Spring Budget and charitable tax reliefs

Following the European Court of Justice judgement of 27 January 2009 in the ‘Persche Case’, EU and EEA member state tax authorities were required to grant the same tax reliefs to cross border EU and EEA charities as domestic ones. This was incorporated into paragraph 2, Schedule 6 to Finance Act 2010 and led to UK tax payers being able to claim higher rate tax relief on donations to non UK charities registered within the EU and EEA who had successfully registered with HMRC to qualify for tax reliefs in the UK. 

Following our departure from the EU our national legislation wasn’t immediately amended leading to the status quo continuing, however, yesterday’s announcement regarding the amendment to the jurisdiction condition in the Spring Finance Bill 2023 means that only charities that come within the jurisdiction of the High Court in England, Wales or Northern Ireland or the Court of Session in Scotland will qualify for charitable tax reliefs. This change once in force will be effective from 15 March 2023 with a transitional period until April 2024 for EU and EEA charities that HMRC had previously accepted as qualifying for relief. For example, the transitional rules can impact upon the stamp duty land tax treatment of land transactions that will depend (among other things) upon whether contracts have been exchanged before 15 March 2023 or 1 April 2024. 

This change means that UK taxpayer money will only receive tax relief when donations are made to UK charities and community amateur sports clubs (CASCs) and from April 2024 all non UK charities and CASCs will no longer be eligible to claim UK charitable tax reliefs. 

It is anticipated that this change will have limited impact as it is understood that relatively few EU and EEA charities had applied successfully to fulfil the tests necessary to register with HMRC.