Finance (No. 3) Bill

Session 2010 - 11
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Other Bills before Parliament

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—
45

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).
45