Measure
The government has announced that it will restrict charitable tax reliefs to UK charities and Community Amateur Sports Clubs only. Specifically, whereas currently some charities located in the European Union (“EU”) and European Economic Area (“EEA”) can qualify for charitable tax reliefs in the UK, the measure means this will be limited to only charities subject to the control of a relevant UK court. Similarly the measure will require that Community Amateur Sports Clubs are based in the UK and provide facilities in the UK to continue to qualify.
EU and EEA charities will cease to qualify for charitable tax reliefs in the UK if they do not meet the new definition.
The measure will affect individuals who make donations to EU or EEA charities which cease to qualify, where higher rate tax relief is currently available on such donations. The measure could also affect businesses that make donations to EU and EEA charities.
There will be wider tax implications for such charities themselves, albeit the HMRC policy paper published at the time of the Spring Budget indicates that there are only approximately 20 such charities that have asserted their eligibility for charitable tax reliefs.
The measure will take effect from 15 March 2023, subject to a transitional period until April 2024 for EU and EEA charities that HMRC have previously accepted as qualifying for charity tax reliefs before 15 March 2023. A similar rule will apply in relation to Community Amateur Sports Clubs.
The UK government previously announced that it would be reviewing tax rules in light of the UK leaving the EU, so it is not surprising that this change to target tax reliefs at UK charities is being made, but there will be some cost and disruption to those charities involved.