What’s the problem
Many charities depend upon major gifts from philanthropists. And in turn, these gifts are incredibly important: £11 billion was given to charity last year, with almost half of this coming from just 7% of donors. And many of these gifts are used to set up grant-making trusts and foundations that support small charities.
Today’s gifts are tomorrow’s grants.
These donors are given strong encouragement to give by an income tax relief called Gift Aid.
Until now, that is. In the March 2012 budget the Chancellor announced a cap on income tax reliefs that will affect charities both large and small and the philanthropists who support them. There’s a detailed explanation here.
It will cost more to give to charity
Amidst the complexity of the tax system, the problem is simple: a cap on the tax reliefs available to philanthropist will increase the cost of giving to charity. And like other things in life, when the price goes up we can afford to do less.
It’s also framing tax relief on donations to charity as some sort of tax avoidance measure: it creates the impression that giving to charity is a bad thing. But unlike other tax reliefs, this is not for personal benefit: it still costs donors to give to charity.
So our largest donors are likely to give less
This will mean our biggest donors will give less to charity. And it will mean charities have less resource available when pressures in our society are already putting more demands upon them.
Another problem is that the Treasury are now equating giving to charity with avoiding tax… when other government departments are asking us to give more to charity.
In short, the cap on Gift Aid is a problem for us all.
- How the chancellor’s tax-relief caps will deter the big philanthropists Karl Wilding, Head of Policy, NCVO
- Giving: the cold shoulder? Philanthropy in the Budget Rhodri Davies, Policy Manager, CAF
- Infographic: Give It Back George campaign explained