Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(b) the amount of the gift is greater by at least 10% than the amount the member of the public would have to pay.

(9) This section needs to be read with section 421.

421 Admission rights: supplementary

(1) This section applies for the purposes of section 420.

(2) Condition C is to be treated as met even if the right does not apply on days which are specified by the charity as event days, provided no more than 5 days are so specified in relation to the applicable period.

(3) The applicable period is--

(a) the period during which the right applies, in the case of a right which applies for a period of 12 months, or

(b) each calendar year during all or part of which the right applies, in the case of a right which applies for a period of more than 12 months.

(4) An "event day" is a day on which an event is to take place on the premises to which the right relates.

(5) In condition D the "same right of admission" means a right relating to the same property, classes of persons and periods of time as the right received in consequence of the gift.

Disqualified overseas gifts

422 Disqualified overseas gifts

(1) This section applies for the purposes of section 416(8).

(2) A gift is an "overseas gift" if--

(a) it is made by an individual to a charity at a time when the individual is neither UK resident nor in Crown employment, and

(b) ignoring condition G in section 416(8), it is a qualifying donation.

(3) An overseas gift made by an individual in a tax year is a "disqualified overseas gift" if, as a result of the gift, the overseas gifts total is more than the individual's charged amount (see section 427).

(4) In subsection (3) "overseas gifts total" means the sum of the grossed up amounts of all overseas gifts made by the individual in the tax year.

(5) In this section "Crown employment" means employment under the Crown--

(a) which is of a public nature, and

(b) the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.

Measures to ensure donor's liability not less than tax treated as deducted

423 Restriction of certain reliefs

(1) This section applies if--

(a) an individual makes one or more gifts to charities in a tax year which are qualifying donations, and

(b) amount A is greater than amount B.

(2) In this section--

"amount A" means the total amount of the tax treated as deducted from the gifts under section 414, and
"amount B" means the total amount of income tax and capital gains tax to which the individual is charged for the tax year (before applying this section).

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425.

(4) The individual's entitlement to the reliefs mentioned in subsection (5) is extinguished, so far as is necessary to ensure that the total amount of income tax and capital gains tax to which the individual is charged for the tax year (after applying this section)--

(a) is equal to amount A, or

(b) if that is not possible, falls short of amount A by as little as possible.

(5) The reliefs are--

(a) an allowance under Chapter 2 of Part 3 of this Act or section 257 or 265 of ICTA (personal allowance and blind person's allowance),

(b) a tax reduction under Chapter 3 of Part 3 of this Act or section 257A, 257AB, 257BA or 257BB of ICTA (tax reductions for married couples and civil partners),

(c) relief under section 457 or 458 of this Act or section 266(7) of ICTA (payments to trade unions and police organisations), and

(d) a tax reduction under section 459 of this Act or section 273 of ICTA (payments for benefit of family members).

424 Charge to tax

(1) Income tax is charged under this section if--

(a) an individual makes one or more gifts to charity in a tax year which are qualifying donations, and

(b) amount A is greater than amount C.

(2) In this section--

"amount A" means the total amount of the tax treated as deducted from the gifts under section 414, and
"amount C" means the sum of--
(a)
the amount of income tax to which the individual is charged for the tax year, and
(b)
the amount of capital gains tax to which the individual is charged for the tax year.

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425, after taking into account any restriction of relief under section 423.

(4) The amount of the tax charged under this section is equal to the difference between amount A and amount C.

(5) Tax charged under this section is charged for the tax year in which the gift or gifts are made.

(6) The person liable for any tax charged under this section is the individual.

425 Total amount of income tax to which individual charged for a tax year

(1) For the purposes of sections 423 and 424, the total amount of income tax to which an individual is charged for a tax year is the amount calculated as follows.

(2) Calculate the individual's liability to income tax for the tax year in accordance with section 23, as modified by subsection (3).

(3) In applying section 23--

(a) at Step 6, ignore any tax reductions to which the individual is entitled for the tax year under a provision listed in subsection (4), and

(b) ignore Step 7.

(4) The tax reductions to be ignored are tax reductions under--

(a) section 453 (qualifying maintenance payments),

(b) section 788 of ICTA (double taxation arrangements: relief by agreement), or

(5) From the amount calculated in accordance with subsections (2) to (4) deduct--

(a) any tax treated as having been paid under--

(i) section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK resident companies etc on which there is no tax credit),

(ii) section 414(1) of that Act (stock dividend income),

(iii) section 421(1) of that Act (release of loan to participator in close company),

(iv) section 530(1) of that Act (gains from contracts for life insurance), or

(v) section 685A(3) of that Act (settlor-interested settlements), and

(b) any tax treated as deducted from estate income under section 656(3) or 657(4) of ITTOIA 2005, so far as that income is treated under section 679 of that Act as paid from sums within section 680(3)(b) or (4) of that Act.

(6) For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 of ICTA if the person is entitled to credit against income tax under double taxation arrangements.

Election to carry back relief

426 Election by donor: gift treated as made in previous tax year

(1) If--

(a) an individual makes a gift to a charity that is a qualifying donation, and

(b) the condition in subsection (2) is met,

the individual may elect to be treated as if the gift had been made in the previous tax year ("year P").

(2) The condition is that the individual's charged amount for year P (see section 427) is at least equal to the increased total of gifts.

(3) If an election is made, sections 414 and 423 to 425 have effect in relation to the individual as if the gift were a qualifying donation made by the individual in year P.

(4) The increased total of gifts is the sum of--

(a) the grossed up amount of the gift, and of any gifts that are the subject of the same election or an election made at the same time,

(b) the sum of the grossed up amounts of any gifts to charities made by the individual in year P which--

(i) are qualifying donations, and

(ii) are not themselves treated as made in the tax year before year P because of an election under this section, and

(c) the sum of the grossed up amounts of any gifts which, as a result of an earlier election under this section, are treated as made in year P.

(5) The grossed up amount of the gifts mentioned in paragraphs (a) and (c) of subsection (4) is to be determined as if the gifts were made in year P.

(6) An election must be made--

(a) on or before the date on which the individual delivers a return for year P under section 8 of TMA 1970 (personal return), and

(b) not later than the normal self-assessment filing date for year P.

(7) An election does not affect the position of the recipient of the gift (see section 520 (gifts to charitable trusts: income tax treated as paid) and section 25(10) of FA 1990 (gifts to charitable companies)).

(8) This section does not apply to gifts which are treated as qualifying donations under section 429 (giving through self-assessment return).

Supplementary

427 Meaning of "charged amount"

(1) For the purposes of this Chapter, an individual's charged amount is the amount calculated as follows.

(2) Calculate the amount of the individual's modified net income for year X (see section 1025).

(3) Calculate the amount on which the individual is chargeable to capital gains tax for year X.

(4) Add together the amounts calculated under subsections (2) and (3).

The result is the individual's charged amount for year X.

428 Meaning of "gift aid declaration"

(1) In this Chapter "gift aid declaration" means a declaration which--

(a) is given in the manner specified by regulations made by the Commissioners for Her Majesty's Revenue and Customs, and

(b) contains any information and any statements required by the regulations.

(2) The regulations may provide for declarations--

(a) to have effect,

(b) to cease to have effect, or

in any circumstances and for any purposes specified by the regulations.

(3) The regulations may--

(a) require charities to keep records with respect to declarations received from individuals, and

(b) make different provision for declarations made in a different manner.

429 Giving through self-assessment return

(1) This section applies if--

(a) as a result of a personal return for a tax year being made by an individual, a tax repayment for one or more tax years falls to be made to the individual, and

(b) conditions A and B are met.

(2) Condition A is that the personal return contains a single direction, in the form specified in the return, requiring--

(a) the whole of the tax repayment, or so much of it as does not exceed a specified amount, to be paid on the individual's behalf as a gift to a single listed charity which is specified in the return, and

(b) the gift to be treated as a qualifying donation for the purposes of this Chapter.

(3) Condition B is that the gift meets Conditions A to G mentioned in section 416.

(4) The gift is to be treated for the purposes of this Chapter as a qualifying donation made by the individual at the time the payment is received by the charity.

(5) In this section--

"listed charity" means a charity which, at the time the personal return is made, is included (at the request of the charity) in a list maintained for the purposes of this section by the Commissioners for Her Majesty's Revenue and Customs,
"personal return" means a return under section 8 of TMA 1970,
"tax repayment" means a repayment (after any set-off that falls to be made against the individual's liabilities) of either or both of--
(a)
income tax or amounts paid on account of income tax, and
(b)
capital gains tax,

and, for the purposes of subsection (2)(a), includes any repayment supplement (within the meaning of section 824 of ICTA or section 283 of TCGA 1992).

430 "Charity" to include exempt bodies

(1) In this Chapter "charity" includes--

(a) the Trustees of the National Heritage Memorial Fund,

(b) the Historic Buildings and Monuments Commission for England,

(d) a club that is registered as a community amateur sports club for the purposes of Schedule 18 to FA 2002.

(2) For the purposes of the application of section 414(1) in relation to clubs that are charities as a result of subsection (1)(d) of this section, membership fees are not gifts.

Chapter 3 Gifts of shares, securities and real property to charities etc

Entitlement to relief

431 Relief for gifts of shares, securities and real property to charities etc

(1) An individual who disposes of the whole of the beneficial interest in a qualifying investment (see section 432) to a charity is entitled to relief if--

(a) the disposal is otherwise than by way of a bargain made at arm's length, and

(b) the individual makes a claim.

(2) The relief is given by deducting the relievable amount in calculating the individual's net income for the tax year in which the disposal is made (see Step 2 of the calculation in section 23).

(3) For the calculation of the relievable amount, see section 434.

(4) If the qualifying investment is a qualifying interest in land (see section 433), this section is subject to--

section 441 (certificates),
section 442 (qualifying interests in land held jointly),
section 443 (calculation of relievable amount where joint disposal), and
section 444 (disqualifying events).

(5) See section 446 for bodies that are treated as charities for the purposes of this Chapter.

(6) See subsection (7) of section 535 of ITTOIA 2005 (top slicing relief) for provision about how relief under this Chapter is to be ignored for the purpose of calculating relief under that section.

432 Meaning of "qualifying investment"

(1) In this Chapter "qualifying investment" means--

(a) shares or securities which are listed or dealt in on a recognised stock exchange,

(b) units in an authorised unit trust,

(d) an interest in an offshore fund, and

(e) a qualifying interest in land.

(2) In this section--

"offshore fund" has the same meaning as in Chapter 5 of Part 17 of ICTA (see sections 756A to 756C of that Act), and
"open-ended investment company" is to be read in accordance with section 468A(2) to (4) of ICTA.

433 Meaning of "qualifying interest in land"

(1) In this Chapter "qualifying interest in land" means--

(a) a freehold interest in land in the United Kingdom, or

(b) a leasehold interest in land in the United Kingdom which is a term of years absolute.

This is subject to subsections (2) to (5).

(2) Subsection (3) applies if an individual with a beneficial interest in a freehold or leasehold interest mentioned in subsection (1)(a) or (b) makes a disposal to a charity of--

(a) the whole of the beneficial interest, and

(b) an easement, servitude, right or privilege so far as benefiting the land in question.

(3) The disposal mentioned in subsection (2)(b) is regarded for the purposes of this Chapter as a disposal by the individual of the whole of the individual's beneficial interest in a qualifying interest in land separate from the disposal mentioned in subsection (2)(a).

(4) If an individual who has a freehold or leasehold interest in land in the United Kingdom grants a lease for a term of years absolute to a charity of the whole or part of that land, the grant of the lease is regarded for the purposes of this Chapter as a disposal by the individual of the whole of the beneficial interest in the leasehold interest so granted.

(5) Neither an agreement to acquire a freehold interest nor an agreement for a lease is a qualifying interest in land.

(6) In the application of this section to Scotland--

(a) references to a freehold interest in land are to the interest of the owner,

(b) references to a leasehold interest in land which is a term of years absolute are to a tenant's right over or interest in a property subject to a lease,

(d) in subsection (4) the reference to granting a lease for a term of years absolute is to granting a lease.

Amount of relief

434 The relievable amount

(1) If the disposal is a gift, the relievable amount is given by the formula--

V + IC - B

where--

V is the value of the net benefit to the charity at, or immediately after, the time when the disposal is made, whichever is less,
IC is the amount of the incidental costs of making the disposal to the individual making it, and
B is the total value of any benefits received in consequence of making the disposal by the individual making the disposal or a person connected with the individual.

(2) If the disposal is at an undervalue, the relievable amount is given by the formula--

E + C - B

where--

E is the amount (if any) by which V (as defined in subsection (1)) exceeds the amount or value of the consideration for the disposal,
C is given by subsection (4), and
B is as defined in subsection (1).

(3) But if the amount given by the formula in subsection (1) or (2) is a negative amount, the relievable amount is nil.

(4) C is found by taking the following steps.

Step 1

Calculate the consideration for which the disposal is treated as made for the purposes of TCGA 1992 as a result of section 257(2)(a) of that Act (in case of disposal to charity etc, consideration to be such that no gain or loss accrues).

Step 2

Find the excess (if any) of the amount calculated at Step 1 over the amount or value of the consideration for the disposal.

If there is such an excess, C is the amount of that excess or, if less, the amount of the incidental costs of making the disposal to the individual making it.

If there is no such excess, C is nil.

(5) This section needs to be read with--

(a) section 435 (incidental costs of making disposal),

(b) section 436 (consideration), and

435 Incidental costs of making disposal

References in section 434 to the incidental costs of making the disposal to the individual making it are to--

(a) fees, commission or remuneration paid for the professional services of a surveyor, valuer, auctioneer, accountant, agent or legal adviser which are wholly and exclusively incurred by the individual for the purposes of the disposal,

(b) costs of transfer or conveyance wholly and exclusively incurred by the individual for the purposes of the disposal,

(d) costs reasonably incurred in making any valuation or apportionment required for the purposes of this Chapter.

436 Consideration

(1) For the purposes of the formula in section 434(2) consideration for the disposal is brought into account--

(a) without any discount for postponement of the right to receive any part of it,

(b) in the first instance, without regard to a risk of any part of it being irrecoverable, and

(2) If--

(a) any part of the consideration so brought into account subsequently proves to be irrecoverable, and

(b) a claim is made,

such adjustment as is required in consequence must be made.

(3) An adjustment under subsection (2) may be made by way of discharge or repayment of tax or otherwise.

Value of net benefit to charity

437 Value of net benefit to charity

(1) For the purposes of this Chapter the value of the net benefit to a charity is--

(a) the market value of the qualifying investment, or

(b) if the charity is, or becomes, subject to a disposal-related obligation, the market value of the qualifying investment reduced by the total amount of the disposal-related liabilities of the charity.

(2) This section is supplemented by--

section 438 (market value of qualifying investments),
section 439 (meaning of "disposal-related obligation"), and
section 440 (meaning and amount of "disposal-related liability").

438 Market value of qualifying investments

(1) The market value of a qualifying investment for the purposes of this Chapter is determined in accordance with sections 272 to 274 of TCGA 1992 (subject to Part 1 of Schedule 11 to that Act).

(2) But, in the case of an interest in an offshore fund for which separate buying and selling prices are published regularly by the managers of the fund, the market value for the purposes of this Chapter is equal to the buying price (that is the lower price) published on--

(a) the day of the disposal, or

(b) if none were published on that day, on the latest day on which the prices were published before that day.

439 Meaning of "disposal-related obligation"

(1) In this Chapter an obligation is a "disposal-related obligation", in relation to a qualifying investment, if condition A or condition B is met in relation to it.

(2) The obligation may be to any person (whether or not the individual making the disposal or a person connected with the individual).

(3) Condition A is that it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation.

(4) Condition B is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a disposal-related investment.

(5) In applying condition A, all the circumstances must be taken into account (including, in particular, the difference in the value of the net benefit to the charity calculated under section 437(1)(a) and that value calculated under section 437(1)(b)).

(6) In subsection (4) "disposal-related investment" means any of the following--

(a) an asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount),

(b) an asset derived from, or representing, the qualifying investment, whether in whole or in part and whether directly or indirectly, and

(c) an asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.

(7) In this Chapter "obligation" includes a reference to each of the following--

(a) a scheme, arrangement or understanding of any kind, whether or not legally enforceable, and

(b) a series of obligations (whether or not between the same parties).

440 Meaning and amount of "disposal-related liability"

(1) In this Chapter a liability is a "disposal-related liability" in the case of a qualifying investment if it is a liability of the charity under a disposal-related obligation in relation to the qualifying investment.

(2) If the disposal-related obligation is contingent, the amount to be brought into account for the purposes of section 437 at any time in respect of the disposal-related liability, so far as contingent, is--

(a) if the contingency occurs, the amount or value of the liability actually incurred in consequence of the occurrence of the contingency, or

(b) if the contingency does not occur, nil.

Special provisions about qualifying interests in land

441 Certificate required from charity

(1) This section applies if the qualifying investment is a qualifying interest in land.

(2) No individual may make a claim for relief under this Chapter unless the individual has received a certificate given by or on behalf of the charity.

(3) The certificate must--

(a) describe the qualifying interest in land,

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