This clause extends an existing tax relief for gifts of equipment or trading stock by businesses so that it will cover all charitable causes s. Relief is already available for such gifts made to educational establishments (Section 84 ICTA 1988), or made through UK charities for educational or medical purposes in the world’s 80 poorest countries (Section 47 Finance Act 1998). That relief is now being widened.

The extension of the relief is set against the background of the Review of Charity Taxation and the consultation document published on Budget Day. Although the consultation document sets out options on various aspects of charity taxation for further discussion, the relief for gifts of equipment or trading stock is being extended now, in order to encourage more giving to charity by businesses.

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Subsection (1) inserts a new Section 83A into ICTA 1988.

New Subsection (1) of new Section 83A provides for tax relief for gifts where a trading company or unincorporated business gives certain articles to:

charities, or

the Trustees of the National Heritage Memorial Fund, the Historic Buildings and Monuments Commission for England, the Trustees of the British Museum, the Trustees of the Natural History Museum , the United Kingdom Eco-labelling Board and the National Endowment for Science, Technology and the Arts. These bodies receive similar exemptions from tax as charities. .

New Subsection (2) provides that the gift must be an article which is either:

an item manufactured or sold in the course of the donor’s trade , or

machinery or plant used in the course of the donor’s trade.

New Subsection (3) sets out the way in which relief is to be given:

In the case of an article manufactured or sold in the course of the donor's trade, the market value of the gift will not have to be included as a trading receipt when calculating the donor's profits for tax purposes (as would otherwise be the case) . The result is that the donor will get relief for cost of the equipment in calculating the taxable profits of the trade .

In the case of machinery or plant used in the course of the donor's trade , the article will be treated as having been disposed of at nil value for capital allowances purposes (rather than at market value, as would otherwise be the case ) . The result is that the total capital allowances given to the donor in respect of the article will be equal to its cost.

New Subsection (4) provides that if relief is given for a gift of machinery or plant and the donor, or anyone connected with the donor, receives a benefit as a result of making the gift, then the donor will be charged to tax on an amount equal to the value of the benefit for the period in which the benefit was received.

New Subsections (5) (6) and (7) sets out the periods for making claims for relief from income tax or corporation tax, and the details to be included in the claim.

New Subsection (8) provides that Section 839 of ICTA 1988 which defines a connected person will apply to this provision. (New Subsection (4) deals with the situation where someone connected with the donor receives a benefit as a result of making the gift.)

Subsection (2) provides that Section 47 FA 1998 - which provides for relief for gifts made before 31 December 2000 to UK charities for educational or medical purposes in the world’s 80 poorest countries - will cease to have effect. The proposed new relief builds on this earlier relief and therefore it becomes superfluous.

Subsection (3) provides that the changes in the clause have effect for gifts made on or after Royal Assent.

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The Review of Charity Taxation was launched in July 1997. During the first phase of open consultation over 3000 charities, individuals and other interested parties sent in their views on a wide range of subjects. A consultation document was issued on Budget Day which asks for comments on a range of options to encourage more people to give to charity and to simplify the tax system for donors and charities. Responses are invited by 31 August 1999. Following evaluation of those responses and of further research into charitable giving, reforms will then be introduced.