As the government publishes draft legislation on changes to tax compliance for charities, Andrie Kazamias, Tax Director at RSM UK, comments:

“This long-awaited draft legislation has the potential to significantly reshape the UK charity landscape, so it’s important the sector takes note. The consultation period for responses to the draft legislation is open until 15 September 2025. With the final legislation expected to be effective from April 2026, the question is whether charities have been given enough time to prepare and implement the appropriate measures.

“The draft legislation covered tainted donations, charitable investments and attributable income, but failed to address sanctions for persistent non-compliance. With the April 2026 deadline fast approaching, charities will be hoping to see the proposed changes surrounding non-compliance sooner rather than later.

“While the changes aim to tighten tax compliance, reduce abuse of charity tax reliefs and ensure fairness across the sector, which is hugely welcome, there’s a risk that some legitimate charities could also fall foul of the rules. Many charities are increasingly feeling the pinch, with rising cost pressures and lower donations, meaning lack of resource is a real issue. As a result, through no fault of their own, charities may fall behind on compliance obligations, which could see some, albeit expected to be in extreme cases, have their access to charity tax reliefs withdrawn.

“It’s critical that charities are aware of and understand their compliance obligations as there could potentially be severe consequences for those that don’t, including the withdrawal of access to charity tax reliefs and possibly late filing penalties. We encourage charities to be proactive and get ahead with reviewing their tax affairs, while seeking advice when necessary, to avoid running into any nasty surprises.”