Charity Deductions - Tax Law Change Ahead?

The UK Government may be required to change the tax law relating to charitable deductions, following a German tax case heard by the European Court.

The case concerned a German taxpayer, who was denied tax relief by the German authorities for charitable gifts made to a Portuguese charity. The Court ruled that where gifts were made by a person resident in one European state to a body which was resident in another and which was recognised as a charity by the government of the second state, the gift qualified for the relief available for charitable gifts in the state in which the donor resided.

Furthermore, in the case in point, the gift was not money but linens etc., for use in a children’s home.

UK law denies Income Tax relief on gifts to charities situated abroad and also has no mechanism for giving relief for gifts of goods. It is likely that both of these rules will have to change as a result of this case. This could have significant implications for taxpayers and charities alike.