Income Tax Act 2007 section 809ZM

Removal of income tax relief in respect of tainted donations etc.

Section 809ZM removes income tax relief that would otherwise be available on donations classified as "tainted" under the anti-avoidance rules, while preserving the charity's ability to treat those donations as qualifying for its own tax purposes.

• Where a donation is tainted, any income tax relief (such as Gift Aid, payroll giving, gifts of trading stock, gifts of plant and machinery, or gifts of shares) that the donor would normally receive is denied
• Any other donations forming part of the same arrangement — known as "associated donations" — also lose their income tax relief, even if they are not individually tainted, unless they are made by a qualifying charity-owned subsidiary or a linked relevant housing provider
• Although the donor loses their tax relief, the donation still counts as a qualifying donation in the hands of the charity — meaning the charity can still claim a Gift Aid repayment and the donation is recognised for charitable trust, charitable company, and community amateur sports club tax purposes
• Where Gift Aid relief is denied, the donor's adjusted net income is not reduced by the donation, and if the donor has not paid enough income tax or capital gains tax to cover the Gift Aid repayment made to the charity, HMRC may recover the shortfall directly from the donor