The Government's U-turn on Charity Tax

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The Budget this year contained a number of tax rises which were quickly given nick-names by the press and opposition. We have already seen changes of heart over the so-called Pasty Tax and Caravan Tax where VAT increases were being introduced. Well-organised campaigns by those affected had clearly had the desired effects. This has been followed up by the abolition of the restrictions on charity tax relief. The Government had intended to restrict this relief to the higher of £50000 or 25% of the person’s annual income. This was presented by Mr Osborne as a weapon in the Government’s anti tax avoidance armoury but it would clearly have had major implications for several well-known charities. The Government has now relented and the restrictions will not now be imposed.

Bob Wheatcroft, who is Armstrong Watson’s head of tax said “It was always difficult to see the charity tax relief measures as being aimed at tax avoidance and the measure has quite properly been dropped. If there is abuse of the tax system using charity tax reliefs, then any loopholes should be addressed in a way that doesn’t catch genuinely philanthropic donations.”