Devolution of control over income tax to Scotland will "raise some pretty fundamental questions" about Gift Aid, the UK government minister responsible for charity tax issues told yesterday’s Charity Tax Group annual conference.
At the same event, the head of policy at the Scottish Council for Voluntary Organisations said he was concerned that discussions on the issue were still at an early stage.
Speaking at the London conference, Damian Hinds, the Exchequer Secretary to the Treasury, outlined four priority areas that the government and the charity sector should collaborate on, as reported by Third Sector before his speech.
The four areas were: an imminent call for evidence on the donor benefit system; ongoing refinements to the Gift Aid Small Donations Scheme; work on giving intermediaries a bigger role in the administration of Gift Aid in response to the rise in text and online giving; and the new model Gift Aid declaration.
In his speech, available in full on the Gov.uk website, Hinds said: "As well as these four areas, on the horizon there are two future developments which, in the longer term, could be quite significant and require further thought.
"The first is that, under the devolution agreement, the Scottish government will receive responsibility for setting income tax rates. Gift Aid is of course a relief on income tax. Even though our thinking on this is at a very early stage, it is clear that this will raise some pretty fundamental questions."
The second development was the creation of personal tax accounts, as announced by the Chancellor in his March Budget. Hinds said there might be "the potential to integrate charitable donations into these accounts – which could have a transformative effect on making charity tax simpler".
Speaking earlier in the day, Ruchir Shah, head of policy at the SCVO, said the future of Gift Aid after income tax devolution was causing "real confusion" and was "something that we’re realising is quite an issue, but it’s not quite yet on the government agenda".
The SCVO has asked for Gift Aid and other charitable tax reliefs to be devolved. Shah said: "There is a real risk that the link between the tax paid and the Gift Aid paid will be lost."
He said that if income tax was higher in Scotland than in the rest of the UK – as has been mooted by the Scottish finance secretary – Gift Aid would have to increase accordingly or it would become a tax on Scottish charities.
He said that the Scotland Bill going through parliament made no mention of Gift Aid, but decisions about the charity tax relief needed to be taken sooner rather than later.
"We need to get the systems in place now rather than have a panicked approach nearer the time," he said. "Scotland is relevant to the whole of the UK. It could undermine or revolutionise the whole Gift Aid system."
Shah also suggested that devolution could offer "a chance to try out new ideas".