Law on major donors 'nightmare for trusts'

Organisations such as CAF could be hit by higher tax bills, Philanthropy UK warns

Laws designed to stop tax avoidance by major donors could make giving money through trusts such as the Charities Aid Foundation almost unworkable, according to major giving experts Philanthropy UK.

It said substantial donor legislation, which affects charitable donations of more than £25,000, could affect organisations such as CAF because it both handles donations and distributes money to charities.

If a substantial donor gives money to CAF and, separately, CAF hands money to a charity the donor is connected to, CAF could be caught under the legislation and hit by a tax bill.

Susan Mackenzie, director of Philanthropy UK, said thousands of transactions could be caught: "This could make CAF giving accounts almost unworkable."

Stephen Mathews, head of accountancy at Stewardship, a Christian charity that gifts money on behalf of 33,000 donors, said compliance would cost his organisation more than £1m a year. Stewardship had turned down £2m in donations to avoid being caught, he said.

"These laws punish the innocent but have no effect on the guilty," he said. "They are easy to work around deliberately, but an administrative nightmare to avoid breaking accidentally."

CAF said it was concerned about the regulations but had received an informal assurance from HM Revenue & Customs that donations through CAF were not intended to be caught.

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