FINANCE NEWS: Plea to extend charity tax credit

Chancellor Gordon Brown should use next week's Budget to extend Advanced Corporation Tax (ACT) credit for charities at the current level of 8 per cent for five more years, a member of ACEVO's investment committee will say today (Wednesday).

In one of three budget demands, John Hildebrand, a member of the Young Committee which in January produced CHIPS, an ACEVO report on charity investment principles, will argue that the Government should freeze ACT credit to charities until 2008.

The Chancellor officially abolished the tax credit on share dividends in 1997 but introduced a phased withdrawal for charities. From 21 per cent in 1999 the credit has dropped to 8 per cent, and from April this year is set to fall to 4 per cent before being abolished.

It has been estimated that the changes have so far cost charities £157 million in lost income.

"With dividend growth having been minimal over the past couple of years and charities under increasing pressure on their income, there is now a strong case to extend this relief for a further period," Hildebrand told Third Sector. "This could be worth £100 million a year to charities."

Hildebrand, who is charities specialist at fund manager Investec, is due to speak this evening at the launch of the firm's fourth annual Who's Who in Charities, a directory of the sector's patrons, trustees and senior executives.

He will also urge the Chancellor to extend existing tax relief on gifts of shares and land to charities and to other assets such as art and antiques.

He also wants tax changes to enable trustees to claim income tax relief for time donated to charities.

"At a time when increasing pressures are being put on trustees, the Chancellor needs to do something to encourage people to become trustees," said Hildebrand.

"Most surveys of charities, including the Young Committee survey, showed that few people are in favour of paying trustees, with the possible exception of trustees of the very largest charities.

"But the majority of people surveyed felt trustees should be able to claim tax relief for donating their time."

According to a survey published in Who's Who in Charities, organisations with trustees from the corporate sector were performing better than those with no company trustees. The median growth for charities with corporate representatives on their board was 12 per cent. This compares with 9 per cent for other charities.

The survey also found that 20 per cent of charities with quoted company directors on their boards had an increase in dividend income last year while 20 per cent experienced a decrease. Of those without company trustees, 19 per cent saw an increase and 25 per cent saw a decline.

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