Income Tax Act 2007 section 809ZO

Income tax charge where payment of trust income to charity

Section 809ZO imposes an income tax charge where a tainted donation to charity has been made through a trust, targeting the tax repayment the charity would be entitled to claim on the trust donation.

• Where a tainted donation (or an associated donation) takes the form of a payment of trust income to a charity entitled to claim a tax repayment, an income tax charge arises equal to the amount of that repayment — whether or not the charity actually claims it
• Liability for the tax charge is joint and several, meaning HMRC can pursue any or all of the liable persons for the full amount — these include the trustees who made the donation, the donor behind the tainted donation (if different), and, where the trust is settlor-interested, the settlor
• Liability also extends to any potentially advantaged person under the arrangements, any beneficiary of the settlement who is party to the arrangements, and any charity (including a connected charity) that was party to the arrangements and knew a linked person was involved in circumstances falling within the tainted donation rules
• No tax charge arises under this section if the tax repayment in question has already been repaid to HMRC under another provision of tax law, preventing a double recovery