Conservative MP Tim Yeo told an audience of charity finance specialists yesterday that he thought there was a “very good chance” that the proposed tax relief cap would be altered as the Finance Bill makes its way through Parliament.
Yeo told the Charity Tax Group’s Tax Conference that the sector should keep piling on the pressure to win some concessions on the cap.
He said: “I think there is a very good chance during the Finance Bill that we will see some modification of this proposal. I am well aware of the strength of feeling and of the very real consequences, and I remain hopeful we will see it changed.”
But he also stressed that ministers were much likely to listen to arguments if there were lots of voices making those arguments.
Yeo, who founded the Charity Tax Group – then the Charity VAT Reform Group – back in 1981 and chaired it until 1990, said: “You need to get numbers. You need to get lots of people going to tell the Treasury that they have got to make a change. I remember back when I was in government…the weight of numbers does make a difference.”
Gather evidence of impact
The current CTG chair, John Hemming, said charities needed to gather as much evidence as they can to demonstrate to the government how the cap would affect them, while at the time continuing to argue that the cap should be dropped altogether.
“It’s essential that we do collect evidence,” he said. “We know that donors are already withdrawing their donations because of this. Evidence will influence [the government] because they have no idea what the impact of this is.”
He went to say that the evidence the Treasury produced showing that some wealthy citizens were using tax reliefs to slash their tax bills to 10 per cent or less, did not distinguish between the different reliefs they were using. “There is no way that donations under gift aid could reduce your tax liability to 10 per cent,” Hemming said.
“If they are looking at abuse of the system, at people hypothecating their tax, it’s the individuals who are doing that for their personal gain, not those that are giving to social causes.”
Divide gift aid from other reliefs
Pamela Greener from Wakefield Cathedral suggested the sector should separate out deductions for gift aid from manufactured losses and other reliefs, instead of arguing for no cap at all.
She said it was “perfectly legitimate” that high net worth individuals should not be able to artificially suppress their incomes using other reliefs, and if the sector were to agree with and support the Treasury on that then it would find it much easier to win exemption for charitable donations.