Income and Corporation Taxes Act 1988

339 Charges on income: donations to charity. U.K.

(1) M1 A qualifying donation is a payment made by a company to a charity, other than—

(a) a covenanted payment [F1 of a sum of money] to charity, as defined in [F2 section 347A(7)]; and

(b) a payment which is deductible in computing profits or any description of profits for purposes of corporation tax.

(2) M2 A qualifying donation shall not constitute a charge on the income of the company unless a claim is made by the company and the company is resident in the United Kingdomand is not a close companyF3 .

(3) M3 A payment made by a company is not a qualifying donation unless, on the making of it, the company deducts out of it a sum representing the amount of income tax on it.

[F4 (3A) A payment made by a close company is not a qualifying donation if it is of a sum which leaves less than [F5 £250] after deducting income tax under subsection (3) above.

(3B) A payment made by a close company is not a qualifying donation if—

(a) it is made subject to a condition as to repayment, or

(b) the company or a connected person receives a benefit in consequence of making it and either the relevant value in relation to the payment exceeds two and a half per cent of the amount given after deducting tax under section 339(3) or the amount to be taken into account for the purposes of this paragraph in relation to the payment exceeds £250.

(3C) For the purposes of subsections (3B) above and (3D) below, the relevant value in relation to a payment to a charity is—

(a) where there is one benefit received in consequence of making it which is received by the company or a connected person, the value of that benefit;

(b) where there is more than one benefit received in consequence of making it which is received by the company or a connected person, the aggregate value of all the benefits received in consequence of making it which are received by the company or a connected person.

(3D) The amount to be taken into account for the purposes of subsection (3B)(b) above in relation to a payment to a charity is an amount equal to the aggregate of—

(a) the relevant value in relation to the payment, and

(b) the relevant value in relation to each payment already made to the charity by the company in the accounting period in which the payment is made which is a qualifying donation within the meaning of this section.

(3E) A payment made by a close company is not a qualifying donation if it is conditional on, or associated with, or part of an arrangement involving, the acquisition of property by the charity, otherwise than by way of gift, from the company or a connected person.

(3F) A payment made by a company is not a qualifying donation unless the company gives to the charity to which the payment is made a certificate in such form as the Board may prescribe and containing—

(a) in the case of any company, a statement to the effect that the payment is one out of which the company has deducted tax under subsection (3) above, and

(b) in the case of a close company, a statement to the effect that the payment satisfies the requirements of subsections (3A) to (3E) above.

(3G) A payment made by a company is not a qualifying donation if the company is itself a charity.]

(4) Where, with a view to securing relief under section 338 a company makes a payment subject to such a deduction as is mentioned in subsection (3) above, then, whether or not it proves to be a qualifying donation, the payment—

(a) shall be treated as a relevant payment for the purposes of Schedule 16; and

(b) shall in the hands of the recipient (whether a charity or not) be treated for the purposes of this Act as if it were an annual payment.

(5) In any accounting period of a company, the maximum amount allowable under section 338by virtue of subsection (2)(b)of that section in respect of qualifying donations made by the company shall be a sum equal to 3per cent. of the dividends paid on the company’s ordinary share capital in that accounting periodF6 .

(6) M4 A covenanted donation to charity shall not be regarded for the purposes of the definition of “charges on income” in section 338, or for any of the other purposes of the Corporation Tax Acts, as being, by reason of any provision of this Act, a distribution.

(7) M5 Notwithstanding anything in any other provision of the Tax Acts, a covenanted donation to charity made by a company shall not be a charge on income for the purposes of section 338 unless the company—

(a) deducts out of it a sum representing the amount of income tax on it; and

(b) accounts for that tax in accordance with Schedule 16;

and any such payment from which a deduction is made as mentioned in paragraph (a) above shall be treated as a relevant payment for the purposes of Schedule 16, whether or not it would otherwise fall to be so treated.

[F7 (7AA) Where—

(a) a covenanted donation to a charity is made by a company which is wholly owned by a charity,

(b) the requirements of subsection (7) above for that donation to be regarded as a charge on income are satisfied,

(c) the disposition or covenant under which the donation is made required it to be made in an accounting period of the company which ended before the time when it is in fact made, and

(d) the donation is made within nine months of the end of that period,

the donation shall be deemed for the purposes of section 338 to be a charge on income paid in the accounting period in which it was required to be made, and not in any later period.

(7AB) For the purposes of this section a company is wholly owned by a charity if it is either—

(a) a company with an ordinary share capital every part of which is owned by a charity (whether or not the same charity); or

(b) a company limited by guarantee in whose case every person who—

(i) is beneficially entitled to participate in the divisible profits of the company, or

(ii) will be beneficially entitled to share in any net assets of the company available for distribution on its winding up,

is or must be a charity or a company wholly owned by a charity.

(7AC) For the purposes of subsection (7AB) above ordinary share capital of a company shall be taken to be owned by a charity if there is a charity which—

(a) within the meaning of section 838 directly or indirectly owns that share capital; or

(b) would be taken so to own that share capital if references in that section to a body corporate included references to a charity which is not a body corporate.]

[F8 (7A) In subsections (3B) to (3E) above references to a connected person are to a person connected with—

(a) the company, or

(b) a person connected with the company;

and section 839 applies for the purposes of this subsection.]

(8) M6 In this section “covenanted donation to charity” means a payment under a disposition or covenant made by the company in favour of a charity whereby the like annual payments (of which the donation is one) become payable for a period which may exceed three years and is not capable of earlier termination under any power exercisable without the consent of the persons for the time being entitled to the payments.

(9) M7 For the purposes of this section “charity” includes [F9 each of the bodies mentioned in section 507, and in subsections (1) to [F10 (4)] above includes] any Association of a description specified in section 508, but, subject to that, in this section “charity” has the same meaning as in section 506.

Textual Amendments

F1 1990 s.26(2)in relation to payments made on or after 1October 1990.

F2 Words in s. 339(1)(a) substituted (with effect and application in accordance with s. 74 of the amending Act) by Finance Act 1995 (c. 4), Sch. 17 para. 3

F3 Words repealed by 1990 ss.26(3)and 132and Sch.19 Part IVin relation to payments made on or after 1October 1990.

F4 1990 s.26(4)in relation to payments made on or after 1October 1990.

F5 Word in s. 339(3A) substituted (27.7.1993 with application in relation to payments made on or after 16.3.1993) by 1993 c. 34, s. 67(1)(3)

F6 Repealed by 1990 ss.27(2)and 132and Sch.19 Part IVin relation to accounting periods ending on or after 1October 1990.

F7 S. 337(7AA)-(7AC) inserted (with effect in accordance with s. 64(2) of the amending Act) by Finance Act 1997 (c. 16), s. 64(1)

F8 1990 s.26(5)in relation to payments made on or after 1October 1990.

F9 1989 s.60(2)in respect of payments due on or after 14March 1989.Previously

“the Trustees of the National Heritage Memorial Fund and the Historic Buildings and Monuments Commission for England and, additionally, in subsections (1) to (5) above includes the Trustees of the British Museum, the Trustees of the British Museum (Natural History) and”.

F10 1990 s.27(2).Previously

“(5)”.

Modifications etc. (not altering text)

C1 See 1990 s.94re production of books etc. in respect of repayment claims in respect of payments made on or after 1October 1990.

Marginal Citations

M1 Source-1986 s.29(1), (2)

M2 Source-1986 s.29(1)

M3 Source-1986 s.29(3)-(5)

M4 Source-1970 s.248(8); 1972 Sch.24 20

M5 Source-1970 s.248(8A); 1986 s.30(2)

M6 Source-1970 s.248(a); 1980 s.55(3)

M7 Source-1981 s.49; 1983 s.46(3); 1986 s.29(6)