New Legislation makes it easier for businesses to donate trading stock to approved donee organisations (mostly registered charities) as well as to public authorities and non-associated persons.
The legislation applies to disposals of trading stock made between 17 March 2020 and 16 March 2022 (inclusive).
The legislation provides temporary relief from an anti-avoidance rule, which would otherwise act as a significant disincentive for businesses to donate trading stock. The anti-avoidance rule applies when businesses dispose of trading stock for less than market value. Before the new legislation came into force, the rule meant businesses were effectively taxed on a deemed profit margin for trading stock they donated. The temporary relief ensures that donations of trading stock to approved donee organisations and public authorities will qualify for an income tax deduction.
Disposals of trading stock below market value to other non-associated organisations will benefit from relief from the anti-avoidance rule, but will only qualify for an income tax deduction if they can show they have a business purpose for making the disposal.
More information about this change can be found in the Special Report on the Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters Act, issued on 9 April 2021.
For more information, please refer to our article 'COVID-19 tax relief for donations of trading stock' in the July 2021 Tax Information Bulletin: