HM Revenue & Customs has launched an informal consultation on substantial donor legislation.
Last month's Budget included the promise of a review of the legislation, which penalises charities if they enter into business relationships with donors who give £25,000 or more in a single tax year or any 'connected persons' to those donors (Third Sector Online, 22 April). HMRC will hold the first meeting for the consultation on 14 May.
Nick Brooks, head of not-for-profit at accountancy firm Kingston Smith, said he expected HMRC to propose a 'motive test' to supplement the current legislation, which would mean it applied only if donors gave with the intention of avoiding tax.
"The motive test would be a welcome development," he said. "However, it still doesn't solve some of the other problems the legislation causes - particularly the number of people you have to keep track of, which can be hundreds, and the length of time you have to keep track of them for, which can be up to 18 years.
"We would still prefer to see the legislation scrapped and the process started again, but I think we have to accept that's not going to happen."
Nicola Evans, a senior associate at law firm Bircham Dyson Bell, welcomed the decision of HMRC to hold meetings.
"HMRC seems to be keen to get the right result, and we're pleased by its attitude," she said.
"It's disappointing only minor changes were made in the Budget, so charities will have to live with these rules until 2010," Evans added. "I expect HMRC might make an announcement that will help to make life easier for charities in the meantime."
HMRC declined to comment on the consultation.
- See At Work Finance, p20.