Minister for civil society Nick Hurd has said it is important that the charity sector draws a line under the row over the tax relief cap on charitable donations so it can work with the government on agendas that really matter for the sector.
Sir Stephen Bubb, chief executive of Acevo, said that in a phone call with Hurd, both agreed that it was important for the sector and government to put it behind them: “This dispute was overshadowing all we did and harming the government's attempts to promote giving and the open public services agenda,” said Sir Stephen in his blog.
However, while the charity tax relief cap has been abandoned, the withdrawal of VAT exemptions for alterations to listed buildings - a move which affects many heritage charities and churches - remains.
Yesterday, Chancellor George Osborne revealed that charitable donations would be exempt from the tax relief cap. Community interest tax relief will also be exempt.
The cap, which limited tax relief on charitable donations at £50,000 or 25 per cent of income (whichever is higher), was announced by Osborne in March’s Budget and was expected to save Treasury up to £80m a year.
The proposal led to vociferous protest from the charitable sector and its supporters, notably the campaign GiveItBackGeorge, led by NCVO and CAF, garnered much support.
Sector commentators have been unanimous in their support for the government’s U-turn on the charity tax relief cap, which followed policy reversals on taxes on pasties and caravans this week.
HMRC may not be satisfied
But George Bull, senior tax partner at Baker Tilly, has warned charities to celebrate with caution:
“The vast majority of honest charities and donors will hope that today’s announcement draws a line under this episode.
"However, HMRC may fear that some of the perceived abuses which they were trying to tackle will continue if specific action is not taken against them. There should be no surprise if HMRC bring forward more targeted anti-avoidance measures over coming months”.
Chancellor George Osborne had defended the tax relief cap – including on charitable donations– by saying that he had evidence that a number of the country’s highest earners were using legal tax loopholes – including charitable giving – to slash their bills.
However, when he was asked by the sector to provide evidence of this, none was forthcoming.