The government has altered charitable relief regulations to support the UK’s philanthropic sector. This legislation changes particular goals, the new limitations and specifications for charities and (Charities and Community Amateur Sports Clubs) CASCs, and the effects these adjustments will have on the sector.
This policy revision’s main goals are to direct tax reliefs to charities and CASCs with UK registrations, improve the use of tax reliefs’ transparency and accountability, and strengthen the legal structure that oversees charities and CASCs in the UK.
The new policy concerning charities and CASCs stipulates that to qualify for tax reliefs, they must be registered with HM Revenue and Customs (HMRC) in the UK. Additionally, UK-based branches of overseas charities are only eligible for tax relief if registered as separate UK charities.
The new restrictions will have significant impacts on charities and CASCs in the UK. UK-based branches of foreign charities must register as separate UK charities to maintain their tax reliefs. UK charities and CASCs must also comply with the reporting and record-keeping requirements to retain their tax relief eligibility. Finally, these restrictions will incentivise unregistered charities and CASCs to register and adhere to the criteria for tax relief access.
The government has limited charitable reliefs to organisations operating within the UK as of 1 April 2023. These changes will affect the charities registered with the Office of the Scottish Charity Regulator, the Charity Commission for Northern Ireland, and the Charity Commission for England and Wales. The updated regulations will also apply to CASCs that are HMRC-registered.
The government has established numerous transition periods for various tax reliefs to ensure a smooth transition. The transitional phase for reducing business rates started on 1 April and expires on 31 March 2024. There is no set transition period for the relief from inheritance tax. Instead, beginning on 1 April 2023, the new regulations will be in effect for all deaths.
The UK government’s choice to limit charity reliefs to domestic charities and CASCs demonstrates its dedication to assisting the industry. These adjustments will strengthen the regulatory structure governing charities and CASCs, improve transparency and accountability, and direct tax reliefs to organisations with UK registrations.
While some charities and CASCs may find the new restrictions and regulations challenging to comply with, the corresponding transition periods will help ensure a smooth transition and limit disruptions to the industry.
To improve transparency, tighten regulation, and provide direct tax benefits to registered charities and CASCs, the UK government has revised its policy regarding charitable reliefs. For further information, contact Legend Financial.
HM Revenue & Customs. (2023, March 15). Restriction of Charitable Reliefs to UK Charities and Community Amateur Sports Clubs. GOV.UK. https://www.gov.uk/government/publications/restriction-of-charitable-reliefs-to-uk-charities-and-community-amateur-sports-clubs#:~:text=From%20April%202024%2C%20all%20non,with%20the%20new%20tax%20definition.
Holmes, J. (2023, April 3). Restriction of Charitable Reliefs to UK Charities. Tax Accountant. https://www.taxaccountant.co.uk/restriction-of-charitable-reliefs-to-uk-charities/
Bateson, J. (2023, March 20). Budget: Restriction of charitable reliefs to UK charities and CASCs. KPMG; KPMG. https://kpmg.com/uk/en/home/insights/2023/03/tmd-budget-restriction-of-charitable-reliefs-to-uk-charities-and-cascs.html