PHILANTHROPISTS will be deterred from giving if the Government presses ahead with its plans to cap tax relief on charitable donations, charities are warning.
The Second Church Estates Commissioner, Tony Baldry MP, has said that the change will have a “significant impact” on the ability of churches to manage and repair buildings, adding to the adverse effect of the abolition of tax relief on alterations (News, 30 March).
George Osborne revealed in his Budget speech, delivered on 21 March, that, from 6 April 2013, anyone seeking to claim more than £50,000 of relief on a charitable donation will be subject to a cap, set at 25 per cent of income. In effect, it will cost more to give to charity.
Mr Osborne said that it was “right” to have tax reliefs that “promote investment, support charitable giving and reflect genuine business losses”. He said, however, that it “can’t be right that some people make unlimited use of these reliefs year after year. We’ve capped benefits. Now it’s time to cap tax reliefs, too.”
The Budget document states that the Government will “explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations”.
Charities have been quick to voice their concerns. Writing in The Guardian, the head of policy and research at the National Council for Voluntary Organisations (NCVO), Karl Wilding, said that tax relief was “a real incentive” for big gifts, and “might be what pushes major donors over the finishing line”.
“It suggests government policy in relation to giving and philanthropy just isn’t joined up,” he said. “And it feels like an end to the consensus — stretching back to the changes in charity tax in 2000 — that using the tax system to increase giving is a good idea.”
Research by CAF and NCVO suggests that £11 billion was given to charity last year, and almost half of this came from just seven per cent of donors. A report produced by Coutts in association with the University of Kent suggests that there were an additional 80 gifts of £1million or more from individuals worth £782 million in 2009/10. HMRC’s own figures show that higher-rate tax payers are reclaiming £360 million on total gifts of £1.4 billion to charities.
Eight out of ten (83 per cent) of the 200 “major philanthropists” surveyed by CAF in the wake of the announcement of the cap said that it would reduce the amount of money given to charity.
The Christian charity Stewardship, which provides legal, financial, and administrative services to Christian charities, has calculated that donations to its cause totalling £11.7 million last year would have been at risk under the new regime.
The charity’s technical director, Kevin Russell, told Civil Society magazine that some donors gave away 90 per cent of their income.
The policy manager at CAF, Rhodri Davies, believes that the Government’s tax avoidance argument “wilfully misses the point that in order to get charitable tax reliefs, you have to give the money away in the first place, so you never end up with a net gain. . . It would therefore seem like an extremely inefficient way to avoid tax, if that was your intention,” he said.
Question of the week: Should churches be favoured whren it comes to tax?