David Cameron, the Prime Minister, has pledged to "look very sympathetically" at charities’ concerns about the potential impact of a cap on tax reliefs for charitable donations.
Speaking at a press conference in Jakarta, Indonesia, Cameron said he was aware of concerns about the policy, which has been labelled a "philanthropy tax", but reiterated the government’s desire to crack down on people using reliefs to avoid paying tax.
George Osborne, the Chancellor of the Exchequer, announced in the Budget that from April 2013 the government intended to cap the amount of tax relief an individual can claim in any year to a quarter of their income or £50,000, whichever is higher. This includes tax relief on charitable donations.
At the press conference today, Cameron said: "I want to see an increase in charitable giving and an increase in philanthropy in Britain.
"George Osborne said in the Budget very carefully that he would look at the effect on charitable donations because we want to encourage charitable giving. We will look very sympathetically at those concerns."
Cameron said, however, that he had been told by HM Revenue & Customs that "some people have been using charities established in other countries to funnel money in and get their tax rates so they’re not paying 50p tax or even 45p tax but in some cases are paying 10 or 20 per cent tax".
He added: "I’m quite convinced that we can get the balance right between increasing philanthropy and charitable giving and making sure the tax system is not abused."Third Sector reported yesterday that Dame Stephanie Shirley, the former philanthropy ambassador, had asked the government to abandon the plans, which she described as "naive and ill-considered".