Article

EU Challenge to UK Gift Aid

The European Commission issued a press release in July 2006 stating that the European Commission has sent the UK a formal request to end discrimination against foreign charities. If the UK Government does not reply satisfactorily to the Commission’s request within two months the Commission may refer the matter to the European Court of Justice. The Taxation & Customs Commissioner, László Kovács, said “The rules of the Internal Market forbid discrimination of charities in other Member States. Gifts to
bona fide charities in other Member States should get the same tax treatment as gifts made to domestic charities.” At present only charities established in the UK may reclaim tax on Gift Aid donations. The Commission is arguing that the difference in treatment between gifts made to charities in the UK and
charities in other member states:

= constitutes an obstacle to the free movement of capital
= is contrary to the free movement of persons (since workers and selfemployed persons moving to the UK might wish to make gifts to charities established in the member state where they came from);
= is contrary to the freedom of establishment (since foreign charities are forced to set up branches in the UK in order to benefit from the favourable tax treatment).

One of the difficulties in the way of according similar treatment to European charities is that our concept of charity is unique in Europe. In order to comply with the EC request arrangements will need to be put in place to allow the Treasury to identify those EU charities which would be eligible for charity registration if established in the UK.

For further enquiries please contact Elizabeth Cairns (view full profile) on 01892 510000 or email elizabeth.cairns@ts-p.co.uk.

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