Finance Act 1990

27 Maximum qualifying company donations

(1) In section 338 of the Taxes Act 1988 (allowance of charges on income and capital) in subsection (2) for the words “to section 339” there shall be substituted the words “to sections 339 and 339A”.

(2) In section 339 of that Act (charges on income: donations to charity) subsection (5) shall be omitted and in subsection (9) for “(5)” there shall be substituted “(4)”.

(3) The following section shall be inserted after section 339 of that Act—

“339A Maximum qualifying donations

(1) If in a particular accounting period of a company the company has no associated company, a qualifying donation made by the company in that period shall not be allowable under section 338 by virtue of subsection (2)(b) of that section to the extent that, when taken together with any qualifying donations already made by the company in that period, the amount given, after deducting income tax under section 339(3), exceeds £5 million.

(2) If in a particular accounting period of a company the company has one or more associated companies, a qualifying donation made by the company in that period shall not be allowable under section 338 by virtue of subsection (2)(b) of that section to the extent that, when taken together with any qualifying donations already made by the company in that period, the amount given, after deducting income tax under section 339(3), exceeds the appropriate fraction of £5 million.

(3) Subsection (1) or (2) above shall not apply where—

(a) the company concerned is not a close company in the accounting period concerned, and

(b) in that period the maximum amount allowable under section 338 by virtue of subsection (2)(b) of that section (“the allowable maximum”) is (apart from this subsection) less than a sum equal to 3 per cent. of the dividends paid on the company’s ordinary share capital in that period (“the relevant sum”);

and in such a case the allowable maximum in that period shall be the relevant sum.

(4) For the purposes of subsection (2) above, the appropriate fraction is a fraction whose numerator is one and whose denominator is one plus the number of associated companies.

(5) In applying subsections (1) to (4) above to any accounting period of a company, an associated company shall be disregarded if—

(a) it has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period), or

(b) it is a charity throughout that accounting period (or, if an associated company during part only of that accounting period, throughout that part of that accounting period).

(6) In determining for the purposes of this section how many associated companies a company has got in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the period, and two or more associated companies shall be counted even if they were associated companies for different parts of the period.

(7) For an accounting period of less than 12 months the figure of £5 million specified in subsections (1) and (2) above shall be proportionately reduced.

(8) For the purposes of this section a company is an associated company of another at a particular time if at that time one of the two has control of the other or both are under the control of the same person or persons; and in this subsection “control” shall be construed in accordance with section 416.”

(4) This section applies in relation to accounting periods ending on or after 1st October 1990.