Share

Treasury won't spare charities from new anti-tax avoidance rules

David Gauke, Exchequer Secretary
News

Treasury won't spare charities from new anti-tax avoidance rules

Finance | Tania Mason | 13 Jun 2013

The Treasury will not exempt charities from complying with anti-tax avoidance measures being added to the Finance Bill because doing so could encourage more “sham charities”, Exchequer Secretary David Gauke said this week.

Charity Tax Group has raised concerns about amendments to Section 13 of the Taxation of Chargeable Gains Act 1992, which aim to ensure that a UK-resident person cannot arrange the artificial placement of assets overseas in order to avoid UK tax on profits.

CTG is concerned that the changes will adversely affect charities with large investment portfolios, such as the Wellcome Trust, Church Commissioners and Esmée Fairbairn Foundation.

It has highlighted a number of problems with Section 13. First, it allows a UK charity to invest in a UK company but has the unintentional effect of prohibiting investment in overseas companies.  

Second, charities are already exempt from paying tax on gains, so to be covered by Section 13 is perverse, because there is no tax to avoid.

The third problem relates to the new 25 per cent limit that any investor “or connected person” can have in an overseas company before gains are caught by the new provisions.

CTG has argued that because many charities invest in investment funds, they do not know who their co-investors are, let alone where they are registered for tax purposes, and so cannot be aware of their collective holding or know whether they exceed the 25 per cent limit.

But most perverse of all, according to CTG chair John Hemming, is the fact that charities are already compelled to optain approval from HMRC that such investments as those covered by Section 13, are not for the avoidance of tax. "These investments are already monitored by the Revenue," Hemming said.

He added that charities only wanted equal treatment to that enjoyed by pensions funds, which are exempted from compliance with the legislation.

CTG has been in discussion with HMRC about these concerns, and during a Finance Bill committee debate on Tuesday Labour MP Catherine McKinnell asked David Gauke if he could give some assurance that they are being reviewed.

Gauke: exemption could encourage sham charities 

But Gauke was unequivocal in his response.  On the suggestion of a “specific exemption for charities”, he said: “We do not believe that would be appropriate.

“The vast majority of charities are genuine but, regrettably, the generosity of reliefs and exemptions afforded to charities can make them targets for those who wish to avoid UK tax.  

“It is important that we protect the positive connotations of the word ‘charity’ in the public mind. An exemption for charities could encourage determined tax avoiders to set up sham charities to avoid UK tax.

“In practice, it will not be difficult for charities to comply with Section 13.”

Comments

[Cancel] | Reply to:

Close »

Community Standards

The civilsociety.co.uk community and comments board is intended as a platform for informed and civilised debate.

We hope to encourage a broad range of views, however, there are standards that we expect commentators to uphold. We reserve the right to delete or amend any comments that do not adhere to these standards.

We welcome:

  • Robust but respectful debate
  • Strongly held opinions
  • Intelligent relevant discussion
  • The sharing of relevant experiences
  • New participants

We will not publish:

  • Rude, threatening, offensive, obscene or abusive language, or links to such material
  • Links to commercial organisations or spam postings. The comments board is not an advertising platform
  • The posting of contact details for yourself or others
  • Comments intended for malicious purpose or mindless abuse
  • Comments purporting to be from another person or organisation under false pretences
  • Gratuitous criticism, commentary or self-promotion
  • Any material which breaches copyright or privacy laws, or could be considered libellous
  • The use of the comments board for the pursuit or extension of personal disputes

Be aware:

  • Views expressed on the comments board are left at users’ discretion and are in no way views held or supported by Civil Society Media
  • Comments left by others may not be accurate, do not rely on them as fact
  • You may be misunderstood - sarcasm and humour can easily be taken out of context, try to be clear

Please:

  • Enjoy the opportunity to express your opinion and respect the right of others to express theirs
  • Confine your remarks to issues rather than personalities

Together we can keep our community a polite, respectful and intelligent platform for discussion.

Free eNews

Supermarkets donate profits from #icebucketchallenge to MND Association

29 Aug 2014

Tesco has announced that it will donate the profits made from an increase in sales of ice to the Motor...

Commission contacts Bradley Wiggins' charity over concerns about how it has spent donations

29 Aug 2014

The Charity Commission has contacted the trustees of the Bradley Wiggins Foundation after the charity...

EU data protection proposals would kill fundraisers’ mailing lists, says report

28 Aug 2014

Proposed EU data protection rules could destroy mailing lists relied on by charity fundraisers, and would...

Lawyers call for animal charity to have greater crime-fighting powers

29 Aug 2014

Lawyers in Scotland have called for a Scottish animal charity to be granted greater powers to investigate...

Commission contacts Bradley Wiggins' charity over concerns about how it has spent donations

29 Aug 2014

The Charity Commission has contacted the trustees of the Bradley Wiggins Foundation after the charity...

Bubb responds to attack on charity campaigning in The Times

28 Aug 2014

Sir Stephen Bubb has written to The Times criticising an article which attacks charities for lacking transparency...

EU data protection proposals would kill fundraisers’ mailing lists, says report

28 Aug 2014

Proposed EU data protection rules could destroy mailing lists relied on by charity fundraisers, and would...

Macmillan: We did not hijack #icebucketchallenge

21 Aug 2014

Macmillan has hit back against accusations on social media that it has hijacked #icebucketchallenge, saying...

Smart wristbands aim to increase charity giving

20 Aug 2014

A new wristband that will enable people to make faster donations with just a tap of a smartphone, is...

Join the discussion

 Twitter button

@CSFinance