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.

Alert me about debates like this

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon 4:00 pm, 13th June 2002

I am extremely grateful to you, Mr. Gale. Two problems have been raised with me and with other Committee members by the Law Society. I do not believe that they have been debated before. They relate to technical problems with the provisions. The danger of recapture of tax relief will be a considerable disincentive for those making gifts of real property to a charity and will defeat the purposes of clause 96. I refer particularly to subsequent innocent, bona fide transactions that could lead to a claim for repayment of tax relief.

The first point relates to clause 96(5), which contains supplementary provisions for gifts of real property. Proposed new section 587C(9) defines a disqualifying event and, accordingly, a clawback of relief given under section 587B, where the person who made the disposal, or any person connected with him,

''becomes entitled to an interest or right in relation to all or part of the land to which the disposal relates . . . otherwise than for full consideration in money or money's worth.''

That is an extremely wide provision. It could catch a number of sets of circumstances in which the spirit of the rules is not breached. For example, if a person grants a lease to a charity and obtains tax relief, it would appear that that tax relief will be withdrawn if the person subsequently makes a gift of the freehold reversion to a relative. Given that example, the charity will still retain the benefit of the property given to it.

My second point concerns a gift that is given to a charity on condition, for example, that the property be used for charitable purposes, which is an eminently sensible provision. If, later, the condition is no longer satisfied, arguably a disqualifying event arises. That could occur many years later and it would not seem

appropriate to recapture the tax relief if the arrangements were genuinely undertaken.

The first problem could be overcome if subsection (9)(a) were limited to the donor or a connected person becoming entitled to the interest acquired by the charity or an interest derived from that interest. The second set of circumstances that I have posited would appear to require a specific saving provision in the legislation.

I hope that the Minister will give some thought to those points. Those of us who advise donors to charity, or who have considered making gifts to charity, will not want to have the original tax relief recaptured or to receive demands for repayment if, in future, a bona fide incident occurs that could give rise to a charge to tax.