SolvedSchedule 9 | Tainted charity donations
From legislation.gov.uk
(1)Chapter 8 of Part 13 of ITA 2007 (tainted charity donations) is amended as follows.
(2)In section 809ZH (overview), in subsection (2), for “section 257A” substitute “sections 257A and 257B”.
(3)In section 809ZI (relievable charity donations), in subsection (3)(b), for “section 257A” substitute “sections 257A and 257B”.
(1)Section 809ZJ (tainted donations) is amended as follows.
(2)In subsection (1)—
(a)the words from “is a tainted donation” to the end become paragraph (a);
(b)after that paragraph insert
(b)becomes a tainted donation at the earliest time when all those conditions are met.
(3)In subsection (2)(b), at the end of sub-paragraph (i) (but before the “and” that follows it) insert “as at the later of the time when the donation is made and the time when the arrangements are entered into”.
(4)In subsection (4), in the words before paragraph (a), for the words from “a time” to “the following times” substitute “any time after the earliest of the following times”.
(5)In subsection (8), in the definition of “qualifying charity-owned company”, for “potentially advantaged person” (in both places it occurs) substitute “linked person”.
(6)In subsection (10), for “advantages” substitute “assistance”.
(5)Omit section 809ZK (circumstances in which financial advantage deemed to be obtained).
(1)Section 809ZL (certain financial advantages to be ignored) is amended as follows.
(2)In the heading, for “advantages” substitute “assistance”.
(3)In subsection (1)—
(a)for “a financial advantage” substitute “financial assistance”;
(b)for “(2)” substitute “(2A)”.
(4)Omit subsection (2).
(5)Before subsection (3) insert—
(2A)Financial assistance is within this subsection if it constitutes a payment made by a charity, on arm’s length terms, in respect of—
(a)work carried out by a person for or on behalf of the charity, or
(b)expenses incurred by a person in the course of such work.
(6)In each of subsections (3), (4) and (5), for “A financial advantage” substitute “Financial assistance”.
(7)In subsections (4)(b) and (5)(b), for “the advantage” substitute “the assistance”.
(8)In subsection (6), at the appropriate place insert—.
(1)Section 809ZM (removal of income tax relief in respect of tainted donations etc) is amended as follows.
(2)In the heading, for “in respect of tainted donations etc” substitute “where donation becomes tainted in same tax year”.
(3)For subsection (1) substitute—
(1)This section applies where—
(a)a person makes a relievable charity donation, and
(b)the donation becomes a tainted donation in the same tax year in which it is made.
(4)Omit subsection (3).
(5)In subsection (4), omit the definitions of “associated donation”, “qualifying charity-owned company”, “relevant housing provider” and “the relevant arrangements”.
(8)After section 809ZM insert—
809ZMAClawback of income tax relief where donation becomes tainted in later tax year
(1)This section applies where—
(a)a person makes a relievable charity donation in a tax year (“the donation year”),
(b)the donation becomes a tainted donation in a later tax year (“the tainting year”), and
(c)if the donation had become a tainted donation in the donation year, the person’s liability to income tax for the donation year would have been greater than it in fact was for that year.
(2)Income tax is charged under this section, for the tainting year, of an amount equal to the difference between—
(a)the amount of income tax for which the person who made the donation would have been liable for the donation year had the donation become a tainted donation in that year, and
(b)the amount of income tax for which that person was in fact liable for the donation year.
(3)The person liable for tax charged under this section is the person who made the donation.
(4)Section 101 of FA 2009 (late payment interest) has effect in relation to tax charged under this section as though the tax had become due and payable on 1 February in the tax year following the donation year.
809ZMBRemoval or clawback of income tax relief for associated donations
(1)This section applies where—
(a)a person makes a relievable charity donation that becomes a tainted donation, and
(b)a person makes an associated donation in relation to the tainted donation.
(2)If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the tax year in which the associated donation is made, any income tax relief that would otherwise be available in respect of the associated donation is not available.
(3)Section 809ZM(5) to (8) (treatment of donation where entitlement to relief is withdrawn) applies to the withdrawal of relief under subsection (2) as it applies to the withdrawal of relief under that section.
(4)Subsection (5) applies where—
(a)the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the tax year in which the associated donation is made, and
(b)if the donation mentioned in subsection (1)(a) had become a tainted donation before the end of that tax year, the liability to income tax for that tax year of the person who made the associated donation would have been greater than it in fact was for that tax year.
(5)Income tax is charged under this section, for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation, of an amount equal to the difference between—
(a)the amount of income tax for which the person who made the associated donation would have been liable for the tax year in which the associated donation was made had the tainted donation become a tainted donation before the end of that tax year, and
(b)the amount of income tax for which that person was in fact liable for the tax year in which the associated donation was made.
(6)The person liable for tax charged under subsection (5) is the person who made the associated donation.
(7)Subsection (5) does not apply in relation to an associated donation if the person who would be liable for tax charged under that subsection—
(a)is already liable for tax charged under that subsection by reference to the tax year in which the associated donation was made, or
(b)is liable for tax charged under section 809ZMA(2) by reference to that tax year,
and for that purpose the tax year “by reference to which” tax is charged is the earlier tax year for which the person’s liability falls to be considered under (as the case may be) subsection (5)(a) and (b) or section 809ZMA(2)(a) and (b).
(8)Section 101 of FA 2009 (late payment interest) has effect in relation to tax charged under subsection (5) as though the tax had become due and payable on 1 February in the tax year following the one in which the associated donation was made.
(9)In this section—
“associated donation”, in relation to a tainted donation, means a relievable charity donation made—
in accordance with the arrangements by reference to which Conditions A and B in section 809ZJ are met, and
by a person other than—
a qualifying charity-owned company in relation to that relievable charity donation, or
a relevant housing provider linked (within the meaning of section 809ZJ(7)) with the charity to which that donation is made;
“income tax relief” has the same meaning as in section 809ZM;
“qualifying charity-owned company” has the meaning given by section 809ZJ(8) (except that paragraph (b) of that definition does not apply);
“relevant housing provider” has the meaning given by section 809ZJ(8).
(1)Section 809ZN (income tax charge where gift aid is withdrawn) is amended as follows.
(2)In subsection (1)—
(a)in paragraph (a), for “tainted donation” substitute “relievable charity donation”;
(b)after paragraph (a) insert—
(aa)the donation becomes a tainted donation (whether in that tax year or a later tax year),
.
(3)After subsection (2) insert—
(2A)Tax charged under this section is charged for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation.
(4)In subsection (4), for paragraph (c) substitute—
(c)each linked person (as defined in section 809ZJ(3)) by reference to whom Condition B in section 809ZJ(5) is met in relation to the tainted donation,
.
(5)In subsection (5)—
(a)in paragraph (a), for “the relevant arrangements relating to” substitute “the arrangements by reference to which Conditions A and B in section 809ZJ are met in relation to”;
(b)for paragraph (b) substitute—
(b)was aware or ought reasonably to have been aware, at the time it entered into those arrangements, that Condition B in section 809ZJ was or would be met by reference to the arrangements.
(6)In subsection (7)—
(a)in the definition of “associated donation”, for “809ZM” substitute “809ZMB”;
(b)omit the definition of “the relevant arrangements”.
(1)Section 809ZO (income tax charge where payment of trust income to charity) is amended as follows.
(2)In subsection (1)—
(a)in paragraph (a), for “tainted donation” substitute “relievable charity donation”;
(b)after paragraph (a) insert—
(aa)the donation becomes a tainted donation (whether in that tax year or a later tax year),
(3)After subsection (2) insert—
(2A)Tax charged under this section is charged for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation.
(4)In subsection (4), for paragraph (d) substitute—
(d)each linked person (as defined in section 809ZJ(3)) by reference to whom Condition B in section 809ZJ(5) is met in relation to the tainted donation,
.
(5)In subsection (5)—
(a)in paragraph (a), for “the relevant arrangements relating to” substitute “the arrangements by reference to which Conditions A and B in section 809ZJ are met in relation to”;
(b)for paragraph (b) substitute—
(b)the charity was aware or ought reasonably to have been aware, at the time it entered into those arrangements, that Condition B in section 809ZJ was or would be met by reference to the arrangements.
(6)In subsection (7)—
(a)in the definition of “associated donation”, for “809ZM” substitute “809ZMB”;
(b)omit the definition of “the relevant arrangements”.
(11)Part 21C of CTA 2010 (tainted charity donations) is amended as follows.
(12)In section 939A (overview), in subsection (2), for “section 257A” substitute “sections 257A and 257B”.
(13)In section 939B (relievable charity donations), in subsection (3)(b), for “section 257A” substitute “sections 257A and 257B”.
(1)Section 939C (tainted donations) is amended as follows.
(2)In subsection (1)—
(a)the words from “is a tainted donation” to the end become paragraph (a);
(b)after that paragraph insert
(b)becomes a tainted donation at the earliest time when all those conditions are met.
(3)In subsection (2)(b), at the end of sub-paragraph (i) (but before the “and” that follows it) insert “as at the later of the time when the donation is made and the time when the arrangements are entered into”.
(4)In subsection (4), in the words before paragraph (a), for the words from “a time” to “the following times” substitute “any time after the earliest of the following times”.
(5)In subsection (8), in the definition of “qualifying charity-owned company”, for “potentially advantaged person” (in both places it occurs) substitute “linked person”.
(6)In subsection (10), for “advantages” substitute “assistance”.
(15)Omit section 939D (circumstances in which financial advantage deemed to be obtained).
(1)Section 939E (certain financial advantages to be ignored) is amended as follows.
(2)In the heading, for “advantages” substitute “assistance”.
(3)In subsection (1)—
(a)for “a financial advantage” substitute “financial assistance”;
(b)for “(2)” substitute “(2A)”.
(4)Omit subsection (2).
(5)Before subsection (3) insert—
(2A)Financial assistance is within this subsection if it constitutes a payment made by a charity, on arm’s length terms, in respect of—
(a)work carried out by a person for or on behalf of the charity, or
(b)expenses incurred by a person in the course of such work.
(6)In each of subsections (3), (4) and (5), for “A financial advantage” substitute “Financial assistance”.
(7)In subsections (4)(b) and (5)(b), for “the advantage” substitute “the assistance”.
(8)In subsection (6), at the appropriate place insert—.
(1)Section 939F (removal of corporation tax relief in respect of tainted donations etc) is amended as follows.
(2)In the heading, for “in respect of tainted donations etc” substitute “where donation becomes tainted in same accounting period”.
(3)For subsection (1) substitute—
(1)This section applies where—
(a)a company makes a relievable charity donation, and
(b)the donation becomes a tainted donation in the same accounting period in which it is made.
(4)Omit subsection (3).
(5)In subsection (4), omit the definitions of “associated donation”, “qualifying charity-owned company”, “relevant housing provider” and “the relevant arrangements”.
(18)After section 939F (but beneath the same italic heading) insert—
939FAClawback of corporation tax relief where donation becomes tainted in later accounting period
(1)This section applies where—
(a)a company makes a relievable charity donation in an accounting period (“the donation period”),
(b)the donation becomes a tainted donation in a later accounting period (“the tainting period”), and
(c)if the donation had become a tainted donation in the donation period, the company’s liability to corporation tax for the donation period would have been greater than it in fact was for that period.
(2)The company’s liability to corporation tax for the tainting period is increased by an amount equal to the difference between—
(a)the amount of corporation tax for which it would have been liable for the donation period had the donation become a tainted donation in that period, and
(b)the amount of corporation tax for which it was in fact liable for the donation period.
(3)Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (2) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the donation period.
939FBRemoval or clawback of corporation tax relief for associated donations
(1)This section applies where—
(a)a person makes a relievable charity donation that becomes a tainted donation, and
(b)a company makes an associated donation in relation to the tainted donation.
(2)If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the accounting period of the company in which the associated donation is made, any corporation tax relief that would otherwise be available in respect of the associated donation is not available.
(3)Subsection (4) applies where—
(a)the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the accounting period of the company in which the associated donation is made, and
(b)if the donation mentioned in subsection (1)(a) had become a tainted donation before the end of that accounting period, the company’s liability to corporation tax for that accounting period would have been greater than it in fact was for that period.
(4)The liability of the company to corporation tax for the accounting period in which the donation mentioned in subsection (1)(a) becomes a tainted donation is increased by an amount equal to the difference between—
(a)the amount of corporation tax for which it would have been liable for the accounting period in which the associated donation was made, had the tainted donation become a tainted donation before the end of that period, and
(b)the amount of corporation tax for which it was in fact liable for the accounting period in which the associated donation was made.
(5)Subsection (4) does not apply in relation to an associated donation if the company—
(a)is already liable for tax by virtue of that subsection by reference to the accounting period in which the associated donation was made, or
(b)is liable for tax by virtue of section 939FA(2) by reference to that accounting period,
and for that purpose the accounting period “by reference to which” the company is liable for tax is the earlier accounting period for which the company’s liability falls to be considered under (as the case may be) subsection (4)(a) and (b) or section 939FA(2)(a) and (b).
(6)Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (4) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period in which the associated donation was made.
(7)In this section—
“associated donation”, in relation to a tainted donation, means a relievable charity donation made—
in accordance with the arrangements by reference to which Conditions A and B in section 939C are met, and
by a person other than—
a qualifying charity-owned company in relation to that relievable charity donation, or
a relevant housing provider linked (within the meaning of section 939C(7)) with the charity to which that donation is made;
“corporation tax relief” has the same meaning as in section 939F;
“qualifying charity-owned company” has the meaning given by section 939C(8) (except that paragraph (b) of that definition does not apply);
“relevant housing provider” has the meaning given by section 939C(8).
(19)In TCGA 1992, for section 257A (tainted charity donations) substitute—
257ATainted charity donations
(1)Section 257 does not apply in relation to a relievable charity donation that becomes a tainted donation in the same tax year in which it is made.
(2)Subsection (3) applies if—
(a)a person makes a relievable charity donation in a tax year (“the donation year”),
(b)the donation becomes a tainted donation in a later tax year (“the tainting year”), and
(c)if the donation had become a tainted donation in the donation year, the liability to tax for the donation year of the person who made the donation would have been greater than it in fact was for the donation year.
(3)The liability to tax for the tainting year of the person that made the donation is increased by an amount equal to the difference between—
(a)the amount of tax for which the person would have been liable for the donation year had the donation become a tainted donation in the donation year, and
(b)the amount of tax for which the person was in fact liable for the donation year.
(4)Section 101 of FA 2009 (interest on CGT etc) has effect in relation to capital gains tax for which a person is liable by virtue of subsection (3) as though the tax had become due and payable on 1 February in the tax year following the donation year.
(5)Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to corporation tax for which a company is liable by virtue of subsection (3) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period of the company in which the donation mentioned in subsection (2)(a) was made.
(6)In this section—
“relievable charity donation” means a relievable charity donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010;
“tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010;
“tax” means—
in relation to a company, corporation tax on chargeable gains;
otherwise, capital gains tax;
and a reference to a donation “becoming” a tainted donation is to be read with section 809ZJ(1)(b) of ITA 2007 and 939C(1)(b) of CTA 2010.
(7)In relation to any donation made by a company, references in this section to a tax year are to be read as references to an accounting period.
257BAssociated donations in relation to tainted charity donations
(1)This section applies where—
(a)a person makes a relievable charity donation that becomes a tainted donation, and
(b)a person makes an associated donation in relation to the tainted donation.
(2)If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the tax year in which the associated donation is made, section 257 does not apply in relation to the associated donation.
(3)Subsection (4) applies where—
(a)the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the tax year in which the associated donation is made, and
(b)if the donation had become a tainted donation before the end of that tax year, the liability to tax for that tax year of the person who made the associated donation would have been greater than it in fact was for that tax year.
(4)The liability to tax of the person who made the associated donation, for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation, is increased by an amount equal to the difference between—
(a)the amount of tax for which the person would have been liable for the tax year in which the associated donation was made had the donation mentioned in subsection (1)(a) become a tainted donation before the end of that tax year, and
(b)the amount of tax for which the person was in fact liable for the tax year in which the associated donation was made.
(5)Subsection (4) does not apply in relation to an associated donation if the person who makes the associated donation—
(a)is already liable for tax by virtue of that subsection by reference to the tax year in which the associated donation was made, or
(b)is liable for tax by virtue of section 257A(3) by reference to that tax year,
and for that purpose the tax year “by reference to which” a person is liable for tax is the earlier tax year for which the person’s liability falls to be considered under (as the case may be) subsection (4)(a) and (b) or section 257A(3)(a) and (b).
(6)Section 101 of FA 2009 (interest on CGT etc) has effect in relation to capital gains tax for which a person is liable by virtue of subsection (4) as though the tax had become due and payable on 1 February in the tax year following the tax year in which the associated donation was made.
(7)Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to corporation tax for which a company is liable by virtue of subsection (4) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period of the company in which the associated donation was made.
(8)In this section—
“associated donation” means an associated donation within the meaning of section 809ZMB of ITA 2007 or section 939FB of CTA 2010;
“relievable charity donation” means a relievable charity donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010;
“tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010;
“tax” means—
in relation to a company, corporation tax on chargeable gains;
otherwise, capital gains tax;
and a reference to a donation “becoming” a tainted donation is to be read with section 809ZJ(1)(b) of ITA 2007 and 939C(1)(b) of CTA 2010.
(9)Where the associated donation mentioned in subsection (1)(b) is made by a company, references in this section to a tax year are to be read as references to an accounting period of the company.
(20)In CAA 2001, in section 63 (cases in which disposal value is nil), in subsection (4)(b)—
(a)for “section 809ZM” substitute “sections 809ZM and 809ZMB”;
(b)for “section 939F” substitute “sections 939F and 939FB”.
(21)In ITEPA 2003, in section 713 (donations to charity: payroll deduction scheme), in subsection (6), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.
(22)In ITTOIA 2005, in section 108 (gifts of trading stock to charities etc), in subsection (5)(b), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.
(1)ITA 2007 is amended as follows.
(2)In section 30 (additional tax), in subsections (1) and (2), at the appropriate place insert—.
(3)In section 58 (meaning of “adjusted net income”), for subsection (4) substitute—
(4)This section is subject to section 809ZM(6) and section 809ZMB(3) (which prevent tainted donations and associated donations from being deducted at Step 2 in subsection (1)).
(4)In section 413 (gift aid: overview), in subsection (4A), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.
(5)In section 431 (gifts of shares, securities and real property to charities etc), in subsection (7), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.
(6)In Schedule 4 (index of defined expressions), omit the entry for “potentially advantaged person (in Chapter 8 of Part 13)”.
(24)In CTA 2009, in section 105 (gifts of trading stock to charities etc), in subsection (6), for “section 939F” substitute “sections 939F and 939FB”.
(25)In CTA 2010, in Schedule 4 (index of defined expressions), omit the entry for “potentially advantaged person (in Part 21C)”.