Gift Aid reform and tax relief figure prominently in Budget

Chancellor George Osborne says these are 'the most generous reforms to charitable giving for 20 years'

George Osborne
George Osborne

George Osborne, the Chancellor of the Exchequer, has unveiled a raft of measures aimed at helping voluntary sector organisations in what he claimed were the "most radical and most generous reforms to charitable giving for more than 20 years".

In today’s Budget, Osborne announced reforms that included enabling charities to claim Gift Aid on donations totalling up to £5,000 per charity without any paperwork, implementing an online claim system for the tax relief by 2013 and a 10 per cent tax break on inheritance tax for people whose wills include a 10 per cent legacy to charity.

He said 100,000 charities would benefit from the removal of Gift Aid paperwork "to the tune of £240m".

Osborne said he would retain community investment tax relief, which allows investors in community development finance institutions to reclaim up to 25 per cent of their investment in tax relief over five years. This was recently recommended for removal by the Office of Tax Simplification.

The Chancellor said he and Jeremy Hunt, the culture secretary, had been working on "a series of substantial reforms that will support giving, from the largest donations to the coins collected in the charity bucket".

Osborne said he wanted to make "giving 10 per cent of your legacy to charity the new norm in our country".

From April 2012, anyone who leaves 10 per cent or more of their estate to charity will have their inheritance tax bill cut by 10 per cent, Osborne said. "Let’s be clear, no beneficiaries will be better off," he said. "Just the charities. To the tune of £300m."

He said the government would increase the Gift Aid benefit limit, which sets the value of items or services that a charity may give to a donor in return for a donation, from £500 to £2,500, as part of measures to "encourage wealthy people in our society to give even more".

The approved mileage allowance payment rate would, for the first time, be extended to include volunteers travelling as passengers in cars. This tax relief allows people to claim a fixed amount per passenger per business mile.

The government will also consult this year on proposals to offer tax breaks on gifts of pre-eminent works of art or historical objects to the nation, said Osborne, a move that would benefit museums.

The government would continue to consult on the possibility of a VAT exemption for charities that share services, said Osborne, and would introduce new substantial donor rules from April 2011.

Papers released by the Treasury also say that the government will investigate how it could increase the take up of payroll giving.

Caron Bradshaw, chief executive of the Charity Finance Directors’ Group, said the sector had been given an unusually high profile in the Budget.

"Normally, you have to crawl through the background paperwork to find reference to the sector, but in this Budget the prominent role the sector plays has been recognised," she said.

"We need to make sure we don’t get carried away, though, because there’s more work to be done."

Ralph Michell, head of policy at the chief executives body Acevo, said: "If you look at this package of measures in the round you can only say it is a good one and one that we welcome whole-heartedly."

See round-up of 2011 Budget stories

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