Income Tax Act 2007 section 561

Approved charitable loans

Section 561 defines which loans made by a charitable trust count as "approved charitable loans" and are therefore excluded from being treated as non-charitable expenditure under Section 543.

• An approved charitable loan must not be made by way of investment — it must be a genuine loan rather than a deployment of the charity's funds for a return.
• The loan qualifies if it is made to another charity for charitable purposes only, or to a beneficiary of the charitable trust in the course of carrying out that trust's purposes.
• Money placed on current account with a bank also qualifies, provided it is not part of an arrangement under which the bank lends to someone else.
• HMRC may approve a loan on a claim if satisfied it is made for the charity's benefit and not for tax avoidance by any party.