Shadow charities minister believes Treasury is planning to scrap the current system
Shadow charities minister Nick Hurd told the House of Commons last week that the Treasury was considering abolishing tax relief on Gift Aid for higher-rate taxpayers - a move that could cost charities up to £270m a year.
"We are getting signals from private meetings that the Treasury actually wants to scrap tax relief for higher-rate taxpayers who give to charity," he said during a debate on the third sector and the recession.
Hurd said there was concern that the Government had still not come up with plans to make Gift Aid more effective, despite two years of consultation.
"This must be the wrong time to be hiding things from the sector," he said. "When will the Government come clean on its plans for the reform of Gift Aid?"
Angela Smith, minister for the third sector, said that delays in making a decision were partly because there was no consensus among charities about the best way for Gift Aid to work.
"A number of changes have been brought in to simplify and improve the system," she said.
"I understand the frustration of some charities that want to see change more quickly, particularly on the issue of higher-rate taxpayers, but the problem is that there is not agreement among the charities themselves about the best way forward."
She did not respond to Hurd's comment on the possible abolition of higher-rate tax relief.
Lindsay Boswell, chief executive of the Institute of Fundraising, said he had also heard rumours that the Treasury was considering scrapping higher-rate Gift Aid.
"There is a huge potential gain here and a huge potential loss," he said. "Higher-rate tax relief was worth £270m to the sector and to donors last year, and losing that would be extremely awkward for the sector, so I'm disappointed that the minister missed an opportunity to refute it."
Boswell said that if the Government simplified higher-rate tax relief to make it easier to claim, it would provide a huge tax advantage to the sector.