There is an interesting EU tax angle for charities in the Referendum debate. This could become very relevant to charities in all parts of the UK in the event of a"yes" vote in September and the different parts of the UK not both being in the European Union (EU).

The reason is this: cases in the European Court of Justice establish that Member States must treat charities established in other Member States, and which would meet their own domestic charity test, in exactly the same way as one of their own charities. Two German tax tribunal cases established this principle. This means that if you are, say, a German taxpayer wishing to make a donation to a Portuguese charity, you must get the same tax reliefs as you would for a donation to a German charity. If you are an Italian charity with an investment property in Germany, then you must get the same tax reliefs on that investment as a German charity would. The principle is that charity tax law cannot be used as a barrier to free movement of capital within the EU.

The UK's response to these cases was to create rules in the Finance Act 2010 which established the circumstances in which foreign charities will qualify for UK tax reliefs. In short, if a body is established for charitable purposes only (as defined for UK tax purposes); is properly registered in its host country; is managed by fit and proper persons, and is based in another Member State, then the charitable tax reliefs are available.

In addition, by HMRC regulation, this treatment can be extended to other countries.

The result is that if, following a"yes" vote, both parts of the UK were and remained in the EU, then these EU rules, as presently applied in the UK in the Finance Act 2010, would mean that cross‑border giving and tax reliefs should be continued without difficulty.

If, however, either Scotland did not join the EU, or if the rest of the UK later voted to leave, charities operating cross-border within the former UK would no longer be dealing with relationships between EU countries. It would then be a matter of discussion between the two former parts of the UK as to how much help and recognition was given to the other's charities.