Corporation Tax Act 2010 section 939C

Tainted donations

Section 939C defines when a charitable donation is treated as "tainted" — meaning it loses eligibility for tax relief because it is linked to arrangements designed to channel a financial advantage back to the donor or a connected person.

• A relievable charity donation is tainted only if three conditions (A, B and C) are all met: the donation is linked to arrangements that would not have been entered into independently of the donation; the main purpose of the arrangements is to obtain a financial advantage from the charity for a non-charity person; and the donor is not an exempt type of entity such as a qualifying charity-owned company or a linked relevant housing provider.
• Condition A looks at whether the donor or a person connected with the donor has entered into arrangements, and whether it is reasonable to conclude — from the likely effects or the surrounding circumstances — that the donation and the arrangements are interdependent. The connection between the donor and the other person is tested across the period running from the earliest to the latest of three events: when the arrangements are entered into, when the donation is made, and when the arrangements are first materially implemented.
• Condition B requires that a main purpose of entering into the arrangements is to secure a financial advantage — directly or indirectly from the recipient charity or a connected charity — for one or more linked persons who are not themselves charities. Each such person is referred to as a "potentially advantaged person". However, certain routine financial advantages (for example, benefits within the normal Gift Aid benefit limits) are ignored under section 939E and do not trigger this condition.
• Condition C excludes two categories of donor from the tainted donation rules: first, a qualifying charity-owned company — one wholly owned by charities (including the recipient charity or a connected charity) that has not previously been controlled by, or carried on the trade of, a potentially advantaged person or their associates within the preceding four years; and second, a relevant housing provider that is linked with the recipient charity by ownership or control, reflecting the common practice of housing providers donating to charities within the same housing group.