Last week, chancellor Gordon Brown announced a ‘£1bn-plus boost for charities’ when he launched a huge shake-up of tax relief on giving. But the move has already been slammed as inadequate by the voluntary sector, despite government claims that it will boost donations by around £1.5bn by 2002. Speaking at a National Council for Voluntary Organisations conference, Brown said: ‘For every pound that someone gives to charity, the Treasury will add 28p in tax relief.’ Under the plans, the government claims there will be new income tax relief for gifts of quoted shares to charities, and the ceiling on how much employees can donate to charity through the pay packet will be abolished. Brown also said he wanted to make it easier for companies in the UK – which donate only a fifth of what is given by US companies – to give to ‘charity and community activity’. He also confirmed his pledge to ‘put charities on a firm foundation for the future’ and encouraged them to exploit the new tax regime. Charities are expected to receive an extra £350m a year as a result of the changes, due to start in April. The regime, coupled with a new computer-based register of volunteers, is expected to boost donations by about £1.5bn by 2002. Under the changes, people will no longer have to draw up covenants to ensure charities benefit from tax relief on donations. Instead, they can make a straight cash contribution which will see charities able to reclaim an additional 28p in the pound. Higher-rate taxpayers will be able to get back 12p in the pound when they assess themselves for income tax, while donations of shares to charities will no longer attract income tax. There will be no limit on payroll contributions and for three years ministers will contribute an extra 50p in the pound of relief for all donations made this way. Also from April, companies will be able to give any amount to charities and get tax relief on the full amount without having to deduct tax from donations themselves. But the charity sector is hardly falling over itself to thank the chancellor for his generosity. For several years the sector has been fighting a futile battle to ease the burden of taxation. It is losing around £400m in irrecoverable VAT every year. Additionally, Brown was the chancellor responsible for abolishing relief on advance corporation tax worth around £400m a year to charities in his 1997 Budget. While charities welcomed the announcement, the issue of VAT remains unresolved. Nick Kavanagh, chairman of the Charities Tax Reform Group, said: ‘It is all very well increasing the income of charities but to be really effective the chancellor needs to tackle the anomaly that, as soon as charities spend money, they incur VAT which they cannot recover. ‘Unfortunately the measures announced by the chancellor … will do nothing to alleviate the £400m VAT burden borne by charities every year.’ Kavanagh’s views were echoed on the opposition benches of the Commons. Shadow chancellor Michael Portillo said that he welcomed efforts to help charities through the tax system, but the announcement was ‘nothing but a reworking of commitments already made in the Pre-Budget Report’. ‘I do find it slightly irksome that the chancellor, who quietly took away £350m in ACT relief and stubbornly refuses to do anything meaningful about VAT, hiding behind Europe, will now get the plaudits for providing incentives for giving,’ said Saffery Champness charities director Stephen Burgess. BROWN’S CHARITY REFORMS – Tax relief for all donations for direct cash donations; – Abolition of the ceiling on how much employees can give through Payroll Giving. Additionally, a 10% supplement on all payroll donations is being offered for the next three years; – New income tax relief not just for cash donations, but for gifts of quoted shares. This enables people and companies to donate shares to charity without having to pay any capital gains tax and get extra relief for the full value of the shares; – Companies can give any amount to charities and get tax relief for the full amount. Also less bureaucracy to make donations; – The launch of a single advice line for charities; – A new directory for charities and new tax guidance will be published; – A scheme to encourage volunteers will be established; – Government will examine proposals for a national campaign based on a partnership with the voluntary sector. http://www.hm-treasury.gov.uk/speech/cx90200.html.
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