{"id":23254,"date":"2013-12-02T14:36:24","date_gmt":"2013-12-02T14:36:24","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=23254"},"modified":"2013-12-02T14:36:24","modified_gmt":"2013-12-02T14:36:24","slug":"its-time-to-reform-charity-tax-relief","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/12\/02\/its-time-to-reform-charity-tax-relief\/","title":{"rendered":"It’s time to reform charity tax relief"},"content":{"rendered":"

The Public Accounts Committee is having a hearing on Gift Aid this afternoon.\u00a0I made my views on this known a year or so ago<\/a>. As I said then:<\/p>\n

* \u00a0It is completely illogical that some gifts \u2014 including many legacies to charity \u2014 get no tax relief at all.<\/p>\n

* \u00a0It makes no sense at all \u2014 and reveals a belief by many that the wealthy count for more \u2014 that their hypothecation of government funding to charity carries more pro rata worth than the giving of basic rate taxpayers and those who do not pay tax at all.<\/p>\n

* Large donations to charity are not necessarily benign because of the influence they carry and the work they can prevent, especially when it comes to questioning the reasons for poverty.<\/p>\n

* \u00a0It is as a result obvious that all higher rate gift relief to charity should be abolished \u2014 and \u00a0all inheritance tax relief to0.<\/p>\n

* In place of these reliefs all gifts to charity of less than \u00a35,000 should be subject to automatic gift aid relief at 20% \u2014 meaning a charity could apply for 25p in the\u00a0pound\u00a0back on all these gifts with much, much less admin than now, and gift aid at the same rate should apply to all gifts whatever the source over that sum if shown to originate in the UK.<\/p>\n

* \u00a0The result would be more money for charity, massive savings in charity admin, vast savings in HMRC admin, a simplified tax system by far and more resources to weed out rogue charities.<\/p><\/blockquote>\n

This builds on suggestions made in 2008 for the TUC in The Missing Billions<\/a>, where I wrote:<\/p>\n

The next tax relief [needing] change appears controversial, but has the capacity to release\u00a0significant resources for social benefit in the UK. This would be the result of abolishing\u00a0the tax relief on gifts made to charity in the UK.<\/p>\n

The current tax scheme for such\u00a0<\/span>gifts is absurdly complex, imposing a considerable administration burden on charities\u00a0<\/span>that could use the resources expended in managing tax reclaims much more\u00a0<\/span>effectively in pursuit of the good causes for which they have been created.\u00a0<\/span><\/p>\n

It must however be noted that charities do benefit from the existing rules that provide\u00a0tax relief for gifts made to them. They recover income tax at the basic rate on all gifts\u00a0for which they can secure documentation made from identifiable people who have\u00a0confirmed they pay tax in the UK. It is this documentary burden that is onerous.<\/p>\n

The arrangement is also discriminatory: some forms of charitable giving, such as street\u00a0collections, are [in most cases] less tax efficient than others but all result from giving with charitable\u00a0intent. It is strange that some forms of giving are favoured more than others.<\/p>\n

The solution is simple. It should be assumed that all gifts to charities are made out\u00a0of taxed income. This is, after all, highly likely to be true. The charity should then be\u00a0allowed to make claim to the Government for a sum equivalent to the tax that would\u00a0have been paid at basic rate. This would be a sum in excess of that charities can claim\u00a0under the Gift Aid rules since not all that income is subject to tax relief at present.\u00a0The result would be an increase in the income of UK charities and a massive\u00a0saving in their administrative costs. Both would, surely, be welcome. The cost of\u00a0the additional relief would be covered by the withdrawal of the current wholly\u00a0anomalous situation where UK individuals paying tax at higher rate can actually\u00a0enjoy a personal tax refund of the difference between the higher rate of income tax\u00a0and the basic rate on the value of all gifts they make to charities: a tax relief from\u00a0which the charities themselves get no benefit at all. By abolishing this relief another\u00a0opportunity for tax avoiders, which has been subject to spectacular recent abuse\u00a0could be eliminated.<\/p>\n

Recent research by HM Revenue &\u00a0Customs has shown no apparent influence of this tax relief on the decision of\u00a0higher rate tax payers to donate to charity, or not, and as such it is unlikely that the\u00a0value of gifts they make will be affected to any significant degree.<\/p><\/blockquote>\n

I will be curious to see what the committee recommends on this issue. I think what I recommend could save enormous amounts of effort by taxpayers, HMRC and charities and almost double the yield to charities.<\/p>\n

What is there to object to unless you're wealthy and want to use the relief for your own gain?<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Public Accounts Committee is having a hearing on Gift Aid this afternoon.\u00a0I made my views on this known a year or so ago. As
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