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HMRC will meet charities to discuss tax relief caps

Charity Tax Group, the Charities Aid Foundation and the Charity Finance Group all say they want clarification of the Budget announcement

HMRC
HMRC

HM Revenue & Customs has promised it will hold meetings with charities to discuss how a cap on tax reliefs for the wealthy will affect large gifts to charities.

The cap, announced in the Budget yesterday, means that the tax relief any individual can claim in any year will be limited to a quarter of their income or £50,000, whichever is higher, from April 2013.

This is likely to mean that some donors will not be able to claim back all the tax paid on gifts of £90,000 or more. But this figure has not been finalised because the Treasury has not finalised the rules abound the relief.

A spokesman for HMRC said that payroll giving, Gift Aid and gifts of land and shares would all be included in the cap.

"The government did not undertake this measure lightly, but it is necessary to take steps to ensure the very wealthy cannot simply wipe out their tax bills using charitable and other tax reliefs," he said.

"Giving shouldn’t mean you pay no tax. However, the government is interested to know what stakeholders think the impact on giving will be. Individuals will be invited to make comments, backed up by evidence, on this agenda.

"The government has already been in touch with significant philanthropists to invite their views. Other relevant stakeholders will also be welcome to make important, evidence-based points."

He said meetings with charity umbrella bodies would also take place.

Charities said they would work together to lobby the Treasury to ensure philanthropy was protected, and to establish the potential impact on the charity sector.

"We will be speaking to the Treasury and HMRC to ask for a distinction, based on the criterion of public benefit," said Chris Lane, policy officer at the Charity Tax Group. "People should not have to pay tax on money they have given away for the public benefit."

Hannah Terrey, a policy officer at the Charities Aid Foundation, said her organisation was seeking urgent clarification of how the relief would work.

"We are trying to work out what the particular areas of concern might be, and what the impact will be on giving," she said. "We’re particularly worried about the effect on the largest gifts."

Kat Smithson, a policy officer at the Charity Finance Group, said it was not yet clear whether Gift Aid claimed by charities would be affected by the cap.

She said the government considered Gift Aid a tax relief for the donor, but she did not think the Treasury had decided whether it would be included in the total amount of relief a donor could claim.

She said the sector also needed to know whether Gift Aid took priority over other reliefs.

"What if a donor ticks the Gift Aid box and we discover he’d already hit his limit for the year?" she asked. "Will HMRC ask the charity for the money back?"

See our round-up of stories on the 2012 Budget

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