A major anomaly in Gift Aid regulations was resolved. Hitherto, charities could claim back the income tax on donations only if they knew the name and address of the tax-paying donor. Thanks to generous George they can now claim Gift Aid on the first five thousand pounds of 'orphan' or anonymous gifts as well: for the first time, tax can now be reclaimed on the contents of collection boxes, saucers or (if you're lucky) buckets - plus gifts from mysterious, anonymous benefactors.
That's bright and helpful. With the basic rate income tax at 20% the measure is worth up to £1,000 to every registered charity, whether they be Guide Dogs (income around £50 million) or the local allotments charity - assuming their income from donations, rather than from renting allotments, is as much as £5,000 in the first place. If every one of Britain's 170,000 charities claimed their £1,000 that would bring an extra £170 million into the coffers. But it won't happen. Lots of charities - especially amongst the 75% that Francis Maude keeps telling us won't suffer from Government cuts - don't have an annual income of £5,000 from donations: remember that trading income, subscriptions and gifts from known taxpayers are excluded from the calculation.
So smaller charities are less likely to claim the maximum help, bigger ones are less likely to need that extra grand. For charities that do gain from Osborne's openhandedness, there's a very big catch. Three years ago Labour delighted the pre-crisis nation by reducing basic rate income tax from 21p in the pound to 20p. All right for some, but not for charities as Gift Aid is related to that basic rate. So three years of protection was introduced for Gift Aid, meaning that for every pound charities received from known taxpayers the Treasury would continue to add 28p rather than the 25p that the new tax rate merited. (Note for Maths 101 students: £1.25 less 20% is £1, £1.28 less 21% is also £1).
That three years of protection runs out in April 2011, next week. It is estimated that charities will loose £100 million a year from that day and I bet my bottom dollar that this figure is higher than the new income the orphan gift measure will actually generate. Even if every charity did claim its grand, that income would be about a fifth of that which currently goes unclaimed through the Gift Aid claim process, according to the Charities Aid Foundation. The Government appears to be taking Giving seriously and a useful discussion was generated by a recent Green Paper. But another Budget measure the Government introduced is slightly weird, to say the least.
The Inheritance Tax threshold is £325,000. If you die tomorrow leaving an estate worth, say, £400,000 and bequeath £100,000 to charity, then instead of paying 40% tax on the balance you would get ten per cent of your tax back from the Chancellor (ie you would pay 36% tax on it). That's more money that goes to… well, to me, even though I'm dead. The charity may not see a penny of that 4% but they will see the value of Gift Aid on that £100,000 fall for the reasons explained above.
The measure requires a tenth of the estate to be donated as a minimum, so if you leave a £375,000 estate with £20,000 of inheritance tax payable and bequeath £37,500 to a charity then your inheritance tax liability will be reduced by £2,000 - from 2012. If this measure does work as an incentive to give more it will apply to precious few estates.
The Budget said nothing about living legacies, whereby the value of an asset such as a property or a work of art is transferred to a charity during my lifetime but the asset itself only upon my death. Living legacies have broad support and this is a missed opportunity. Come on, George, admit it: this was a giving with one hand, taking with the other Budget for charities as it was for so many others.
Tom Levitt is a freelance consultant on cross-sector partnerships. He established http://www.sector4focus.co.uk/ Sector 4 Focus in 2010 to specialise in bringing together businesses and charities to focus on the 'triple bottom line' of social responsibility in mutually beneficial ways. He was Labour MP for High Peak from 1997 to 2010.
This content is brought to you by Guardian Professional
That's bright and helpful. With the basic rate income tax at 20% the measure is worth up to £1,000 to every registered charity, whether they be Guide Dogs (income around £50 million) or the local allotments charity - assuming their income from donations, rather than from renting allotments, is as much as £5,000 in the first place. If every one of Britain's 170,000 charities claimed their £1,000 that would bring an extra £170 million into the coffers. But it won't happen. Lots of charities - especially amongst the 75% that Francis Maude keeps telling us won't suffer from Government cuts - don't have an annual income of £5,000 from donations: remember that trading income, subscriptions and gifts from known taxpayers are excluded from the calculation.
So smaller charities are less likely to claim the maximum help, bigger ones are less likely to need that extra grand. For charities that do gain from Osborne's openhandedness, there's a very big catch. Three years ago Labour delighted the pre-crisis nation by reducing basic rate income tax from 21p in the pound to 20p. All right for some, but not for charities as Gift Aid is related to that basic rate. So three years of protection was introduced for Gift Aid, meaning that for every pound charities received from known taxpayers the Treasury would continue to add 28p rather than the 25p that the new tax rate merited. (Note for Maths 101 students: £1.25 less 20% is £1, £1.28 less 21% is also £1).
That three years of protection runs out in April 2011, next week. It is estimated that charities will loose £100 million a year from that day and I bet my bottom dollar that this figure is higher than the new income the orphan gift measure will actually generate. Even if every charity did claim its grand, that income would be about a fifth of that which currently goes unclaimed through the Gift Aid claim process, according to the Charities Aid Foundation. The Government appears to be taking Giving seriously and a useful discussion was generated by a recent Green Paper. But another Budget measure the Government introduced is slightly weird, to say the least.
The Inheritance Tax threshold is £325,000. If you die tomorrow leaving an estate worth, say, £400,000 and bequeath £100,000 to charity, then instead of paying 40% tax on the balance you would get ten per cent of your tax back from the Chancellor (ie you would pay 36% tax on it). That's more money that goes to… well, to me, even though I'm dead. The charity may not see a penny of that 4% but they will see the value of Gift Aid on that £100,000 fall for the reasons explained above.
The measure requires a tenth of the estate to be donated as a minimum, so if you leave a £375,000 estate with £20,000 of inheritance tax payable and bequeath £37,500 to a charity then your inheritance tax liability will be reduced by £2,000 - from 2012. If this measure does work as an incentive to give more it will apply to precious few estates.
The Budget said nothing about living legacies, whereby the value of an asset such as a property or a work of art is transferred to a charity during my lifetime but the asset itself only upon my death. Living legacies have broad support and this is a missed opportunity. Come on, George, admit it: this was a giving with one hand, taking with the other Budget for charities as it was for so many others.
Tom Levitt is a freelance consultant on cross-sector partnerships. He established http://www.sector4focus.co.uk/ Sector 4 Focus in 2010 to specialise in bringing together businesses and charities to focus on the 'triple bottom line' of social responsibility in mutually beneficial ways. He was Labour MP for High Peak from 1997 to 2010.
This content is brought to you by Guardian Professional
0 comment:
Post a Comment