ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is adverse to some taxpayers in principle. But it is expected to have no practical effect as it is in line with current practice.
Change 77: Gift aid: gifts and benefits linked to periods of less than 12 months: priority between methods of calculating annualised amounts of gifts and benefits: section 419 and Schedule 2Part 9 (gift aid: restrictions on associated benefits)
This change clarifies the operation of the rules about annualising the amounts of gifts and benefits in the various different sets of circumstances which can arise, by providing a priority rule to cater for certain cases where more than one of the statutory rules could apply in relation to a given set of circumstances.
If an individual makes a donation of money to a charity, and receives a benefit in consequence of making the donation, that benefit may affect whether the donation is “qualifying” (section 416(7)). And that in turn will affect whether the individual obtains tax relief for the donation under section 414(2). It will also affect whether the charity may obtain repayment of the tax treated as deducted from the donation under section 521(1) and (4) of this Act, or under section 25(10) of FA 1990 and section 505(1)(c)(ii) of ICTA.
The source legislation (section 25(5B) to (5D) of FA 1990) contains rules to counter tax advantages from fragmentation of the time periods attaching to donations or to consequent benefits. In particular, section 25(5D) (rewritten in section 419(8) of this Act) lays down the method of annualising either the gift, or both the gift and the benefit, in different circumstances. Those circumstances are set out in section 25(5B) and (5C), rewritten in section 419(2) to (5) of this Act as Conditions A to D.
But the source legislation does not set out what is to happen if the circumstances fall within one of Conditions C and D and within one of Conditions A and B, which in theory can occur.
This change provides a priority rule to cater for such cases, which is located in Step 2 of section 419(8). It provides that, in such a case, the rule relating to Conditions C and D takes priority.