Government u-turns on charity tax relief cap

Government u-turns on charity tax relief cap

Government u-turns on charity tax relief cap4

Finance | Vibeka Mair | 31 May 2012

The government has buckled to pressure from the charity sector and dropped its plans to limit tax relief on charitable giving announced in March’s Budget.

Chancellor George Osborne said this morning that the Treasury will proceed with a cap on income tax reliefs for wealthy individuals, but charitable giving will now be exempt from this cap.

It follows a series a u-turns on policies announced in the Budget, including hot pasty and caravan taxes.

Commenting on the move, Osborne said the Treasury had listened to the charity sector:

"It is clear from our conversations with charities that any kind of cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.”

The Treasury will write to the charitable sector confirming the new position.

However, the Treasury could not confirm whether community interest tax relief was also included in the exemption.

Sector relief is unanimous

Responding to the government’s announcement, John Low, chief executive of the Charities Aid Foundation which with NCVO launched the Give It Back George campaign, said: “We are delighted that the government has responded to the challenging calls from philanthropists and charities across the country and taken this bold decision.

“We realise government is responding to truly exceptional financial circumstances and is having to make tough decisions about public finances.  We acknowledge and welcome the Chancellor’s decision to do the right thing and exempt charity donations from the cap. We thank ministers for the support they have shown to charities large and small, which are so vital to the health of our country.”

Sir Stuart Etherington, chief executive of NCVO, said: "We are delighted that the Chancellor has listened to reason and pledged to drop the charity tax. This is a victory for common sense and validates the strength of feeling from the thousands of organisations who lent their weight to the Give it Back George campaign. This is a great day for philanthropy."

And Stephen Bubb, CEO of Acevo, noted: “This is good news for charities up and down the land. The Chancellor has listened and done the right thing, and I applaud him for doing so.”

Caron Bradshaw, chief executive of CFG, said: "We previously made the point that charities are suffering unprecedented levels of financial pressure, the cap on tax reliefs could not have come at a worse time. Not only that but it would also have been hugely damaging for the giving agenda.

"We really pleased that the government have shown real leadership and strength in listening to the concerns, not just of the charity sector but all those who desire a strong and vibrant civil society."

Labour: toughest year for charities in a generation

However, Gareth Thomas, shadow minister for civil society, was less forgiving:

“This decision has already done considerable damage, and taken alongside huge cuts in government funding and contracts like the Work Programme not delivering the money for charities ministers once promised, has been responsible for the toughest year in a generation for Britain's charities and community groups.

“If ministers understood the work charities did, the vital difference they make for some of our most vulnerable and the important contribution they offer to make our communities stronger this policy mess could have been avoided.

“Instead we have the spectacle of George Osborne trying to bury bad news on the day one of his rivals is in hot water at the Leveson Inquiry.”

Chief Questioner
Awkward Questions
31 May 2012

Premature celebrations as the war is not over and here is why ...

Fact Higher rate taxpayers are entitled to use the charity tax relief mechanism that is limitless and not subject to periodic review, analysis and challenge. This is an unheard of discretion in terms of accountability.

Point Where is the government's evidence for continuing this entitlement as is?

Fact This charity tax relief mechanism indirectly gives unelected private individuals absolute discretion as how to spend tax funds on the registered charitable objectives including buildings and fishes.

Point Where is the government's justification for this policy of absolute discretion noting that no form of reporting exists for transparency purposes?

Fact The government is not a charitable funder but a funder who would include charitable objective in it's planning and budgeting as a matter of course.

Point In times of austerity, does the government have no charitable priorities for the indirect use of tax funds re higher rate taxpayers charitable relief? And does the public have no say in this matter but only the organised charitable sector?

There may yet be black swans out there as evidence for changing the conditions of limitless cap use.

Gary Wiltshire
31 May 2012

This could be a case of be careful what you wish for. It provides the government with an ideal opportunity to say that now the tax relief stays uncapped it's up to philanthropists to maximise the benefit, and to balance things out the Government will cut direct spending to the charitable sector. Watch the DCMS close first as cuts hit arts, culture and post-Olympic sport.

31 May 2012
Response to [Gary Wiltshire]

That is a well put obverse to what I wrote.

Hilary Barnard
Principal Consultant
31 May 2012

Your use of the word 'buckled' is exactly right in describing what the government has done. If the government has been persuaded on its own merits of the very strong case being put by the sector, it would have made this announcement weeks ago.

The government waited and hoped they could get away with this damaging policy. In the meantime, Ministers took their opportunities to defend the policy publicly but the weight and breadth of the opposition did for them.

We should be glad of the u-turn and aware of the public strength of the sector when it moves together for change.


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