IoF proposal for charities to collect higher-rate tax relief is 'flawed'

Kevin Russell, technical director of the Christian charity Stewardship, says changing the tax system is unnecessary

Kevin Russell, technical director of the Christian charity Stewardship
Kevin Russell, technical director of the Christian charity Stewardship

A proposal to allow charities, rather than donors, to collect higher-rate tax relief, is "logically and technically flawed", according to Stewardship, a charity that facilitates tax-effective giving in the Christian community.

Earlier this week, the Institute of Fundraising said that the government should replace its proposed cap on tax relief on donations with a system that allows charities to reclaim all the tax paid by higher-rate taxpayers.

Kevin Russell, technical director of Stewardship and vice-chair of the Charity Tax Group, said that the existing scheme in effect already transferred the whole of the tax to the charity by allowing the donor to give more initially.

Changing the system would be complex and unnecessary, he said.

"The proposal, so far as I understand it, is logically and technically flawed," he said.

"A higher-rate donor is in exactly the same position as a basic-rate donor in that they are both deemed, for tax purposes, to have never earned the income that they have given to charity for the public good.

"This is not just a matter of academic debate – but a very serious issue that threatens to bring damage to major donor philanthropy."

He said the process would be technically extremely complex to manage, especially with three tax bands that changed from year to year. He said it would present donors with too many options and, unlike basic-rate taxpayers, many higher-rate taxpayers were not clear how much tax they would have to pay until well after the end of the year.

He said Stewardship continued to support the Give it Back, George campaign, which calls on the government to abolish the proposed tax relief cap on charitable giving.

Simon Morrison, director of marketing and communications at the IoF, said that his organisation also supported the Give it Back George campaign, and that its first target was the removal of the cap.

"But what we're really trying to do is look at alternatives," he said. "There will be complexities, but we're pretty confident this would be possible."

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