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Tax cap rethink is next, predicts Tory MP2

Finance | Jonathan Last | 29 May 2012

The Treasury's reversal on taxation for hot pasties and caravans should now lead to him shelving the controversial charity tax cap, Conservative MP David Ruffley has said.

Ruffley is quoted on the Guardian's website saying that "ministers are now preparing the ground for a rethink to avoid hurting the voluntary sector". He described the tax relief cap as "an idea that Nick Clegg came up with on the back of an envelope to hit tycoons... It's not a very good tax change".

The MP also warned that rescinding the cap would be "trickier" than today's u-turn because it involves hundreds of millions of pounds. 

Following the Treasury's decision, which came to light last night, some hot food will now be exempt from VAT and the rate on static holiday homes will drop from 20 per cent to 5 per cent. These amendments are widely predicted to cost the Treasury £65m in lost revenue.  

Sector remains cautious

NCVO has released a statement responding to the Treasury's plans, its chief executive Sir Stuart Etherington insisting that having relented on pasties and caravans the government now needs to do the same with the charity tax cap.

"The concessions from the Chancellor show that he is willing to listen to reason following a period of genuine consultation,” said Sir Stuart. “We hope he will apply the same logic to the much-maligned 'charity tax'.

"The cap on gift aid is already putting off donors. It is affecting the vital work undertaken by charities both large and small, be that advancing medical research, supporting returning veterans or caring for the elderly."

Mark Astarita, chair of the Institute of Fundraising, is frustrated that the Chancellor did not think of the charity sector when making his decision.

“I’m disappointed that we have come third to sausage rolls and caravans,” he told civilsociety.co.uk. “Let’s hope that this is a step towards dealing with the charity tax cap, which needs to be dropped right now. We should begin talking as soon as possible, so we can all move on.”

Michael O’Neill, chief executive of Stewardship, called the government's reconsideration "encouraging".

“The decision to continue to zero-rate pasties cooling on a rack is commendable," he said. "Stewardship now encourages the government to consider allowing the nation's philanthropists to also cool down by abandoning the proposed limits to tax relief, thereby allowing gifts that support the nation's charities to ‘heat up’ again.”

Will tax cap be next?

Today’s Times newspaper claims that: “Mr Osborne is on course for another u-turn from the Budget over the proposed cap on tax-free charity donations.”

Twitter has also been rife with speculation. ITV News political correspondent Lucy Manning tweeted: “On charity tax u-turn, told not to expect a change at the moment. Treasury minister last night said 'not today' which suggests another day…” 

The Give It Back George campaign, which has close to 3,500 supporters, has also been using social media to reinforce its drive to have the cap abolished.

Directory: National Council for Voluntary Organisations (NCVO) | Stewardship
Who's Who: Michael O'Neill | Sir Stuart Etherington | Mark Astarita