Better guidance for charities that spend money abroad.

HMRC guidance coming on withdrawal of tax reliefs on spending abroad

By David Ainsworth, Third Sector, 13 July 2010

Promise to clear up confusion over ‘reasonable steps’ clause

HM Revenue & Customs has promised to produce guidance explaining new legislation that gives it more power to withdraw tax reliefs from charities that spend money abroad.

A clause in the Finance Act passed after the Budget in April says that overseas expenditure by charities might be considered non-charitable, and therefore liable for tax, if organisations have not taken “such steps as HMRC considers are reasonable” to ensure funds are used for charitable purposes.

HMRC has promised to define what those reasonable steps might be, because they are not clearly outlined in the legislation. An HMRC spokesman said the guidance would appear “within weeks”.

“The decision by HMRC to produce this guidance is good news,” said Bill Lewis, a tax consultant at specialist charity law firm Bates Wells & Braithwaite. “We need strong guidance to make sure that no tax inspector with a bee in his bonnet can insist that a charity has not behaved properly.

“The consequences of getting this wrong are serious. But people don’t know what HMRC is thinking, and they can’t be expected to guess what steps might be appropriate.”

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