Charities in Scotland could lose out on tens of millions of pounds a year owing to a new cap on tax relief for major donations announced by George Osborne in his latest budget. From a charity perspective, the new 25% cap on income tax relief is not good news and the sector did not waste any time in calling for the decision to be reversed.
Within days hundreds of organisations, including SCVO, and more than 1,000 individuals had signed up to a campaign called Give It Back, George which is seeking a rethink of the cap. There has also been a deluge of representations to ministers, MSPs and MPs.
Organisations in Scotland which will be most affected by the cap have joined with SCVO to write to Michael Moore MP, Secretary of State for Scotland, asking him to intervene to protect charitable giving in Scotland. Signatories included the principals of The University of Edinburgh, University of Aberdeen, Heriot-Watt University, University of Glasgow and Glasgow Caledonian University, as well as the Directors of the National Museums Scotland and National Galleries of Scotland.
The new arrangements will mean less tax efficiency ? part of the motivation of wealthier people to give to charities. This change will effectively increase the cost of donating to charities for large donors, almost certainly reducing the income of charitable organisations in the process.
Although it will only affect a relatively small number of donors, it will affect the largest and most significant donations. With around 50% of the ?11bn donated to charities in the UK each year coming from just 8% of donors, the new rules will have a disproportionate effect.
The new rule flies in the face of the UK Government?s pledge to build a ?Big Society? and encourage philanthropy. At a time when public funding of charities is reducing and demand is rising, this becomes even more important but the cap will have the opposite effect.
The fact that it is being ushered in as part of a range of other initiatives aimed at tackling tax avoidance insinuates that charitable giving is akin to avoiding taxes. This is an astonishingly unhelpful message.
The reality is that move is a partial withdrawal of the Government?s tax support for charitable giving. A survey of wealthy philanthropists by the Charities Aid Foundation has indicated that eight out of 10 of those surveyed will rethink their charitable donations because of the changes, with some saying that it will force them to cut their donations by as much as 40%.
Only time will tell what impact the new measures will really have on philanthropic behaviour but what is clear is that, unless charity giving is excluded from this cap, the UK Government will effectively be taking a slice of the largest donations to charities for the Treasury.
To risk reducing donations to charity or making giving more complicated is a very dangerous move. These changes could stifle donations from wealthier people whose generosity is helping charities to continue supporting the most vulnerable members of society at a time when their budgets are being squeezed like never before.
It could seriously affect larger organisations which depend on major gifts from philanthropists. But smaller organisations won?t be immune. A ripple effect could also see smaller, local organisations lose out as charitable foundations will have fewer funds to distribute.
The UK Government must reverse its decision and exempt charitable donations from the cap on tax relief before it can do any damage to the essential work of charities across Scotland and the rest of the UK.
Tags: 4 April 2012, Give it Back George, Martin Sime, Scottish Council for Voluntary Organisations, tax cap
Source: http://www.scvo.org.uk/scvo-comment-opinion/taking-from-the-rich-but-taking-more-from-the-poor/
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