THE INLAND Revenue is demanding tough new restrictions on Church covenants, following in-depth investigations into the finances of four dioceses. They are pressing for repayments backdated up to six years.
The Revenue has laid before Church negotiators five stipulations to be met before covenanting is permitted. If agreed the conditions mean: • No covenants will be accepted unless contributions are given in a Planned Giving numbered envelope by cheque or bankers order. This spells the end to some covenanted income being given in cash in the Sunday collection.
• The total amount covenanted in any parish will not be allowed to exceed 60 per cent of the covenantable income of that parish. This condition will reduce the amount of tax which parishes with a lot of covenants currently reclaim from the Revenue.
• Covenantable donations will be limited to offertory collections and some retiring collections, provided there is proof of payment. Christmas and Easter offerings, Mass stipends, church boxes, money for flowers will be excluded.
• Covenants will be permitted only in favour of the parish where the contributions are given.
• Parishes which have covenants exceeding 60 per cent of their newly defined "covenantable income" will be liable to repay some tax to the Revenue, possibly backdated up to six years.
Dioceses are taking urgent action to tighten up the administration of their covenants in advance of any official Inland Revenue guidelines. Discussions on the five point plan are still in progress between a committee of diocesan finance officers and the Revenue. The dioceses are seeking legal advice.
It is thought probable that the Revenue will extend its investigation from the four dioceses to the rest of the country.
One diocese warned parish priests in January that "we must eventually expect to receive similar demands and treatment to those Dioceses already visited". One of those dioceses, Leeds, faces a possible demand from the Inland Revenue of between £200,000 and £400,000.
Westminster diocese has called all parishes to "ensure that our house is in 'apple pie' order".