Corporation Tax Act 2010 (c. 4)

Part 6 U.K. Charitable donations relief

Chapter 3 U.K. Certain disposals to charity

Amounts treated as qualifying charitable donations U.K.

203 Certain disposals of investments U.K.

(1) This section applies if—

(a) a company disposes of the whole of the beneficial interest in a qualifying investment to a charity,

(b) the disposal is otherwise than by way of a bargain made at arm's length,

(c) the company is not itself a charity, and

(d) the company makes a claim.

(2) The relievable amount is treated for corporation tax purposes as a qualifying charitable donation made by the company in the accounting period in which the disposal is made.

(3) No relief in respect of the disposal is to be given under section 105 of CTA 2009 (gifts of trading stock to charities etc).

(4) For the calculation of the relievable amount, see section 206.

(5) If the qualifying investment is a qualifying interest in land, this section is subject to—

• section 213 (certificates),

• section 214 (qualifying interests in land held jointly),

• section 215 (calculation of relievable amount etc where joint disposal), and

• section 216 (disqualifying events).

204 Meaning of qualifying investment U.K.

(1) In this Chapter “qualifying investment” means any of the following—

(a) shares or securities which are listed on a recognised stock exchange or dealt in on a designated market in the United Kingdom,

(b) units in an authorised unit trust,

(c) shares in an open-ended investment company,

(d) an interest in an offshore fund, and

(e) a qualifying interest in land.

(2) In this section—

• “offshore fund” has the meaning given by section 355 of TIOPA 2010, and

• “open-ended investment company” is to be read in accordance with sections 613 and 615.

(3) In paragraph (a) of subsection (1) “designated” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that paragraph.

(4) An order under subsection (3)—

(a) may designate a market by name or by reference to a class or description of market,

(b) may vary or revoke a previous order under that subsection.

205 Meaning of qualifying interest in land U.K.

(1) In this Chapter “qualifying interest in land” means—

(a) a freehold interest in land in the United Kingdom, or

(b) a leasehold interest in land in the United Kingdom which is a term of years absolute.

This is subject to subsections (2) to (5).

(2) Subsection (3) applies if a company with a beneficial interest in a freehold or leasehold interest mentioned in subsection (1)(a) or (b) makes a disposal to a charity of—

(a) the whole of the beneficial interest, and

(b) an easement, servitude, right or privilege so far as benefiting the land in question.

(3) The disposal mentioned in subsection (2)(b) is regarded for the purposes of this Chapter as a disposal by the company of the whole of its beneficial interest in a qualifying interest in land separate from the disposal mentioned in subsection (2)(a).

(4) If a company which has a freehold or leasehold interest in land in the United Kingdom grants a lease for a term of years absolute to a charity of the whole or part of the land, the grant of the lease is regarded for the purposes of this Chapter as a disposal by the company of the whole of the beneficial interest in the leasehold interest so granted.

(5) Neither an agreement to acquire a freehold interest nor an agreement for a lease is a qualifying interest in land.

(6) In the application of this section to Scotland—

(a) references to a freehold interest in land are to the interest of the owner,

(b) references to a leasehold interest in land which is a term of years absolute are to a tenant's right over or interest in a property subject to a lease,

(c) references to an agreement for a lease do not include missives of let that constitute an actual lease, and

(d) the reference in subsection (4) to granting a lease for a term of years absolute is to granting a lease.

206 The relievable amount U.K.

(1) If the disposal is a gift, the relievable amount is given by the formula—

where—

V is the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever is less),

IC is the amount of the incidental costs of making the disposal to the company making it, and

B is the total value of any benefits received in consequence of making the disposal by the company making the disposal or a person connected with the company.

(2) If the disposal is at an undervalue, the relievable amount is given by the formula—

where—

E is the amount (if any) by which V (as defined in subsection (1)) exceeds the amount or value of the consideration for the disposal,

C is given by subsection (4), and

B is as defined in subsection (1).

(3) But if the amount given by the formula in subsection (1) or (2) is a negative amount, the relievable amount is nil.

(4) C is found as follows.

• Step 1

  Calculate the consideration for which the disposal is treated as made for the purposes of TCGA 1992 as a result of section 257(2)(a) of that Act (in case of disposal to charity etc, consideration to be such that no gain or loss accrues).

• Step 2

  Find the excess (if any) of the amount calculated at step 1 over the amount or value of the consideration for the disposal.

If there is such an excess, C is the amount of that excess or, if less, the amount of the incidental costs of making the disposal to the company making it.

If there is no such excess, C is nil.

(5) This section needs to be read with—

(a) section 207 (incidental costs of making disposal),

(b) section 208 (consideration), and

(c) sections 209 to 212 (value of net benefit to charity).

207 Incidental costs of making disposal U.K.

References in section 206 to the incidental costs of making the disposal to the company making it are to—

(a) fees, commission or remuneration paid for the professional services of a surveyor, valuer, auctioneer, accountant, agent or legal adviser which are wholly and exclusively incurred by the company for the purposes of the disposal,

(b) costs of transfer or conveyance wholly and exclusively incurred by the company for the purposes of the disposal,

(c) costs of advertising to find a buyer, and

(d) costs reasonably incurred in making any valuation or apportionment required for the purposes of this Chapter.

208 Consideration U.K.

If the disposal is at an undervalue, section 48 of TCGA 1992 (consideration due after time of disposal) applies in relation to the calculation of the relievable amount as it applies in relation to the calculation of a gain.