Inland Revenue Shuts Down Charitable Gift Tax Scheme

by Robert Lee, Tax-News.com, London

07 July 2004

The UK government last week tabled amendments to the Finance Bill that seek to prevent individuals taking advantage of tax gains deriving from the gift of shares and securities to charity.

The Inland Revenue took the action after becoming aware of a scheme using offshore trust and options arrangements to manipulate the value of gilts donated to charities in an attempt to cut the tax liability of the individual concerned.

According to the Revenue, the effect of the avoidance scheme is to eliminate most of the value of the gift in the hands of the charity, while potentially returning virtually the whole value of the gift to the control of the donor. In short, the donor gets substantial tax relief while potentially getting his donation back.

Commenting on the action to remove “this highly abusive tax avoidance scheme” the Economic Secretary to the Treasury, John Healey, remarked: “I am not prepared to see the generous reliefs provided by this Government to support charities jeopardised by those seeking only to avoid tax.”

“We are committed to using the tax system to encourage charitable giving but are determined to take action against those who abuse the reliefs,” he added.

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