13 April 2012

Charity tax debacle - update

The Spectator has a lot more information than my simple opinion piece, blogged yesterday, in its Coffee House blog: How Mitt Romney inspired the British charity tax debacle. Fascinating insight, and certainly confirming that the Departmental ministers for Business and for Culture, Media and Sport were cut out of the policy-making loop.
The Times gave five cases where HM Treasury say that charitable donations are abused. These all look pretty tenuous and could be handled under existing rules if the Charities Commission and HMRC do their jobs properly. To summarise the abuses and the charities' response:
Treasury caseCharity response
1Shares donated to charity found to be worth less than claimedRelief is based on fair market value
2Business gives money and claims relief. Money is then lent back.Government has already cracked down on 'tainted donations'
3Relief claimed for donation to a dubious charity that doesn't do much charitable workThis is for the Charities Commission to police
4Tax relief claimed for donation to a dubious foreign charity It's not allowed to claim relief on donations to charities outside the EU
5Tax relief given on donation to UK charity which passes the cash to a dubious charity abroadUK charity has to satisfy HMRC that the foreign charity would qualify

In a final dagger thrust to the Government's credibility, it also vented rumours that Oliver Letwin is to be asked to sort out the political mess. For heaven's sake!

12 April 2012

Charities tax breaks - impact analysis?

The UK government has decided to limit the tax breaks that are available for charity donations because there are some cases where people use their donations to reduce their effective tax rates to very low levels. The feeling seems to be that money donated to charities is unjustifiably lost tax. The policy appears to have been introduced without proper planning or impact analysis. Other Government departments seemed not to have been consulted.

David Gauke MP, the Treasury Minister responsible for defending the policy on BBC2 Newsnight programme tonight (12th April) mentioned charities that don't distribute much money to real causes, but refused to name them. Apparently some charities lend money back to companies controlled by their 'donor'. To me this is a sign that the Charities Commission isn't doing its job properly, not a reason to cut off significant flows of major donations to key charities that support (to pick a few from many) health, social causes, sports, and the arts.

Whether he was completely out of his depth, or just defending the indefensible, is hard to say. But to me, without names and evidence, this just looked like bullshit being raked together to defend a poorly thought-through policy announcement.