# HMRC Charity Tax Compliance Consultation

In April, HMRC [published a consultation](https://www.gov.uk/government/consultations/charities-tax-compliance) on charity tax compliance to:

“_examine … charity taxation rules to help tackle non-compliance and protect the integrity of the charity sector without changing the overall purpose of the reliefs … \[and\] … ensure the rules continue to be fit for purpose_.”

In the consultation document, HMRC stated that it wanted to explore reasonable and proportionate changes where tax relief rules do not work as intended. It added that: “Any changes would not detract from the overall generosity of the reliefs or be intended to catch out legitimate charities.”

Working alongside [ACEVO](https://www.acevo.org.uk/), [CAF](https://www.cafonline.org/), [CFG](https://www.cfg.org.uk/), [CRA](https://www.charityretail.org.uk/), [CIOF](https://ciof.org.uk/) and [NCVO](https://www.ncvo.org.uk/), SCVO has supported the [Charity Tax Group](https://www.charitytaxgroup.org.uk/) in developing a response to the consultation, urging HMRC to exercise caution to avoid unintended consequences for the majority of law abiding charities, as well as a possible adverse risk to donor generosity brought about by tax uncertainty.

In our joint response:

*   **We have urged HMRC to tweak the Tainted Charity Donations rules, rather than replace them, or adopt more radical change.**
*   **Although recognising the scope for abuse within the Approved Charitable Investment rules, we have argued for a more focused approach, only changing the rules within the 11 types of approved investments that need to be changed, rather than adopting a blanket approach.**
*   **We questioned the logic of changing the Non-Charitable Expenditure rules in the way proposed by HMRC pointing to the risk that HMRC may claw back tax relief that was not granted in the first place! We also resist the idea that the claw back rules be extended to more than six years back.**
*   **We also urged HMRC to exercise caution over its proposal to withhold tax reliefs such as Gift Aid from charities that, when asked, have failed to submit tax returns on time. We believe that HMRC should only penalise charities that have deliberately and knowingly defaulted. Many charities, especially smaller ones, can be late in making a submission either out of ignorance or through no fault of their own.**

The [full text of our joint response](https://www.charitytaxgroup.org.uk/wp-content/uploads/HMRC-Consultation-on-Charity-Tax-Compliance-Sector-Bodies-Response-17-July-2023.docx) addresses the issues raised by the consultation in some detail. HMRC has not, as yet, committed to any of its proposals. Discussion may therefore continue well beyond the consultation period and we therefore encourage charities to familiarise themselves with the issues involved.

---

## About SCVO

SCVO (Scottish Council for Voluntary Organisations) is the national membership organisation for Scotland's voluntary sector.

Our role is to champion the role of voluntary organisations in Scotland and to support them to do work that has a positive impact.

SCVO supports members and the wider voluntary sector with all aspects of setting up and running a voluntary organisation. SCVO represents the needs and concerns of the voluntary sector to the Scottish government in Holyrood and UK government and Westminster. Through our learning and events programme SCVO offers training and development opportunities to the sector.

Members access an extensive membership benefits package including specialist, in-depth, 1-to-1 guidance from our Information Services team and from professional service partners.

Access to exclusive membership networks (including comms, employers, governance and policy) supports members to grow their connections, stay up to date, exchange ideas and views with peers, and learn through tailored learning opportunities.

SCVO members enjoy free access to Funding Scotland Premium to stay on top of funding opportunities to support their organisation’s financial resilience.

Discounts and savings on SCVO products and services (including our HR service, managed IT support, payroll service and events and training) and partner offers provide members with support to allow them to focus on delivering their organisation’s goals. Further SCVO products and services include [extensive digital support](https://scvo.scot/support/digital), a climate action resource [Growing Climate Confidence](https://climateconfident.scot), a voluntary sector publication [Third Force News](https://tfn.scot) and a voluntary sector jobs and recruitment service [Goodmoves](https://goodmoves.org).

For more information on SCVO membership, visit [SCVO membership](https://scvo.scot/membership)