Editorial: The wrong message on philanthropy

The Budget has cast a shadow over the government's rhetoric about giving, says Stephen Cook

Stephen Cook, editor
Stephen Cook, editor

There everyone was, expecting the Budget to offer a few improvements to Gift Aid and some tax breaks for community investment finance; and then the door clicked open and George Osborne rolled a stun grenade into the room.

This came in the form of the new cap on the tax relief that individuals can claim: no one will be permitted relief of more than £50,000 or a quarter of their annual income, whichever is the larger.

This affects the sector mainly through the provision for higher-rate taxpayers who make donations under Gift Aid to claim for themselves the difference between the standard and higher rate of tax on the amount they give.

The move has caused consternation and some incredulity. Was the Treasury aware of the Giving White Paper and the warm words from the Prime Minister and other members of the government about transforming the culture of generosity in the UK?

It would be comforting to think that the cap is set so high that it will not, in practice, have much of an impact. But everyone reached for their calculators and concluded provisionally that this is not necessarily the case.

Beth Breeze, academic author of a recent report on million-pound donors, says the cost to a philanthropist of setting up a £1m charitable foundation could in some cases go up from £500,000 to £750,000.

The focus now moves to meetings between the sector and HM Revenue & Customs to assess the situation and see what can be done. But it has been made clear already that there will be no exemption for donors: the sentence "Giving shouldn't mean you pay no tax" is being repeated like a mantra across Whitehall.

Maybe big givers will recognise the justice in this and carry on giving as before. Maybe they won't. It's very difficult to tell how strongly tax relief features in their charitable impulses. But whatever they do, a confusing and potentially damaging message has gone out that casts a shadow over the government's rhetoric about philanthropy.

See our round-up of stories on the Budget 2012

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