Wednesday, 11 April 2012

Uncharitable donations

The government says that it is concerned that rich people may be avoiding tax by giving money to charities which do not "do a great deal of charitable work".  This follows a report in the Telegraph of an interview George Osborne gave them in which he included charitable donations as one of three "aggressive avoidance schemes" he wants to crack down on, based on a confidential report prepared for him by HMRC.  "Mr Osborne insists that he wants to protect and encourage philanthropy, but Treasury sources say the system is open to abuse as people are giving money to foreign charities which they have often established themselves."

There is something very strange about this.  Tax relief on donations to a charity is available only if the charity is "formally recognised by HM Revenue & Customs (HMRC) for tax purposes."  If the HMRC is unhappy about the validity of a foreign charity all it has to decline to recognize it for tax purposes.

I think talk of fake charities is a smokescreen.  If the government were genuinely concerned about what charities are doing, it could instruct HMRC to check them more carefully, or, if it thinks that's too difficult for HMRC to do properly, it could allow tax relief only on donations to charities registered in the UK.  I think this is simply a tax grab from charities genuine or not, which the government doesn't have the courage to admit to.

It's only fair to point out that there is support from the left for Osborne's view of this.  In the face of such an alliance, I am on the side of the charities.

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