Christian charity opposes Red Cross tax relief cap idea

03 May 2012 News

Christian donor-advised charity Stewardship has come out against the compromise on the tax relief cap suggested by the British Red Cross and supported by the Institute of Fundraising.

Kevin Russell, vice chair of Charity Tax Group and technical director at Stewardship

Christian donor-advised charity Stewardship has come out against the compromise on the tax relief cap suggested by the British Red Cross and supported by the Institute of Fundraising.

The compromise mooted by the Red Cross would see the proposed cap applying only where the donor claims the relief for themselves.  The Institute, whose chair is the Red Cross’s fundraising director Mark Astarita, announced its official support for the proposal earlier this week.

But Stewardship’s technical director Kevin Russell (pictured), who is also vice-chair of Charity Tax Group, described the idea as “logically and technically flawed”. The NCVO has also declined to back the plan.

In a comprehensive response to the story regarding the Institute’s support for the idea on civilsociety.co.uk, Russell said the compromise proposal risks further damaging charity fundraising by cementing the misconception that donors claiming higher-rate relief are getting a tax break by giving to charity.

“We really need to get to grips with the false idea that a higher-rate donor receives an additional tax break over and above a basic-rate donor.

“A higher-rate donor is in exactly the same position as a basic-rate donor in that they are both deemed, for tax purposes, to have never earned the income that they have given to charity for the public good. No income, no tax. Charity gets all.

“It also needs to be understood that, in cashflow terms, the charity already gets that higher-rate relief from the donor.  So asking (or requiring) the higher-rate or additional-rate taxpayer to give the tax relief to the charity is effectively asking for them to be more than 100 per cent out of pocket on their donation.”

Donors forced to repay money to HMRC

Russell went on to voice his “grave concern” that the Red Cross proposal could mean that some donors will be forced to make repayments to HMRC, as well as losing their tax relief. This could happen if the beneficiary charity claims gift relief in excess of the amount that they would otherwise be entitled to under the donor cap.

He concluded by reinforcing Stewardship’s backing for the Give it back George campaign launched by the NCVO and Charities aid Foundation.

Russell said that Charity Tax Group did not yet have an official position on the suggested compromise, but would be considering it shortly.

NCVO: Current system is best

NCVO has also declined to offer support to the Red Cross/IoF proposal. Deputy chief executive Ben Kernighan said:  "The current system of higher-rate tax relief being divided between the donor and the charity serves charities well. Charities benefit directly and philanthropists have an incentive to give and to give more.

"It is hard to predict the behavioural change that would happen if this were to change and maintaining stability is valuable in these turbulent times.  What is crucial is that the government drops the tax relief cap."

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