Donors can claim tax relief on donations to overseas charities

Move comes after ruling by European Court of Justice

Taxpayers in the UK will now be entitled to claim tax relief on donations to charities in other countries, the Chancellor has announced in the Budget.

The move comes in the wake of last year's European Court of Justice ruling that a German donor, Hein Persche, should receive tax relief on a donation to a Portuguese charity.

As a result, a new definition of charity for tax purposes will be introduced, designed to identify which EU charities qualify for British tax relief.

Peter Fanning, chief executive of the Chartered Institute of Taxation, said this would remove the administrative burden for charities based in other EU countries of having to set up UK entities in order for UK individuals to be able to claim Gift Aid.

"In our view, the existing Gift Aid restriction to UK charities alone is one of the many areas of the UK tax code that do not comply with EU rules. Hopefully this is the start of wider reforms to Gift Aid - there is a real need to simplify its administraton for charities."

Charity representatives in Britain said the ruling was a positive one for British charities, but carried potential administrative burdens.

John Low, chief executive of the Charities Aid Foundation said: "Changes, such as new limits on Gift Aid claims, or the introduction of a ‘fit and proper persons test', must be applied rationally, not over-zealously."

Ralph Michell, head of policy at Acevo, said: "In principle, it's a good idea that UK taxpayers should be able to give to whoever they like, but there's a lot to worry about in the implementation,"

But he said that tax breaks on cross-border giving could bring benefits to UK charities because they were applied Europe-wide.

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