Those of you who are involved in the charitable sector will no doubt by now be very familiar with the legislative changes made to the sector by the Charities Act 2005 (“the Act”).  But have you done anything about them? 

Despite being passed by Parliament a while ago now, the biggest impact to the sector arising from the Act has just come into effect!  Since 1 July 2008 all charities wishing to obtain or maintain their charitable-purpose tax exemption have to be registered with the Charities Commission.  If they are not, they will be at risk of tax liability.  Needless to say, it is an important deadline for charities.  Has it passed you by?

Don’t Lose Your Tax Exemption

Unfortunately many charities have delayed applying for registration, no doubt feeling that they had plenty of time.  As a result the Commission is now being inundated by last minute applications.  An unfortunate consequence is that the Commission has fallen behind in the processing of applications and had indicated that they would be unable to process them all before 1 July.  So what does this mean for your tax status if your application is not processed pre-1 July? 

The Commission will have the ability to backdate correctly-completed applications to the date they received them.  This means that your charity’s tax exemption, if accepted, will be backdated.   But do not further delay!  If any issues arise with your application you need to be able to correct them and resubmit before the deadline expires so that you get the benefit of the maximum period for backdating. 

Donee Status – Tax Rebate As A Marketing Tool

Registration with the Charities Commission does not affect an organisation’s donee status.

Donee status is received from the Inland Revenue Department (IRD).  It allows individuals to claim a significant rebate on cash donations made to organisations with donee status.   This is an obvious marketing angle for charities with donee status.  Who would not want to give to an organisation that can offer a 33.3% tax rebate on the amount donated?  OK, so it is not that easy, but it is an advantage.

As such you should be aware of changes in this area also.  These come not via the Charities Act but recent tax legislation.  These changes took effect from 1 April 2008. 

Under the changes the threshold for which individuals can claim a tax rebate has been removed.  Previously, individuals could claim rebates of 1/3 of the amount of gifts over $5, up to a maximum of $1,890 annually.  Now donors will be able to claim the 1/3 tax rebate for cash donations over $5, up to their annual net income.

A more significant and advantageous change for charities has been to donations made by Companies.   Previously, closely-held companies could not claim an income tax deduction on gifts, while listed companies were privy to a measly 5% limit on deductions for cash donations.  Under the changes, all companies can claim a deduction for all donations made.  They are now limited only by the amount of their net income.

These changes provide companies with a huge incentive to incorporate donations into their corporate responsibility initiatives.  Time, therefore, to start targeting those companies with some active marketing!

Charities Commission And Donee Status

Organisations that currently have donee status will continue to have donee status whether they register with the Charities Commission or not. All new charities registering with the Charities Commission who indicate on their registration that they will obtain funding by way of donations will have their details forwarded directly to the IRD by the Commission.  The IRD will decide your donee status based on this information and will advise you of your status in writing.  Non-charities will need to contact the IRD directly to obtain donee status.

A Postitive Time For The Charities Sector

After many years of relative stability the Charities Sector is now coping with multiple changes in charities and tax law.  Having said this, it is a very positive time for Charities!  There are significant opportunities for your organisation that arise from some of these changes.  Do not be left behind in this increasingly competitive sector.

The Charities Commission website is a hugely valuable source for self-education (  Have a good look at the information they provide, as failure to be on top of the changes could prove detrimental to your organisation.  If uncertain about any aspect of the changes use your professional advisors. They should be on top of the changes and should be able advise you on using them to your organisation’s benefit. 

5 Hot Tips 

  1. If you have not already, register your charity with the Charities Commission today.  Further delays could see you lose the benefits of your charitable-purposes tax exemption.
  2. Ensure your organisation has Donee Status so that individuals and companies making gifts can claim a tax rebate.
  3. Once you have it, use your Donee Status proactively as a marketing tool.
  4. Start targeting companies who previously could not claim a tax rebate on gifts.  They may not yet be aware of the tax changes.
  5. Be positive about the changes to the sector and use them to your advantage!