Skip to main content

Charitable Covenants

Volume 982: debated on Thursday 17 April 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked the Chancellor of the Exchequer (1) what effect the proposed changes in the tax relief for covenants in favour of charities will have on deeds made between now and the passing into law of the necessary legislation;(2) whether it is proposed that those who make deeds of covenant in favour of charities now for seven years will be able to re-make them for four years and/or claim relief at the higher rates after the new law comes into effect;(3) whether it is proposed that deeds of covenant in favour of charities under the new proposals should be made gross or net;(4) whether charities in whose favour deeds of covenant are made under the new proposals will be able to reclaim the tax at the top rate payable by the covenantor;(5) whether a covenantor who makes such a gift by deed of covenant in favour of a charity will be entitled to specify what rate of tax relief, not exceeding the top rate payable by him, he wishes to apply to such gift.

It is proposed that the new "over three year" limit for charitable covenants will operate from 6 April 1980 and will apply to all existing and future covenants, provided they have been executed to cover periods of over three years. The re-making of existing covenants is not a matter for tax law. The question whether a new covenant should be made in terms which reflect a constant net sum after deduction of basic rate tax rather than a gross amount, is one for the parties themselves to decide. Relief at the higher rates will apply from 6 April 1981 onwards to all payments made after that date under covenants which can run for over three years, which will include, of course, existing "over six year" covenants. Tax relief at the higher rates is given to the covenantor and cannot be reclaimed by the charity. The relief is allowable at the difference between the taxpayer's marginal rate—including the investment income surcharge—and the basic rate.