Annex 1: Minor changes in the law Change 27: Charitable donations relief: gifts and benefits linked to periods of less than 12 months: priority between methods of calculating annualised amounts of gifts and benefits: section 198
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 a company makes a donation of money to a charity, and receives a benefit in consequence of doing so, that benefit may affect whether the donation is “qualifying” (section 191). And that in turn affects whether the company obtains tax relief for the donation under section 190 as a qualifying charitable donation.
The source legislation (section 339(3DB) to (3DD) of ICTA) contains rules to counter tax advantages from fragmentation of the time periods attaching to donations or to consequent benefits. In particular, section 339(3DD) of ICTA (rewritten in section 198) 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 339(3DB) and (3DC) of ICTA, rewritten in section 198 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 198(8). It provides that, in such a case, the rule relating to Conditions C and D takes priority.
This change is in principle adverse to some taxpayers and favourable to others. But it is expected to have no practical effect as it is in line with generally accepted practice.