Tax avoidance – Gifts of investments to charities
New draft legislation has been published to block a tax avoidance scheme which exploits the rules for gifts of qualifying investments to charities. The draft legislation will be included in the 2010 Finance Bill but took effect from 15 December 2009.
The new rules are aimed at higher rate taxpayers who receive tax relief on the full market value of a donation of qualifying investments to charity. The avoidance scheme being blocked involved situations where the investments were acquired at below market value or the market value was somehow artificially inflated at the time the gift was made to the charity.
In future the amount of relief available to taxpayers will be limited to the ‘economic cost of acquisition’ where the following scenario applies:
- The qualifying investment (or anything from which the investment derives) gifted to the charity was acquired within 4 years of the date of disposal; and
- The main purpose or one of the main purposes, of acquiring the qualifying investment was to dispose of it to a charity and claim the tax relief.