Commentary on Sections Section 13: Charity mergers: new charity taking over activities of several charities
85.Section 13 provides that a new charity or CASC created to take on the activities of two or more charities or CASCs can take on the compliance history of one of the predecessor charities or CASCs for the purposes of deciding the new charity’s or CASC’s eligibility to make claims under the scheme under section 2. The provision applies only if the new charity or CASC applies to HMRC, and HMRC certifies that the conditions in subsection (1) are met.
86.The new charity or CASC must have taken over the activities of the pre-merger charities or CASCs and have purposes that are substantially similar to the pre-merger charities or CASCs.
87.More than half of the managers of the new charity or CASC must have been managers of the old charities or CASCs. “Managers” is defined at subsection (8) of section 13 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.
88.It is not necessary for the new managers to be drawn from each of the old charities.
89.For example Charity A, with four managers, merges with Charity B, with two managers, to form Charity C. Charity C has three managers. Two of the managers of Charity C were managers of Charity A. The third manager of Charity C is new and was not associated with either Charity A or Charity B. Charity C meets the requirement that over half of its managers were old charity managers.
90.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 one of the pre-merger charities or CASCs, known as the “relevant old charity”.
91.The relevant old charity is the pre-merger charity or CASC with the least eligibility history under section 2.
92.If all the pre-merger charities or CASCs would be eligible under section 2 in the year of merger then to identify the relevant old charity:
	assume that, if the merger had not gone ahead, none of the pre-merger charities makes a successful Gift Aid exemption claim in the year of merger or in future
	identify which of the charities or CASCs would cease to become eligible under section 2 first.
93.For example Charities A, B and C merge to form Charity D on 7 April 2016. All the conditions are met. The claim history of the Charities A, B and C is as follows.
94.The relevant old charity is Charity B because it would not be eligible to make a top-up claim in 2017/18. Charities A and C could make claims in 2017/18, but not in 2018/19.
95.If all but one of the pre-merger charities or CASCs would be eligible charities or CASCs under section 2 in the year of merger then the relevant old charity is the charity or CASC that is not eligible.
96.If more than one of the pre-merger charities or CASCs would not be eligible charities or CASCs under section 2 in the year of merger then, to identify the relevant old charity:
	assume that, if the merger had not gone ahead, each of the ineligible pre-merger charities makes a successful Gift Aid exemption claim in the year of merger and in future
	identify which of those charities or CASCs would be the last to become eligible under section 2.
97.For example Charities A, B and C merge to form Charity D on 7 April 2017. All the conditions set out in section 13(1) are met. The claim history of the Charities A, B and C is as follows.
98.Charity A cannot be the relevant old charity as it is eligible under section 2 for the year of the merger. Charity C would be able to make a top-up claim from 2018-19. However, the relevant old charity is Charity B because it would not be eligible to make a top-up claim under section 2 until 2019-20 – it is the last charity that would have become eligible. Charity D therefore takes on the claim history of Charity B.
99.If there is a tie between two or more pre-merger charities or CASCs when determining which of them is the relevant old charity, then the new charity must elect which of the charities or CASCs is to be the relevant old charity.
100.Where the merger takes place after 6 April of a tax year then:
	if any of the old charities or CASCs have made a successful top-up claim in respect of small donations made to it in that tax year, the new charity or CASC cannot take on the compliance history of the relevant old charity to determine its eligibility until the following tax year at the earliest, that is the year after the merger;
	if none of the old charities or CASCs has made a successful top-up claim in respect of small donations given to it in that tax year, the new charity or CASC can take on the compliance history of the relevant old charity to determine its eligibility to make claims for the year of the merger.