Budget 2023: Restriction of Charitable Reliefs

The Chancellor announced the following measures on Charitable reliefs in his Spring 2023 Budget.

From 15 March 2023

• There is a restriction on charitable tax reliefs so that they apply only to UK charities and Community Amateur Sports Clubs (CASCs).
• EU and EEA charities that HMRC have previously accepted as qualifying for relief will have a transitional period until April 2024. 

The proposed changes will affect individuals who make donations to EU or EEA charities and who have previously been able to claim higher rate tax relief on those donations. The government estimates there are around 2,000 such individuals. The changes could also impact businesses if they make donations to EU and EEA charities.

New tax definition of a charity or CASC

Currently, the wording of the legislation (the ‘jurisdiction condition’) means that some charities or CASCs located in the UK, EU or the EEA could qualify for charitable tax reliefs in the UK.

The proposed measures will amend the jurisdiction condition to change the tax definition of a charity or CASC.

• For charities, only those that come within the jurisdiction of the High Court in England, Wales or Northern Ireland, or the Court of Session in Scotland will qualify for tax reliefs.
  • They must of course also meet the definition of a charity in Paragraph 1, Schedule 6 to the Finance Act 2010.
• For CASCs, it will change the location condition so that the CASC must be based in the UK and provide facilities for eligible sports in the UK.
  • They must also be registered as a CASC under section 658 of Corporation Tax Act 2010, or, if they are not registered, they must be entitled to be registered and have made a registration application to HMRC.

Commencement dates

• For charities that have not asserted their status for charitable tax reliefs before 15 March 2023, the measure takes effect from 15 March 2023.
• For CASCs that have not asserted their status for reliefs before 15 March 2023, it applies for accounting periods beginning on or after 15 March 2023.
• For non-UK entities that have asserted their status for charitable tax reliefs before 15 March 2023, of which there are estimated to be just 20 charities, there will be a transitional period until April 2024.
  • For taxes raised by tax year e.g. Income Tax and Capital Gains Tax, the transitional period will run to 2024-25. For all other taxes, it will run to 1 April 2024. There are specific commencement rules for particular taxes such as Stamp Duty Land Tax (SDLT).
• From April 2024, all non-UK charities and CASCs will no longer be eligible to claim UK charitable tax reliefs.
• From 15 March 2023, any new applications by charities or CASCs to be recognised by or registered with HMRC will need to comply with the new tax definition.

Useful guides on this topic

Budget 2023: At a glance
Freeview summary of the measures announced in the Budget 2023

External link

Policy paper: Restriction of Charitable Reliefs 

Draft legislation