Substantial donors and tainted charity donations

Produced by Tolley
Substantial donors and tainted charity donations

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Substantial donors and tainted charity donations
  • Substantial donors
  • Transitional rules
  • Tainted charity donations
  • Conditions
  • Arrangements
  • Connected person
  • Connected charity
  • Financial advantage
  • Impact of the tainted charity donation provisions
  • More...

There are anti-avoidance rules in place to ensure that the tax reliefs available for charitable giving are not abused. The first provisions to be introduced related to substantial donors and only affected the tax reliefs available to the charity. However, with effect from 1 April 2011, rules on tainted charity donations were introduced where the main impact of a donation falling within the rules is on the donor rather than the charity and the monetary threshold for the application of the anti-avoidance legislation is removed.

The rules apply to gifts of cash (both via gift aid and payroll giving) and assets to charity which would otherwise qualify for tax relief. For more on the reliefs for donations to charity by individuals, see the Gifts of cash to charity and Gifts of quoted shares and land to charity guidance notes.

Substantial donors

The substantial donor provisions restricted the tax exemption or relief granted to charities which entered into certain transactions with a substantial donor. A substantial donor is one who donated £25,000 in one year or £150,000 over six years to one charity.

These measures applied to donations made between 22 March 2006 and 31 March 2013 (although see the transitional rules below). The legislation was originally designed 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 own benefit. The rules only affected the charity’s tax position and not the donor’s personal tax position and so are not considered further in the Personal Tax module.

For more information on the substantial donor provisions, see Simon’s Taxes C5.127A. There is also guidance and examples in section 10 of the HMRC guidance on non-charitable expenditure.

However, these rules also caught genuine donations and so the tainted charitable donations provisions were introduced with effect from 1 April 2011 and fully replaced the substantial donor rules from 1 April 2013, the two

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