HM Revenue & Customs has issued new guidance for charities that have transactions with substantial donors. Transactions could include letting a property to a donor, commissioning them to supply services, or investment by a charity in the business of a donor. Such donors are broadly defined as giving £25,000 or more in a year. These transactions may be treated as non-charitable expenditure, resulting in a restriction of the charity's tax exemption.
The guidance goes into more detail on what constitutes a substantial gift and outlines how to account for them in subsequent accounting years. It also specifies which donations qualify for tax reliefs and what kind of transactions may be caught by legislation. It also explains circumstances when charities need to be aware of the legal position of transactions with donors through the use of case studies.
www.hmrc.gov.uk/charities/guidance-notes/annex2/annex_ii.htm#11
