Income and Corporation Taxes Act 1988

[F1 506A Transactions with substantial donors U.K.

(1) This section applies to the following transactions—

(a) the sale or letting of property by a [F2 charitable company] to a substantial donor,

(b) the sale or letting of property to a [F2 charitable company] by a substantial donor,

(c) the provision of services by a [F2 charitable company] to a substantial donor,

(d) the provision of services to a [F2 charitable company] by a substantial donor,

(e) an exchange of property between a [F2 charitable company] and a substantial donor,

(f) the provision of financial assistance by a [F2 charitable company] to a substantial donor,

(g) the provision of financial assistance to a [F2 charitable company] by a substantial donor, and

(h) investment by a [F2 charitable company] in the business of a substantial donor.

(2) For the purposes of this section a person is a substantial donor to a [F2 charitable company] in respect of [F3 an accounting] period if—

(a) the [F2 charitable company] receives relievable gifts of at least £25,000 from him in a period of 12 months in which [F4 the accounting] period wholly or partly falls, or

(b) the [F2 charitable company] receives relievable gifts of at least [F5 £150,000] from him in a period of six years in which [F4 the accounting] period wholly or partly falls;

and if a person is a substantial donor to a [F2 charitable company] in respect of [F3 an accounting] period by virtue of paragraph (a) or (b), he is a substantial donor to the [F2 charitable company] in respect of the following [F6 five accounting] periods.

(3) A payment made by a [F2 charitable company] to a substantial donor in the course of or for the purposes of a transaction to which this section applies shall be treated for the purposes of section 505 as non-charitable expenditure.

(4) If the terms of a transaction to which this section applies are less beneficial to the [F2 charitable company] than terms which might be expected in a transaction at arm's length, the [F2 charitable company] shall be treated for the purposes of section 505 as incurring non-charitable expenditure equal to that amount which the Commissioners for Her Majesty's Revenue and Customs determine as the cost to the [F2 charitable company] of the difference in terms.

(5) A payment by a [F2 charitable company] of remuneration to a substantial donor shall be treated for the purposes of section 505 as non-charitable expenditure unless it is remuneration, for services as a trustee, which is approved by—

(a) the Charity Commission,

(b) another body with responsibility for regulating charities by virtue of legislation having effect in respect of any Part of the United Kingdom, or

(c) a court.]

Textual Amendments

F1 Ss. 506A-506C inserted (with effect in accordance with s. 54(2)(3) of the amending Act) by Finance Act 2006 (c. 25), s. 54(1)

F2 Words in s. 506A substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 96(2) (with Sch. 2)

F3 Words in s. 506A(2) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 96(3)(a) (with Sch. 2)

F4 Words in s. 506A(2) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 96(3)(b) (with Sch. 2)

F5 Words in s. 506A(2)(b) substituted (23.4.2009) by The Substantial Donor Transactions (Variation of Threshold Limits) Regulations 2009 (S.I. 2009/1029), regs. 1, 2(a)

F6 Words in s. 506A(2) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 96(3)(c) (with Sch. 2)