Commentary

B5.851 Transactions with substantial donors

Business tax
Business tax | Commentary

B5.851 Transactions with substantial donors

Business tax | Commentary

B5.851 Transactions with substantial donors

There are provisions1 restricting the tax exemption or relief granted to charities which enter into certain transactions with a substantial donor. The rules apply for transactions occurring after 21 March 2006, unless they were undertaken as part of a contractual arrangement made before 22 March 2006 (otherwise than in pursuance of a variation of the terms of a contract on or after that date)2. However, FA 2011 introduced the concept of 'tainted' charity donations as a means of deterring abuse of the charity tax reliefs (see B5.852) and it applies in respect of charitable donations made on or after 1 April 2011. Substantial donor transactions with donors who were already substantial donors before 1 April 2011 continued to be chargeable under the existing legislation up to and including 31 March 2013 after which date those provisions were repealed, except in the case of transactions occurring on or after 1 April 2013 where the contractual obligations were entered into before 1 April 20133. These particular transactions will continue to be dealt with under the substantial donors legislation. However, where such a contract is varied on or after 1 April 2013 the substantial donor legislation will no longer apply and the situation will be considered under the new rules in B5.852.

The substantial donors legislation was introduced to counter perceived abuse of charitable status by taxpayers whose level of connection with the charity was such that they were able to control its actions and do so for their

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