HMRC has concerns over the misuse of tax exemptions available to charities and wishes
to prevent bogus charities from being used in artificial tax planning schemes.
HMRC developed alternative legislative approaches to implement in the autumn statement but, following informal consultation, decided that the proposed changes would have a disproportionate and unacceptable effect on the charity sector and legitimate charity donors.
HMRC already has a wide range of tools available to tackle avoidance and has recently had considerable success in the courts in challenging certain schemes.
The introduction of legislation such as the General Anti-Abuse Rule and the “fit and proper person test” for charities, coupled with the new Accelerated Payments regime, will help to provide additional deterrence.
HMRC has confirmed that it will continue to monitor the use of exemptions available to charities and will ask the government to legislate if it is felt that more controls are needed.
For more information, please contact Leo Joyce.