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One of the surprises of the Budget announcements made 21 March was the capping of certain reliefs, particularly the reliefs for charitable giving and business losses.
The aim of the cap is to restrict the amount of tax relief claimed by high income earners. The Chancellor was apparently shocked to discover that some of the country's wealthiest individuals pay hardly any income tax.
What is the cap?
The Budget itself contained very few details about the proposed cap other than:
• It will be introduced from April 2013.
• The Government plans to introduce a limit on all currently uncapped income tax reliefs.
• The restriction is proposed to be set at 25% of an individual's income (the precise definition of which is yet to be confirmed) or £50,000, whichever figure is greater.
Not surprisingly charities are concerned.
One of the key tax reliefs affected is that afforded to individuals who make charitable donations. Charities are concerned that the cap on donations will drastically reduce the large donations on which they rely.
Detailed legislation is unlikely to be published on this issue until the present round of consultations is completed later this year.
We will, of course, keep our clients informed as more information becomes available.
Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Director - Corporate Tax
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