Charities - Donation plan flawed

Government plans for US-style tax breaks on charity gifts by individuals would not work in the UK, a leading tax expert has warned.

Ministers are considering switching gift tax relief from charities to donors in a bid to boost ‘significantly’ individual giving. The move could come in next month’s Budget following the six-month-long review of charity taxation.

Chris Smith, culture secretary, is understood to be championing the proposal, which he hopes will see massive increases in donations to the arts, with a particular eye on the Royal Opera House. Smith has argued there is currently little incentive for donors, unlike the US where donations can be offset against tax bills.

But John Whiting, Price Waterhouse’s head of direct tax, warned fundamental differences in the US and UK tax systems could scupper the government’s plans.

‘Telling someone they can claim a tax break for a donation is attractive,’ Whiting said. ‘But that presupposes everyone fills in a tax return to claim the relief, which they do in the US but not here, as we know only too well with self-assessment.’

He suggested gift aid as a tax-efficient means of giving.