HMRC drop anti-avoidance plans
The taxman will not introduce new rules to prevent abuse of charitable status and will instead rely on existing safeguards, the government has announced.
HMRC developed two alternative legislative approaches following the 2013 autumn statement, which highlighted concerns about charities being set up for the purpose of tax avoidance.
Feedback strongly suggested that both mechanisms to change the definition of charity would have a disproportionate and unacceptable effect upon the charitable sector and legitimate donors.
The Revenue concluded that legislation already in effect, including the general anti-abuse rule and the fit-and-proper test for charities, are sufficient to deal with cases of abuse.
Accountancy group Baker Tilly applauded the tax department’s decision. Partner Andrew Hubbard said, “We support the government in its attempt to prevent the exploitation of charitable reliefs, but we were concerned that the proposed approach was the wrong solution.
“This was a good example of a positive outcome from a consultation process.”
The Charity Tax Group’s chairperson, John Hemming said his organisation was “delighted that HMRC decided not to introduce a new definition of charity”.
He added, “Our members made it very clear to officials that we did not support the need for a new legislative solution, with members explaining how existing legislation provides effective safeguards against abusive activity.”