TAX NEWS: Retrospective legislation at its worst - The case of charitable donations. By Nichola Ross Martin

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Nichola Ross Martin reports on the recent debate in the House of Commons over the anti-avoidance draft clause in the 2006 Finance Act dealing with abuse of charity tax reliefs.

The clause in question - 54 'Transactions with substantial donors' - focuses on abuse of charity tax reliefs, particularly where donors make gifts with conditions attached.

In the words of Dawn Primarolo speaking during the Commons debate last week:

"Substantial donors either make payments or transfer assets to charities, and then receive back money, shares or property. Reliefs in the form of gift aid payments or share relief payments are then triggered depending on which of those applies. Having obtained the relief, the donor then gets back a loan that may, for example, carry no repayment schedule with it ' in fact, t...

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Let's get real
This law is required to target a serious abuse of charity law which is, I understand, being promoted by firms of accountants, amongst others.

We should welcome it. Abuse of charity law is always wrong, and anything that stops it (even if retrospectively) equires an honest profession to applaud the move - not criticise it.

When will we be ethical?

Will I ever be able to say "Trust me, I'm a chartered accountant" and not have the person I am speaking to laugh themselves silly, precisly because they know that for too many of that ilk that is an unsustainable argument?

Richard Murphy
www.taxresearch.org.uk/blog/

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What about the Trustees?
In the scenario shown, where a "donor" gets back their money in a beneficial loan, are the Trustees are acting properly?
I would expect that such reduced rate loans do not comply with the statutory duty to manage the assets of the charity in the best interests of the beneficiaries. Gently targeting this approach would soon eliminate the artificial arrangements mentioned in the article without requiring yet more legislation.

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