David Whiscombe examines the issues around UK tax relief on charitable donations.
Charity begins at home. But sometimes events call for an international response. Getting tax relief for donations is seldom high on people’s agenda: but it’s nonetheless a factor that warrants some attention.
Until about 10 years ago, UK tax relief was afforded only for donations to UK charities. This didn’t of course mean that they had to be carrying out all their charitable activities in the UK, but they had to be UK charities.
Things changed after a German taxpayer sought and was denied tax relief under German law for a donation to a Portuguese charity. On appeal, the European Court of Justice held that such a territorial restriction was inconsistent with EU rules on free movement of capital: an EU member state could not treat a domestic charity more favourably than an equivalent organisation established in another member state.
The UK duly changed its law in 2010. Now tax relief is available for donations to a foreign charity which meets broadly the same conditions as a UK one. So it needs to be:
- established for charitable purposes;
- susceptible to oversight by the local equivalent of the High Court;
- registered with the appropriate local charity regulatory authority; and
- established in an EU member state or some other country specified by statutory instrument (so far, Iceland, Norway and Liechtenstein).
Does that mean that donations to a French appeal to rebuild Notre Dame qualify? Well, only if the appeal fund meets these criteria. The building is, like many churches in Paris, owned by the French state. Donations to the French state as such would not qualify. “Friends of Notre-Dame” is a 501c3 public charity (meaning that all gifts are tax deductible for US tax purposes); its status for UK tax deduction purposes is not clear from its website.
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There’s still time for tax professionals to vote for the Taxation Awards’ Outstanding Contributor to Taxation here. You have until 25 April; we’re delighted that David Whiscombe is on the shortlist.