| | | | | | | | Charity compliance: changes to charity tax relief rules | | Following HMRC’s consultation on charity tax compliance, a number of changes to the charity tax relief rules came into effect from April 2026. These changes apply to UK charities, Community Amateur Sports Clubs (CASCs), donors, and the agents and intermediaries who support them. HMRC has said the measures are intended to strengthen confidence in the charity sector by preventing misuse of charitable tax reliefs, while continuing to support the vast majority of charities that already operate compliantly. Tainted donations The rules relating to tainted donations have been updated. The previous approach, which focused primarily on a donor’s motivation, has been replaced with an outcome‑based test. HMRC will now consider whether a donor receives any form of financial assistance, directly or indirectly, as a result of making a donation. This replaces the former “financial advantage” test and lowers the threshold for determining whether a donation is tainted, ensuring that charitable giving does not result in personal financial benefit. | | Approved charitable investments
HMRC recognises 12 categories of approved charitable investments for tax relief purposes. From April 2026, a single condition now applies to all of these investment types. Charities must be able to demonstrate that investments are made for the charity’s own benefit, and not for tax avoidance by any individual or organisation. HMRC has confirmed that this change simplifies previously inconsistent rules and reduces the potential for abuse of charitable investment reliefs. | | | |
Attributable income and legacies
The definition of attributable income has been expanded to include legacies.
As legacies may already benefit from Inheritance Tax relief, charities and CASCs must now ensure that legacy funds are applied to their charitable purposes to avoid a tax charge. This change aligns the treatment of legacies with the existing treatment of residual estate income and reinforces the expectation that legacy funds are used to further charitable aims. What this means for charities, CASCs and advisers HMRC has indicated that these changes are aimed at preventing misuse of reliefs rather than penalising well‑run organisations. However, charities and advisers should now: - Review donation arrangements and investment structures to ensure they comply with the updated rules
- Identify, monitor and document legacy income, and ensure legacy funds are used for charitable purposes
- Familiarise themselves with HMRC’s updated guidance as it is published
Further information is available through HMRC’s published materials, including: If you wish to discuss this in further detail, please contact one of our Business Tax experts here. | | | | | | Webinar: Preparing for SORP 2026 - Essential accounting updates and guidance for Charities | | | | Charities are preparing for the most significant update to the Statement of Recommended Practice (SORP) in years, with SORP 2026 introducing far-reaching changes to revenue recognition, lease accounting, and narrative reporting. | | As these revisions come into effect for accounting periods beginning on or after 1 January 2026, it is vital that charity finance leaders, Trustees, and those responsible for statutory reporting understand what is changing, and what practical steps are required to get your charity ready.
To support you through this transition, we hosted a webinar with our charity experts, Mike Bath and Bekki Foy, to provide a clear and practical overview of what SORP 2026 means for your organisation. | | | | To watch our latest webinar or to download a copy of the webinar slides, please click below. | | | | | | | | James Cowper Kreston is a leading firm of accountants and business advisers, with offices across the South of England. Many of our partners and senior staff are trustees for charitable organisations so have an in-depth understanding of your operations and how to maximise your charities potential.
If you would like to discuss this topic further, then please contact a member of our charities team at James Cowper Kreston.
Kind regards Fiona Hawkins | Partner T: +44(0)7990 525280 E: fhawkins@jamescowper.co.uk | | | | | | | | | | | | | | | | | | | | | | | |
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