David Cameron yesterday insisted he wants to see charitable giving rise, and that a consultation on income tax relief caps would allow the government “plenty of time to get it right” before the caps are implemented next year.
Since charities and some high profile donors have insisted that capping income tax relief on donations will hit charities, possibly to the tune of billions of pounds, the Prime Minister’s words might get their hopes up that the plan will be dropped.
However, the Treasury has repeatedly ruled that out, telling City A.M. that the consultation is purely over implementation – dealing with the technical details between charities and HMRC, for example – and not about the end result of capping reliefs.
Other claims from the Prime Minister are less suspect – it is clearly true that a few high earners are paying low rates of income tax.
However, it remains a tiny minority, and most of the relief claimed is simply offsetting previous years’ business losses – standard practice in a firm’s early years, or when it has gone through a tough patch. Furthermore, those can only be offset once, and cannot be used to dodge tax year after year.
Cameron is right that a consultation will take place before the tax reliefs are changed next year. However, he is wrong to hint that this will lessen the impact on charities – it is only on technical matters.