The Institute of Chartered Accountants in England and Wales (ICAEW) has called on the UK government to rethink its proposed tax changes that could significantly impact charities and their ability to receive donations.

The concerns stem from a consultation initiated during the Autumn Budget 2024, which outlined potential alterations to tax compliance rules affecting charities and community amateur sports clubs (CASCs).

Following this, draft legislation for the Finance Bill 2025/26 was published in July 2025, with plans for implementation in April 2026.

Among the proposed changes is the introduction of an outcome test for the tainted charity donations rules. This would require an assessment of the results of a donation, in addition to the donor’s intent, which ICAEW argues could complicate the donation process and create uncertainty.

Another significant change involves extending the requirement for investments to benefit charities to all recognised investment types for charitable tax relief, which could restrict charities’ financial flexibility.

The definition of “attributable income” is also set to be amended to include legacies, placing additional pressure on charities to allocate these funds to their charitable purposes or face tax implications.

ICAEW has expressed concern that these changes could lead to confusion regarding the timing of fund utilisation, potentially discouraging individuals from leaving gifts to charities in their wills.

The institute has also suggested that the proposed purpose test for assessing approved charitable investments be modified to a “wholly or mainly” test, allowing for a broader interpretation of what constitutes an approved investment.

As the government prepares to move forward with these proposals, ICAEW’s response highlights the need for careful consideration of the implications for the charitable sector and the potential impact on future donations.