European Commission urges UK to extend Gift Aid to EU charities
Howard Lake | 19 July 2006 | News
The UK government is facing possible legal action from the European Commission because the latter claims that UK legislation that allows tax relief on gifts to charities, such as Gift Aid, discriminates against charities elsewhere in the EU.
Currently Gift Aid is only available to British taxpayers making a donation to a charity registered in the UK. Not extending this to charities registered elsewhere in the European Union amounts to illegal discrimination, claims the Commission.
EU Taxation and Customs Commissioner László Kovács said: “Gifts to bona fide charities in other Member States should get the same tax treatment as gifts made to domestic charities.”
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The Commission argues that the difference in treatment between gifts made to charities in the UK and charities in other Member States “constitutes an obstacle to the free movement of capital”. Indeed, cross-border gifts are explicitly mentioned in Council Directive 88/361/EEC.
In addition it argues that the current rules constitute discrimination “contrary to the free movement of persons”, because “workers and self-employed persons moving to the UK might wish to make gifts to charities established in the Member State where they came from.”
The Commission also argues that “the rules are contrary to the freedom of establishment, as foreign charities are forced to set up branches in the UK in order to benefit from the favourable tax treatment.”
HM Treasury has two months in which to reply to the Commission’s “reasoned opinion” or risk facing court action.
An HM Revenue & Customs spokesperson told Third Sector magazine that “the UK is carefully considering the Commission’s reasoned opinion”.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.