Ian Murray, the Labour MP for Edinburgh South, has called for a review of Gift Aid in Scotland within a year of the Scotland Bill coming into force, to ensure Scottish charities are not short-changed by devolution.
Under the Scotland Bill, the Scottish government would have the right to set its own income tax rates — but powers for distributing Gift Aid would be left with the Treasury in Westminster.
Currently Gift Aid mirrors income tax at 20 per cent, but Murray has argued that if Scotland were to increase its rate of income tax, Scottish tax payers would be unable to gift the full value of the tax on their donations to the charity, and the Treasury would keep the difference.
If Scotland charged a lower rate of income tax than 20 per cent, he has said, the Treasury would in effect be subsidising Scottish charities — which might prompt the Chancellor to cut its block grant.
To address this, Murray last week tabled an amendment to the bill, which is in the report stage in the House of Commons, requiring the Treasury to review and report back on the operation of Gift Aid in Scotland within a year of the act coming into force.
Ruchir Shah, head of policy at the Scottish Council for Voluntary Organisations, welcomed Murray’s amendment. "We completely agree with his proposals," he said.
The SCVO’s concern was not solely about the money, he said: "Charities need to be able to keep people’s trust, and anything that confuses them will put them off registering their donations for Gift Aid for donations or even donating at all. We don’t want to lose donors’ trust."
The SCVO has previously called for fundraising and its regulation to be completely devolved, as well as Gift Aid, social investment tax relief, and inheritance tax.
No date has yet been set for the Scotland Bill to receive its third reading in Parliament.