The budget wasn’t all bad news for non-dom Lord Ashcroft

by Stephen Tall on March 25, 2010

There wasn’t much in yesterday’s budget for charities, but one snippet caught my eye: the extension of gift aid reliefs on charitable donations to the EU. This means a UK resident can now make a philanthropic donation to any charity in the European Union (or Norway or Iceland) so long as that charity meets the requirements of the regulators in their home country.

Fair ’nuff, you say – but what’s that got to do with Lord Ashcroft? Panopticon Policy explains:

These changes are very welcome and will help the charity sector and will hopefully encourage cross-border philanthropy and cut red tape for charities involved in EU wide fundraising. They will be particularly attractive for non-dom donors using the remittance basis because they will be able to make donations from untaxed income outside the UK and then claim gift aid relief in the UK. This could create a large incentive for more philanthropy amongst those individuals.

Even more reason, therefore, for Lord Ashcroft to donate some of the £127m he’s saved by being registered as a non-dom for the past 10 years he’s been a peer of the realm.

Hopefully that budget announcement will have put a smile on his face – unlike Alasdair Darling’s pledge to cut down on tax avoidance in Belize.

PS: hopefully the Government’s announcement that UK taxpayers will be able to make tax-effective charitable donations to EU-based charities will shortly be reciprocated, so that UK-based charities can benefit from donations from the EU. As law firm Henmans noted in November 2009:

At present, many EU Member States restrict claims for cross-border charitable tax relief, often by imposing higher tax rates on cross-border legacies, to encourage giving to national charities. However, the 2009 case of Re Persche may bring about a change to this approach.

Mr Persche (a German resident) made gifts to a Portuguese charity running a care home. He claimed a German income tax deduction, which his local tax office rejected, principally on the grounds that the recipient charity was not established in Germany.

The ECJ upheld his appeal, as the gift would have been deductible had it been made to a similar German public-benefit charity. The original decision to deny tax relief was also seen as being contrary to the free movement of capital between Member States. The Court found that a taxpayer should be allowed the opportunity to prove that a gift to a foreign charity met the same charitable requirements as for a similar charity in the donor’s home country. …

Re Persche might give rise to an added level of competition for UK donations, but the opportunity may soon exist for overseas donors to easily make tax-efficient gifts to UK charities. UK charities should consider what they should be doing to be eligible for equivalent tax reliefs in force in other Member States. This may include determining whether their activities/structure meets the criteria that other EU Member States apply to their own charities, and considering constitutional changes which might arise from that review.

By considering their options now, UK charities can aim to ensure that – if and when the law changes – they are well placed to meet enquiries from potential overseas donors concerning their eligibility to receive tax-effective gifts.