Scottish charities 'will qualify for tax relief'

The Office of the Scottish Charity Regulator and HM Revenue & Customs have reassured Scottish charities that they can pass the Scottish charity test and qualify for tax relief without amending their constitutions.

Scottish lawyers had been concerned that differences in the meanings of ‘charitable’, ‘charitable purpose’ and ‘charity’ in tax law, which adheres to English law, and the Charities and Trustee Investment (Scotland) Act 2005 could cause some Scottish charities to be denied charitable tax relief unless they changed their constitutions.

The OSCR and HMRC have agreed that charities already appearing on the Scottish charity register will not be required to change their constitutions.

Those charities that want to be entered on the register will be advised to adopt a model definition of the relevant terms that is acceptable to both the OSCR and HMRC. Those that decline to do so will still be registered, but the OSCR will bring them to HMRC’s attention so that the tax regulator can make its own judgement about whether they should qualify for tax relief.

Marieke Dwarshuis, head of charities at the OSCR, said she was pleased with the outcome of the negotiations. “We have worked very hard on this and come to a sensible and pragmatic solution that has a very limited impact on existing charities and very little impact on new ones,” she said.

Alan Eccles, a solicitor at Maclay Murray & Spens, also welcomed the guidance. “It is heartening that worries about a third definition of ‘charitable’ that blends Scots law and tax law would be created can now be set aside,” he said. “Advisers and charities should be happy with the long-awaited joint statement.”

The joint statement can be read here.

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