Income Tax Act 2007 section 551

Non-charitable expenditure in substantial donor transactions

Section 551 specifies that certain amounts arising from transactions between a charity and a substantial donor are to be treated as non-charitable expenditure, which can affect the charity's tax reliefs.

• Where a charity enters into a transaction with a substantial donor that is not on arm's length terms, the difference between the actual terms and arm's length terms is treated as non-charitable expenditure.
• If a charity makes a gift or loan to a substantial donor (or a connected person), the amount of the gift or the outstanding loan balance counts as non-charitable expenditure.
• Where a charity provides remuneration to a substantial donor (or a connected person) that exceeds an arm's length amount, the excess is treated as non-charitable expenditure.
• Decisions on whether terms are at arm's length, or whether remuneration is excessive, are made by an officer of Revenue and Customs, subject to appeal.