part of it, is or is not to be
treated as a community building or as part of a community building for
the purposes of this Act;

(b) 5provide for cases in which 2 or more buildings in the same vicinity are
to be treated as a single building for the purposes of this Act.

(6) Provision under subsection (5) may be framed by reference to a description of
building, the use to which it is put or any other circumstances; and the
provision may be framed so as to apply at all times or at certain times only.

(7) 10In the application of this section to Scotland—

(a) a reference to a freehold interest in land is to the interest of the owner,
and

(b) a reference to a leasehold interest in land is to a tenant’s right over or
interest in a property subject to a lease.

9 15Connected charities and community buildings

(1) This section applies if—

(a) two or more charities (“connected eligible charities”) are connected
with one another in a tax year and are eligible charities for the tax year,
and

(b) 20one or more of them runs charitable activities in a community building
in the tax year.

(2) Section 1 applies to each of the charities in relation to the tax year as if
references to small donations made to a charity included remaining donations
made to any of the charities.

(3) 25In relation to any of the charities that does not run charitable activities in a
community building in the tax year, the specified amount for the purposes of
section 1(4) for the charity for the tax year is an amount equal to—

(a) the capped total of remaining donations, divided by

(b) the number of the connected eligible charities which make a top-up
30claim in respect of small donations made in the tax year.

(4)
In subsection (3) “the capped total of remaining donations” means—

(a) the sum of the remaining donations made to each of the connected
eligible charities in the tax year, or

(b) if less, £5,000.

(5) 35But for the purposes of subsection (3), a charity that runs charitable activities
in a community building in the tax year is to be treated as not having made a
top-up claim in respect of small donations made in the tax year unless—

(a) its total claimed amount for the year, exceeds

(b) its community buildings amount for the year.

(6) 40In subsection (5)—

• “total claimed amount for the year” means the sum of the small donations
  made to the charity in the tax year and in respect of which it has made
  successful top-up claims;

• “community buildings amount for the year” means the amount that
  45would be the specified amount for the charity for the tax year under
  section 6 if the charity’s remaining amount for that year were nil.

(7) In relation to any of the charities that runs charitable activities in a community
building in the tax year, section 6 applies as if the charity’s remaining amount
were the specified amount given by subsection (3).

(8) “Remaining donations” has the meaning given by section 6(5).

5Overpayments and administration

10 Overpayments

If—

(a) an amount is paid to a charity under section 1, and

(b) the charity was not, or has ceased to be, entitled to it (because of section
102(3), 3(2), 4 or 9, or otherwise),

the amount must be repaid to HMRC.

11 Management of top-up payments

(1) Matters relating to top-up payments are to be under the management of
HMRC.

(2) 15HMRC may by regulations make provision—

(a) about the administration of top-up payments;

(b) otherwise for the purposes of fully implementing this Act.

(3) Regulations under subsection (2) may in particular—

(a) make provision in relation to top-up claims applying or incorporating,
20with or without modifications, any enactment that applies in relation to
gift aid exemption claims;

(b) make provision in relation to top-up payments applying or
incorporating, with or without modifications, any enactment that
applies in relation to repayments of income tax treated as having been
25paid;

(c) make provision in relation to overpayments applying or incorporating,
with or without modifications, any enactment that applies in relation to
amounts of income tax or corporation tax which are due and payable;

(d) make other provision applying or incorporating, with or without
30modifications, any enactment relating to the collection or management
of income tax or corporation tax;

(e) make provision postponing the determination of a top-up claim in
prescribed circumstances.

(4) The enactments mentioned in subsection (3) include, in particular,
35enactments—

(a) providing for the payment of interest;

(b) requiring the provision of information;

(c) conferring a power of entry onto land;

(d) providing for the imposition of a civil penalty;

(e) 40creating a criminal offence (including, in particular, offences relating to
the provision of false or misleading information or failure to provide
information);

(f) providing for enforcement of sums owed (whether by action on a debt,
by distraint against goods or in any other way);

(g) providing for appeals.

(5) A power conferred by subsection (3) to apply or incorporate a provision
creating an offence does not include power to increase the level of any
punishment for which a person may be liable on conviction for the offence.

(6) 5A power conferred by subsection (3) to apply or incorporate a provision
imposing a civil penalty does not include power to increase the maximum
amount of the penalty.

(7) In subsection (3) “enactment” includes—

(a) a provision of an Act passed after the day on which this Act is passed,
10and

(b) a provision made, or that may be made, under an enactment.

(8) In subsection (3)(c) “overpayment” means an amount to which section 10
applies.

(9) An amount calculated for the purposes of any provision of this Act is to be
15rounded to the nearest whole penny, taking 0.5p as nearest to the next whole
penny.

Miscellaneous

12 Charity mergers: new charity taking over activities of one charity

(1) This section applies if, on an application made by a charity (“the new charity”),
20HMRC certify that in their opinion—

(a) the new charity was created with a view to taking over all of the
activities of one other charity (the “old charity”),

(b) the new charity has taken over those activities,

(c) the purposes of the new charity are substantially similar to the
25purposes of the old charity, and

(d) more than half of the managers of the new charity were old charity
managers.

(2) For the purposes of determining whether a charity is eligible under section 2
for a relevant tax year—

(a) 30things done (or treated as having been done) by or in relation to the old
charity before the time of the merger (or after that time but in
connection with things done before that time) are to be treated as if they
had instead been done by or in relation to the new charity;

(b) the new charity is to be treated as if it had been a charity (as defined by
35section 18(1)) at any time, before the time of the merger, when the old
charity was (or is treated as having been) a charity.

(3) “Relevant tax year” means—

(a) if the old charity does not make a successful top-up claim in respect of
small donations made in the year of the merger, that year or any later
40tax year;

(b) otherwise, any tax year after the year of the merger.

(4) In deciding whether to issue a certificate under this section, HMRC must have
regard in particular to the extent to which the property of the old charity has
been transferred to the new charity.

(5) HMRC must issue such guidance as they consider appropriate about the
exercise of their functions under this section.

(6) Regulations under section 11 may in particular make provision—

(a) about the form and contents of applications under this section;

(b) 5imposing a time limit for the making of an application;

(c) for an application to require the consent of the old charity if it is in
existence at the time of the application;

(d) for appeals against a refusal to issue a certificate under this section.

(7) In this section—

• 10“managers” means the persons having the general control and
  management of the administration of a charity;

• “old charity manager” means a person who was a manager of the old
  charity immediately before the last of the activities of the old charity
  were transferred to the new charity;

• 15“time of the merger” means the time when the new charity took over the
  activities of the old charity (or, if that occurred over a period of time, the
  end of that period);

• “year of the merger” means the tax year in which the time of the merger
  fell.

13 20Charity mergers: new charity taking over activities of several charities

(1) This section applies if, on an application made by a charity (“the new charity”),
HMRC certify that in their opinion—

(a) the new charity was created with a view to taking over all of the
activities of more than one other charity (the “old charities”),

(b) 25the new charity has taken over those activities,

(c) the purposes of the new charity are substantially similar to the
purposes of the old charities (taken together), and

(d) more than half of the managers of the new charity were old charity
managers.

(2) 30For the purposes of determining whether a charity is eligible under section 2
for a relevant tax year—

(a) things done (or treated as having been done) by or in relation to the
relevant old charity before the time of the merger (or after that time but
in connection with things done before that time) are to be treated as if
35they had instead been done by or in relation to the new charity;

(b) the new charity is to be treated as if it had been a charity (as defined by
section 18(1)) at any time, before the time of the merger, when the
relevant old charity was (or is treated as having been) a charity.

(3) “Relevant tax year” means—

(a) 40if none of the old charities makes a successful top-up claim in respect of
small donations made in the year of the merger, that year or any later
tax year;

(b) otherwise, any tax year after the year of the merger.

(4) Which of the old charities is the “relevant old charity” is determined as
45follows—

(a) if each of the old charities was an eligible charity for the year of the
merger, the relevant old charity is whichever of those charities would