Philanthropists hit back at Budget "anti-avoidance" tax relief
12 April 2012
Leading philanthropists have gone to the media
to criticise the Treasury's plans to limit the amount of tax relief
allowed to charitable donors.
The proposed measure will cap total income tax
relief at GBP50,000 or 25 per cent of a person's annual earnings,
whichever is greater. It will affect all reliefs that are currently
uncapped, such as business loss relief and gift aid relief to
One of the most prominent opponents of the
proposal - announced without warning or consultation in last
month's Budget - is Dame Stephanie Shirley, the former UK
government's Founding Ambassador for Philanthropy. As well as
giving TV interviews she has written an open letter to Prime
Minister David Cameron expressing "deep dismay" at these "naive,
vague and ill-considered proposals", which she says are already
discouraging donations from major philanthropists.
The PM, and Chancellor George Osborne, have
been briefing the press that many UK residents with high incomes
are paying "virtually no income tax" because they make large
donations to dubious charities. HMRC apparently showed Osborne
anonymised copies of tax returns submitted by some of the UK's
wealthiest people - labelled "Britain's twenty biggest tax
avoiders". These purportedly showing that, after tax reliefs, these
individuals paid about 10 per cent of their income in tax. Osborne
told the Daily Telegraph that he was "shocked" by this finding -
which cannot be checked because the tax returns are of course
Dame Stephanie replied: "It is claimed,
without producing a scrap of evidence, that these measures are
essential to prevent tax evasion and fraud. We doubt that. Instead,
these plans, if enacted, would limit giving."
Another allegation - made in public several
times by both Osborne and Cameron - is that the wealthy are
claiming relief on donations that are not really charitable at all.
They did not provide any specific examples of such abuse, though,
despite being asked by several interviewers why they had to stop it
by capping all relief rather than simply by reporting the specific
offenders to the Charity Commission.
Some of the claims made by the government are
not even approximately true, according to George Bull TEP of tax
specialists Baker Tilly. For example a Treasury statement says
"individuals can offset their entire income against income tax
reliefs, and as a result pay no income tax at all".
"That is false, and in the case of charitable
donations made within the gift aid scheme, completely false", says
Bull. "Donors must pay sufficient tax to cover the 20 per cent gift
aid repayment made by HMRC to donee charities. To the extent that
individuals donate to charity under gift aid, they must already pay
an effective minimum rate of tax of 20 per cent. It is a myth that
a person can reduce their income tax liability to nothing by
gifting to charity."
The issue has now been pushed right to the top
of the national news agenda, with more politicians making
statements every hour. Charities may now be hoping that the
government consultation paper on the relief cap, due this summer,
may try to exclude charitable relief from its scope. The Treasury
may be regretting ever including it.
Ambassadors for Philanthropy (Shirley's letter to PM)