Plans to limit the tax reliefs that can be claimed on charitable donations have been scrapped by Chancellor George Osborne, the third policy change from the Budget announced this week.
Osborne said yesterday: ‘It is clear from our conversations with charities that any kind of cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.’
The cap on reliefs for business investments and pensions contributions will still go ahead. From April 2013, no individual seeking reliefs above £50,000 will be able to claim more than 25% of their income.
Osborne’s March 21 statement said the government would curtail ‘excessive use’ of tax reliefs so that high-income earners paid their fair share. Budget documents estimated that the overall cap on reliefs would raise £490m in 2014/15.
However, charitable groups argued that limiting reliefs could reduce their funding, a point now accepted by the government.
A Treasury spokesman added: ‘We said at the Budget that we did not want the cap on the amount of tax relief people can claim to impact significantly on charities that rely on large donations. Since then we had discussions with charities.’
Groups representing third sector organisations welcomed the move.
Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said: ‘We are delighted that the chancellor has listened to reason and pledged to drop the charity tax. This is a great day for philanthropy.’
Sir Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, added: ‘This is good news for charities up and down the land. The chancellor has listened and done the right thing, and I applaud him for doing so.’
Earlier this week, the government dropped controversial plans to charge VAT on hot baked goods such as pasties. It has gone ahead with plans to charge VAT on static holiday caravans but has agreed to lower the planned rate from 20% to 5%.
