In the latest new relevant to the Charity sector, it has also been announced that following feedback on a HMRC discussion paper the Government has decided not to change the definition of charity for tax purposes. In addition, HMRC is developing and testing a new digital service for organisations applying to be recognised as a charity for tax purposes.

HMRC are trialling the new service by asking applicants to complete their registration details online, rather than using the ChA1 paper form, in addition to providing feedback on using the service. Anyone interested in trialing the new service is asked to contact HMRC for further details. The paper form for applications is still available for completion.

Autumn Statement 2013 had announced that legislation would be brought forward to prevent charities being set up to avoid tax following consultation with the sector. HMRC had developed two alternative legislative approaches to implement that announcement.

Following informal consultation, HMRC published a discussion paper seeking feedback to the two approaches. Based on responses to that discussion paper and engagement with the sector, the Government has decided not to legislate in Finance Bill 2014.

Feedback confirmed that the two approaches outlined in the paper would have a disproportionate and unacceptable effect upon the charity sector and legitimate donors. Possible damage to innocent charities and existing and new controls meant that the Government did not see a change of law justified at this point.

HMRC advise that it already has a wide range of tools available to tackle avoidance and has recently had considerable success in the courts in challenging certain schemes. Recent changes in powers such as the General Anti-Abuse Rule and the fit and proper person test for charities, coupled with the new Accelerated Payments regime, are intended to provide additional deterrence.

However, the Government is clear that charity tax reliefs should not be subject to abuse. HMRC will continue to monitor the situation and maintain a dialogue with the sector in case there are developments or new ideas are put forward. The Government will act if it becomes clear that more controls are needed.