The government has dropped plans for a change in the definition of charity for tax purposes aimed at stopping charities being set up to avoid tax.
The original plan had been to bring in new legislation in Finance Bill 2014.
The decision follows feedback on a HMRC discussion paper which confirmed that the two approaches outlined in the paper, which involve a change to the definition of charity to explicitly exclude charities established to facilitate tax avoidance arrangements, would have a disproportionate and unacceptable effect on the charity sector and legitimate donors.
This possible damage to innocent charities and HMRC’s existing and new controls mean that changing the law is not justified at this point.
HMRC will continue to monitor the situation and maintain a dialogue with the charities sector for developments or new ideas put forward.
More details are available at http://www.hmrc.gov.uk/news/charity-change.htm