THE CHANCELLOR George Osborne has abandoned plans to introduce a cap on charity tax relief amid vociferous opposition to the proposals.
He announced in the Budget he intended to impose a limit of £50,000 or 25% of income – whichever was higher – on the amount a person could give instead of paying it in tax.
The measure was designed to prevent the use of charities as a tax avoidance tool, which he branded “morally repugnant” in Parliament. Osborne claimed in an interview with The Telegraph he was “shocked” at the level of tax avoidance taking place.
“I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people, but we won’t be capping relief for giving money to charity”, Osborne said as he announced the climb-down, cited by the BBC.
It is the latest in a series of Budget concessions made this week, which also includes backing down on the equally controversial caravan and pasty taxes.
Labour took the opportunity to criticise the decision, describing it as a sign of “shambolic” governing, but charities welcomed the move.
John Low, chief executive of the Charities Aid Foundation, acknowledged the government’s need to reduce the deficit, but hailed the “bold” decision.
“We are delighted that the government has responded to the challenging calls from philanthropists and charities across the country”, he said.
“The government’s ambition to strengthen the culture of giving, encourage philanthropy and build a ‘Big Society’ is something we strongly support. We are enthusiastic about working with ministers to encourage people to give time or money to support the causes we all care about.”
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The firm says that the U-turn 'does not alter the need for a fundamental review of the way we tax work' and that the current tax system is in need of reform