Following the announcement in this year’s Budget that the basic rate of income tax is to be reduced from 22 per cent to 20 per cent from 6 April 2008, concern was raised about the impact on charities. Charities receive a basic rate tax rebate corresponding to donations received under the Gift Aid scheme so a reduction in that rate means charities will receive less from the government.
No doubt aware of this factor, the Treasury published a consultation in June this year asking how the Gift Aid system might be changed to increase take-up.
In his 1999 Budget Speech, the Prime Minister, then Chancellor of the Exchequer, announced the introduction of Gift Aid for charitable gifts of any size made by British citizens. He said that he wanted "a democracy of giving". But in translating this to the current tax law, we ended up with a system whereby charities can benefit from Gift Aid on gifts by taxpayers only.
In responding to the consultation, the LITRG submission therefore looks back to his original intention, putting forward a scheme under which charities would benefit from Gift Aid on gifts by all citizens, including non-taxpayers.
We have previously highlighted the pitfalls in the current Gift Aid system for non-taxpayers.
Contact: Robin Williamson (Tel: 0844 579 6700 Fax 0844 579 6701)