Clause 96 - Gifts of real property to charity

Part of Finance Bill – in a Public Bill Committee at 4:00 pm on 13th June 2002.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 4:00 pm, 13th June 2002

I beg to move amendment No. 81, in page 72, line 37, at end insert—

'(4A) Section 25 of the Finance Act 1990 and section 339 of the Taxes Act 1988 are amended as follows.

'(4B) At the end of subsection (2)(f) of section 25 of the Finance Act 1990 insert '', but this paragraph shall not apply where, had such property been transferred to the charity by way of gift, relief would have been allowed under section 587B of the Taxes Act 1988.''

(4C) At the end of subsection (3E) of section 339 of the Taxes Act 1988 insert '', but this subsection shall not apply where, had such property been transferred to the charity by way of gift, relief would have been allowed under section 587B of the Taxes Act 1988.''.'.

There is a problem with the clause, in that quoted shares or land that a donor wishes to give to a charity may be standing at a capital gains tax loss, particularly in the case of shares since the measures were introduced. If the donor makes a gift of the shares or land, thereby obtaining income tax relief under section 587B of the Taxes Act 1988, the shares or land will be transferred at a zero gain, zero loss consideration under that Act and the loss will not be available.

If the donor were to sell the shares or land to the charity and then gift the cash proceeds of the sale to the same charity, he would remain entitled to the capital gains tax loss on the sale but would be denied the income tax relief for the cash gift because of the anti-avoidance rules in section 252F of the Finance Act 1990 for individuals and the relevant section for companies, which deny gift aid relief unless the cash

gift is not conditional or associated with or part of an arrangement involving the acquisition of property by the charity otherwise than by way of gift from the donor to a person connected with him.

The purpose of the amendment is to address that situation and to clarify that it applies to shares as well as to land.