Time to reform Charity Tax relief

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The TUC report 'The Missing Billions: The UK Tax Gap', published this morning has a number of recommendations in it for both stopping abuse and simplifying the tax system. One that the TUC have highlighted today is a plan to prevent the wholly unwarranted tax relief given on charitable donations to higher rate tax payers, which HS been subject to abuse over time, and to at the same time massively simplify the administrative burden on charities and boost their income. What might fairly be called a 'triple whammy'.

As the TUC put it:

The TUC is today calling for the replacement of the current system of tax relief on gifts made to charity, to simplify bureaucracy for charities and stop the abuse of charitable tax relief through tax avoidance schemes.

The TUC want charitable tax relief replaced by an automatic assumption by the Treasury that all individual donations are made out of income taxed at the basic rate, with tax relief paid accordingly. This would both simplify bureaucracy for charities, as they would no longer need to gather evidence that donations come from tax payers, and increase their funds as relief on donations currently made through routes such as street collections cannot be claimed.

This tax assumption would be paid for by ending the tax relief that higher rate tax payers can claim for themselves on their charitable donation. Recent research by the Treasury shows that this is not an effective incentive to make charitable donations. It would also end any potential for abuse of charitable tax relief as part of creative tax avoidance schemes.

It's never my aim to say 'look, there's a problem' and leave the issue alone. It's always my aim to show that there are better ways of doing things. This is one such way.

I sincerely hope it gets support: thousands of charities and as many charity treasurers will welcome this with open arms, and higher rate tax payers really can't complain. They were after all intending to help charities with their gift.