Budget 2012 — a view from our charities and philanthropy team
22 MARCH 2012
CATEGORY: ARTICLE
Overview
For charities and philanthropists, much of the Chancellor’s budget yesterday covered familiar ground; the budget revisits and con rms key changes announced in last year’s budget including a reduced rate of inheritance tax where substantial gifts are made to charity, Gift Aid in respect of small donations without the requirement for a Gift Aid declaration, and tax relief for gifts of pre-eminent objects to the nation. However, a potentially worrying announcement for charities and philanthropists is also lurking in this year’s budget 2012.
Confirmations and news for charities and philanthropists
The Government con rmed key announcements which were made in last year’s budget including:
For deaths on or after 6 April 2012, the reduced rate of inheritance tax of 36 per cent will be available for estates which leave 10 per cent or more of the taxable estate to charity. From April this year the Government will withdraw Self Assessment Donate or ‘SA Donate’ for tax returns for 2011 – 12 onwards. Also from April tax relief will be available to donors who donate a pre-eminent object or artwork to the nation, subject to caps and limitations. From April 2013 charities will be able to make a Gift Aid repayment claim of up to £5,000 without Gift Aid declarations in respect of donations of up to £20 (an increase from the £10 announced in last year’s budget 2011). The existing legislation introduced by the Finance Act 2010 to put onto a statutory footing the practice of claiming Gift Aid repayments ‘in year’ will be amended to address certain issues with its drafting.
In addition, the budget set out the following items of interest to charities and philanthropists:
The Government will work with the charity sector to simplify Gift Aid in the context of charity shops. The suggestion of a Gift Aid database has been advanced by sector groups such as the Charity Tax Group in order to achieve this, but it is not yet evident if this will be taken up. The Treasury will conduct an internal review looking into the nancial barriers to social enterprise. A VAT exemption for cost-sharing arrangements will be introduced following the announcement in the Government’s Autumn Statement last year that services shared between VAT-exempt bodies, including charities and universities, will be exempt. From 1 October this year, the Government will withdraw charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials. Capping tax reliefs
The budget contains another key item of importance to charities and philanthropists, however.
The Chancellor announced the introduction of a limit, from 6 April next year, on all income tax reliefs that are not currently capped. This would include in principle Gift Aid and Payroll Giving, relief for gifts of shares, securities and land to charities, and gifts of pre-eminent objects to the nation under the forthcoming scheme, as well as any uncapped non-charitable reliefs. Although the detail is not yet known, this cap will apply to those seeking to claim more than £50,000 in reliefs (across all reliefs) in which case the relief available will be limited to 25% of a person’s income.
The majority of donors who give a small percentage of their income to charity will not be affected. This proposal would, however, affect a donor wishing to make signi cant gifts to charity. HMRC has separately (i.e. not in the budget statement) clari ed that an individual with an income of £1m will be able to claim up to £250,000 of tax reliefs which are uncapped, but the present Gift Aid relief – including both the charity’s basic rate reclaim and the donor’s additional rate reclaim – could enable more than £250,000 to be claimed by way of relief and is thus mor