New anti-tax-avoidance legislation ‘unnecessary’, charity bodies say

The NCVO, the Charity Finance Group and the Association of Charitable Foundations say HMRC should focus on enforcing existing law

Three charity umbrella bodies, including the National Council for Voluntary Organisations and the Charity Finance Group, have called on the government to drop plans to introduce new regulations aimed at reducing the risk of charities being used for tax avoidance, because they are “unnecessary” and could cause confusion.

HM Revenue & Customs last month published a discussion paper in which it detailed two approaches to reducing the use of charities as tax avoidance schemes.

Version A was aimed at preventing a charity from being recognised by HMRC if “one of the main purposes or result of its establishment is to secure a tax advantage,” according to the paper. Under Version B organisations would be blocked if their single main purpose was to avoid paying tax.

In a joint response to HMRC from the NCVO, CFG and the Association of Charitable Foundations, the organisations said that the government should abandon the new approach and focus instead on enforcing existing preventative legislation.

The organisations said that after receiving legal advice they did not believe that the legislative changes would be necessary.

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