EC warns UK on foreign charity prejudice

The United Kingdom allows tax relief for gifts to charities, but only if they are established in the UK. Charities in other Member States are excluded from the relief and the Commission considers that this discrimination is contrary to the EC Treaty. The request is in the form of a ‘reasoned opinion’ under Article 226 of the EC Treaty. If the United Kingdom does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

The United Kingdom offers various forms of tax relief for gifts to charities. However, this favourable tax treatment is only granted if the charity is established in the United Kingdom.

The discrimination is also contrary to the free movement of persons, as workers and self-employed persons moving to the United Kingdom might wish to make gifts to charities established in the Member State where they came from.

Finally, the rules are contrary to the freedom of establishment, as foreign charities are forced to set up branches in the UK in order to benefit from the favourable tax treatment.

If the United Kingdom would like to check whether the assets and income of charities in other Member States are only used for charitable purposes, it can ask for assistance of the Member States where the charities are established on the basis of the Mutual Assistance Directive (77/799/EEC).

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