Charities urge rethink on tax relief cut

Charities and philanthropists are urging Chancellor George Osborne to rethink plans to restrict tax relief on charitable donations.

As part of the government’s clampdown on tax avoidance, plans have been outlined to restrict the tax relief on charitable giving to a maximum of £50,000, or a quarter of the donor’s income, if that is greater.

The plans have been drawn up to tackle tax avoiders who funnel money through a charity (often based overseas) with little evidence that the money has been put to philanthropic use.

However, the plans sit uncomfortably with the government’s expressed wish to encourage philanthropy – and in particular, to foster a culture of giving akin to America’s, where donations run at twice the level seen here.

Whilst Mr Osborne’s measures may cut tax avoidance, they could make it less attractive to give money to good causes. Sir Nicholas Hytner, head of the National Theatre, said yesterday, it is easier for such institutions to raise money in the US than in the UK. He disclosed that an individual who had intended to donate £250,000 to the theatre was now reconsidering, in light of the Budget announcement.

Other leading philanthropists have also warned that the government's plan to limit tax relief on charitable donations will put people off giving money. 

In a letter to the Sunday Telegraph, philanthropists and representatives of charities including three members of the Sainsbury family and the chief executive of Marie Curie Cancer Care called the proposals "confusing and dispiriting". The letter, which was also signed by Gordon Roddick, the widower of the Body Shop founder Anita Roddick, stated:

"The government was making progress in encouraging more people to give more of their wealth to charity. The proposal in the budget to cap charity tax reliefs is a brake on philanthropy that may deter future donors."

The government has seen a growing revolt over the plans to limit tax relief on charitable donations to 25% of earnings.

The business secretary Vince Cable has warned that the move could harm university funding, and David Davis, the influential Tory backbencher, has said it would be better to ensure charities are scrutinised to make sure they are not being used for tax avoidance.

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