Cross border charitable giving

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Clive Cutbill and Christopher Groves assess the tax implications of making charitable donations across EU member states.

To qualify as a charity for UK tax purposes it is necessary that the body in question is subject to the jurisdiction of the courts, and established under the law of a UK jurisdiction1. This is not an approach which is unique to the UK; many other countries have taken a similar approach.

On 27 January this year, the European Court of Justice issued its judgment in the case of Hein Persche v Finanzamt Lüdenscheid2. The judgment altered the ground rules for the tax deductibility of charitable donations throughout the European Union.

Hein Persche, a German tax adviser, had made a gift to a Portuguese charity. Mr Persche then claimed a German...

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By colci
28th Oct 2009 15:18

Impact on gift Aid

I wonder what impact , if any the Persche case, has on the UK Gift Aid system.  If I, as an Italian tax resident, give money to a UK charity, then the charity cannot claim the Gift Aid payment.  I am left to claim the deduction in my Italian tax return and although Persche makes this easier, the Italian legislation allowing deductions for donations makes specific reference to Italian registered entities.  So if I am fortunate not to have my tax return queried within the five year limitation period, or pending the next tax amnesty, I can then make a further donation to the charity equal to my tax saving, possibly this time being brave enough to gross it up for the future deduction I now feel more confident about getting.  

HMRC would no doubt resist any attempt to extend gift aid to cirumstances where the donor does pay enough UK income tax and/or capital gains tax themselves to cover the amount of tax the charity will reclaim, but I wonder if such resistance might also be deemed to be contrary to arts. 56 and 58 of the EU Treaty.  If it is, then is there not a risk of the gift aid system being removed altogether?  I cannot see much scope for an EU wide settlements system or even a single listing of approved charities round Europe, which is the obvious solution.  

Colin Jamieson

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