Other Matters

Child Trust Fund

Every eligible child born on or after 1 September 2002 has a Child Trust Fund account. Family and friends can contribute up to £1,200 into the account each year.

The government will make payments of £100 per year into the Child Trust Fund accounts of all disabled children. Severely disabled children (those who receive the High Care element of Disability Living Allowance) will receive £200 per year.

These payments will not count towards the £1,200 yearly contribution limit. The payments will start in April 2010.

Charities: substantial donors

The substantial donors rules potentially apply to all charities carrying out transactions with their largest donors (where tax relief is available in respect of their donation(s)).

If a charity enters into a specified transaction with a substantial donor the transaction will be treated as non-charitable expenditure which is subject to a tax charge.

Existing legislation defines a substantial donor as a person that makes tax relievable donations of:

• £25,000 or more in 12 months or
• £100,000 or more in a period of six years.

Such a person is treated as a substantial donor of the charity for all chargeable periods falling wholly or partly within that 12 month/six year period, and for a further five chargeable periods. A chargeable period for a charitable trust is a tax year and for a charitable company is its accounting period.

Regulations will increase the threshold of relievable gifts which a person may make before becoming a substantial donor. The relievable gifts threshold of £100,000 in a period of six years will be increased to £150,000 from 23 April 2009. The annual threshold of £25,000 will remain the same.

Comment

These rules were introduced to tackle those who influence or set up charities with a view to avoiding tax rather than with any charitable intent but the rules need to be considered carefully if substantial donations are being made.