Commentary on Sections Section 12: Charity mergers: new charity taking over activities of one charity
77.Section 12 provides that a charity or CASC created to take over the activities of one predecessor charity or CASC, for example on a change of legal form, can benefit from its predecessor’s Gift Aid compliance history. The provision applies only if the new charity or CASC applies to HMRC, and HMRC certifies that the conditions in subsection (1) are met.
78.So, for example, a charitable trust successfully operating Gift Aid for four years may decide to incorporate, and become a charitable company in year five. It can make an application under this section, and HMRC will consider the activity and the extent of transfer of any property of the charitable trust in determining the eligibility of the charitable company. It is not essential that the old charity or CASC is dissolved when the new charity or CASC applies to HMRC under section 12. However, the new charity or CASC must have taken over the activities of the old charity or CASC and, as far as possible, the old charity’s or CASC’s property. The new charity or CASC must also have purposes substantially similar to those of the old charity or CASC.
79.More than half of the managers of the new charity or CASC must have been managers of the old charity or CASC. This provision ensures that the new charity or CASC continues to be controlled and led by the same people who established a good compliance track record for the old charity or CASC. “Managers” is defined in subsection (7) of section 12 as the persons having the general control and management of the administration of the charity. All trustees and directors of a charity and all directors of a CASC are managers.
80.Where HMRC certifies the four elements of subsection (1) are satisfied, the new organisation would not necessarily need to wait for two complete tax years before satisfying the eligibility criteria. Instead it can rely on the compliance history attributable to the old organisation.
81.Where the change in legal form takes place after 6 April of a tax year then:
	if the old charity or CASC has made a successful top-up claim in respect of small donations made in that tax year, the new charity or CASC cannot make a top-up claim until the following year at the earliest;
	if the old charity or CASC has not made a successful top-up claim in respect of small donations made in that tax year, the new charity or CASC may make a top-up claim in the tax year when the change of legal form took place, provided that the old charity would have been eligible to make a top-up claim for the year, if the change of legal form had not taken place.
82.For example, Charity A, charitable trust, changes legal form to become Charity B, a charitable incorporated organisation on 1 October 2014. Charity A has successfully claimed top-up payments in 2013-14, but has not made any top-up claims in respect of small donations made since 5 April 2014. Charity B may claim top-up payments for small donations collected by Charity B since 1 October 2014.
83.If Charity A had made a successful top-up claim on 31 July 2014 for small donations collected since 6 April 2014 then Charity B will only be able to make a claim on small donations collected on or after 6 April 2015. It will not be able to claim for small donations collected by it from 1 October 2014 to 5 April 2015.
84.If, instead, Charity A had made a successful top-up claim on 31 July 2014 for small donations collected between 1 October 2013 and 5 April 2014 – that is the previous tax year – and not claimed on any small donations collected after 5 April 2014 then Charity B may claim top-up payments for small donations collected by Charity B since 1 October 2014. That is because Charity A had not made a claim in respect of small donations collected since 6 April 2014.