HM Revenue & Customs (HMRC) has released a summary report of responses to its consultation on the Substantial Donor legislation.

The consultation received 54 responses, with around half calling for full repeal of current legislation. The Philanthropy UK consultation response also advocates full repeal. Around 40% of respondents suggested that a motive test would be helpful.

A number of respondents to the consultation were concerned that the current rules, as well as the amendments proposed in the consultation document, would act as a disincentive to giving to charity.

Anti-avoidance legislation was introduced in Section 54 of the Finance Act 2006 to target instances of abuse by major donors.  It is commonly referred to as the Substantial Donor (SD) legislation. 

The legislation has raised concerns because it catches a variety of innocent transactions by donors to charities.  These include grant-making foundations; donor-advised funds at community foundations and other intermediaries, such as CAF; venture philanthropy funds; and academy school endowments.

HMRC launched a consultation on the legislation in July 2008 to address the aim of preventing the abuse of tax relief without “discouraging charitable giving or creating unnecessary administrative burdens”.

HMRC said that it will liaise informally with certain stakeholders over the coming months, and that the Government will announce their response to the consultation by Budget 2009.

• The summary report is available on the HMRC website.