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Gift aid cap row was about 340 people, HMRC figures show

Gift aid cap row was about 340 people, HMRC figures show
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Gift aid cap row was about 340 people, HMRC figures show6

Fundraising | Tania Mason | 10 Jul 2012

A total of 340 high earners used gift aid last year to reduce their tax rate to less than 10 per cent, according to figures just released by HMRC in response to a Freedom of Information request.

And just 20 people have repeatedly used gift aid over the last five years to significantly cut their tax bill, the figures show.

HMRC published the data in response to an FoI request from Grant Addison, who is a trustee of the Woodlands Group of Churches but submitted the request in a personal capacity.

The publication of the figures finally adds some context to the government’s claim, during the row over the proposed tax relief cap, to have evidence that “a number of the country’s highest earners are using legal tax loopholes, including charitable giving, to slash their tax bills”.

Addison told civilsociety.co.uk: “It is fascinating that the whole argument with the charity sector was effectively over 340 very high-paid people in a single year – 2010/11 – and only 20 who repeatedly used gift aid to significantly reduce their tax rate.”

The analysis published by HMRC uses information reported on self-assessment tax returns, and calculates “the number of individuals with incomes over £150,000 who are reducing their tax liability below 10 per cent purely through their use of gift aid”.

Five years ago, in 2006/07, this amounted to 120 people.  By 2008/09 it was 160 people, and in 2009/10 it jumped to 330, rising further to 340 in the latest financial year, 2010/11.

And around 20 of these people used gift aid relief to pay little or no tax in four of those five years, persistently using the relief to slash their tax liability.

Addison had asked HMRC to use “whatever definition of ‘very high incomes’ and ‘little or no tax’ it wished; HMRC itself chose to use the thresholds of £150,000 income and 10 per cent tax.

HMRC: 1,200 used other tax reliefs to shrink tax bills

In its response to Addison, HMRC pointed that the numbers of people cutting their tax liability to less than 10 per cent would be much higher if they included those self-assessment taxpayers who claimed other tax reliefs as well as gift aid.

"For example, in 2010/11 there would be 1,200 of these individuals," it said.

HMRC also told Addison that it was unable to answer his final question – to identify the total value of tax reliefs received by high-income earners and what proportion of that is gift aid. It explained that this data is not possible to capture centrally because some reliefs are provided outside of self-assessment – such as those attached to payroll giving or pension contributions – and some are in the form of a deduction from taxable income while others are constituted as tax credits.

FoI request initially refused

The tax office initially refused Addison’s FoI request, citing an exemption relating to the formulation and development of government policy - even though the refusal came a week after the government u-turned on the inclusion of charitable donations in the tax relief cap. At the time, HMRC said that releasing the data might affect the forthcoming consultation on the relief cap measure and could therefore prejudice effective policy development.

But Addison appealed this decision and yesterday HMRC changed its mind and released the figures. Aidan Callan, from the HMRC FoI Team, wrote: “Having further considered our position…I consider that the information you have requested is not covered by the exemption originally cited.”

Callan concluded the letter by stating: “As set out at Budget 2012, the government was keen to work with the charity sector to ensure the impact from the proposed cap was not significant.  

“During these discussions it became clear that the uncertainty caused by the proposal to cap charitable reliefs was creating considerable risk to the charitable sector.

“This was not the government’s intention, and therefore it was decided to exempt charitable reliefs from the cap.

“However, the government remains committed to the principle that everyone should pay their fair share of tax.  The cap on unlimited tax reliefs will stand, with the exception of charitable reliefs.”

Jenny
13 Jul 2012

This was blown out of all proportion by the sector, very sad. The Government should have had more courage.

Adrian Beney
Partner
More Partnership
13 Jul 2012

And contained in here is some really good news. "Five years ago, in 2006/07, this amounted to 120 people. By 2008/09 it was 160 people, and in 2009/10 it jumped to 330, rising further to 340 in the latest financial year, 2010/11."

So despite the deepest recession for a long time, the number of people making gifts at this level has tripled over just four years.

Add this to the £75m gift to the University of Oxford from Michael Moritz for student support and this makes it a pretty good week for philanthropy and the people who benefit from the work of the charities that have been supported.

Ian Theodoreson
chair
charity finance group
11 Jul 2012

Even this statistic from HMRC is misleading. The higher rate relief is simply that - it means that income that otherwise would have been taxed at 40% is instead taxed at basic rate (20%) because the income received was given away (and HMRC, through the Gift Aid system returns that 20% back to the charity). How then does it result in people reducing their tax liability to 10%? It doesn't make sense.

Carl Allen
10 Jul 2012

Legal and lawful.

What awful happenings that term brings to mind when it refers to tax.

Andy Ball
10 Jul 2012

And is there any evidence that any of these people improperly benefitted from their donations, which is what the Government was suggesting at the time? It may be rather churlish if a rich person were to deliberately make donations to charity so that the state gets less tax, but it would still be a contribution to society.

Catherine Clark
Head of Communications, Marketing & Development
Royal School of Church Music
10 Jul 2012

Callan concluded the letter by stating: “As set out at Budget 2012, the government was keen to work with the charity sector to ensure the impact from the proposed cap was not significant. ...

“However, the government remains committed to the principle that everyone should pay their fair share of tax. The cap on unlimited tax reliefs will stand, with the exception of charitable reliefs.”

The government did NOT work with the charity sector, which is why this blew up in their faces. And these donors do pay their LEGAL and indeed LAWFUL share of taxes. It seems no one is able to offer the abject, grovelling apology that this situation merits.

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