CHARITY RAID SET TO COST BILLIONS

GEORGE Osborne’s plan to cap tax relief on charitable donations will cost good causes billions of pounds, the City warned last night, as a series of senior MPs fed a growing political revolt.

Investment manager Brewin Dolphin and accounting firm Baker Tilly spoke out against the proposal while business secretary Vince Cable said he was “sympathetic” to concerns.

Osborne is also under pressure from the Arts Council and Universities UK after a survey showed almost nine out of every 10 charity bosses said gifts from major donors will be severely hit if tax relief is capped at £50,000 a year, or 25 per cent of an individual’s income, whichever is higher.

Brewin, which manages more than £25bn, said this policy, which is part of a drive to close tax loopholes, would reduce donations by billions of pounds a year.

Head of corporate affairs Charlotte Black said: “For centuries the foundations and bedrock of the charitable sector has been the generosity of those who see needs in society... The promotion of a ‘Big Society’ and citizenships runs counter to the financials disincentive announced in the Budget.”

George Bull, senior tax partner at Baker Tilly, said: “The restrictions are really ill-thought through and will have a lot of unintended effects... It is wrong to encourage people [to donate] on the one hand and then brand generous donors as tax avoiders.”

The political fall-out grew yesterday as David Davis, the former shadow home secretary and a senior Tory backbencher, called for a re-think while a spokesman for Cable, a Liberal Democrat, said: “Concerns have been raised with ministers, including Vince, by universities and he’s sympathetic to those concerns.”

The row has sparked predictions of another coalition u-turn, after changes on policies including sentencing discounts for guilty pleas, the forests sell-off and cuts to school sport.

Iona Joy, head of charity effectiveness at think tank New Philanthropy Capital, said: “The government has made a mistake – don’t confuse philanthropists with tax dodgers.”

When chief Treasury secretary Danny Alexander was asked if there would be a u-turn on the cap he told the BBC “everyone should pay a decent proportion of their income in tax”.

He left the door open to a change however, saying the coalition would work with charities and philanthropists to ensure the cap does not have a “significant impact” on bodies which depend on large donations.