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Finance (No. 3) Bill


Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

116

 

(3)   

A financial advantage is within this subsection if (ignoring the

tainted donation provisions) it is—

(a)   

a benefit associated with a gift which is a qualifying donation

for the purposes of Chapter 2 of Part 8 (gift aid), or

(b)   

a benefit associated with a payment which is a qualifying

5

payment for the purposes of Chapter 2 of Part 6 of CTA 2010

(charitable donations relief: payments to charity).

(4)   

A financial advantage is within this subsection if (ignoring the

tainted donation provisions)—

(a)   

the relievable charity donation is a disposal in respect of

10

which tax relief would be available under Chapter 3 of Part 8

of this Act (gifts of shares, securities and real property to

charities etc) or Chapter 3 of Part 6 of CTA 2010 (charitable

donations: certain disposals to charity), and

(b)   

the advantage is a benefit the value of which would be taken

15

into account in determining the relievable amount in respect

of the disposal for the purposes of the Chapter in question.

(5)   

A financial advantage is within this subsection if (ignoring the

tainted donation provisions)—

(a)   

the relievable charity donation is a gift in respect of which tax

20

relief would be available under section 108 of ITTOIA 2005 or

section 105 of CTA 2009 (gifts of trading stock to charities

etc), and

(b)   

the advantage is a benefit attributable to the making of the

gift in respect of which an amount would be brought into

25

account under section 109 of ITTOIA 2005 or section 108 of

CTA 2009 (receipt of benefits by donor or connected person).

(6)   

In this section—

“benefit associated with a gift” has the meaning given by section

417;

30

“benefit associated with a payment” has the meaning given by

section 196 of CTA 2010;

“the tainted donation provisions” has the meaning given by

section 809ZI(3).

Removal of reliefs and imposition of charge to tax

35

809ZM   

 Removal 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—

40

(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—

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Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

117

 

“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

5

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;

“income tax relief” means relief under—

10

(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),

15

(d)   

Chapter 2 of Part 8 of this Act (gift aid), or

(e)   

Chapter 3 of that Part (gifts of shares etc);

“qualifying charity-owned company” has the meaning given by

section 809ZJ(8) (except that paragraph (b) of that definition

does not apply);

20

“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.

25

(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

30

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

35

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

40

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

45

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—

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

118

 

(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).

809ZN   

 Income tax charge where gift aid is withdrawn

5

(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

10

(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

15

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—

20

(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

25

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

30

(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

35

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

40

809ZM;

“linked person” has the same meaning as in section 809ZJ;

“the relevant arrangements” has the same meaning as in section

809ZM.

809ZO   

 Income tax charge where payment of trust income to charity

45

(1)   

Income tax is charged under this section if—

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

119

 

(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

5

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

10

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,

15

(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

20

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

25

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

30

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

35

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;

40

“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).

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Revised 31 March 2011