Sarah J spoke with Stewardship to find out what the current situation is

Kevin Russell

Earlier this year in the Chancellor's budget statement, he announced that there would be a cap placed on certain tax relief. This caused an outcry, with concern that giving would drop and services would be cut, affecting the most vulnerable in society. Sarah J spoke with Kevin Russell, the Technical Director of Stewardship and the Vice Chair of the Charity Tax Group to find out what the current situation is.

Sarah J: Back in March/April time we heard from the Government that there were going to be some changes in terms of tax limitations relating to the charitable sector. Just give us a quick overview of what was causing a little bit of a concern amongst the charity sector here in the UK.

Kevin: The Chancellor in his budget statement announced that there would be a cap placed on certain tax relief. These were tax relief's that were previously uncapped, and include tax relief for charitable gifts. Now this wouldn't affect the majority of donors but it would affect those at the higher end; those that are claiming higher rate relief and giving more than £50,000 a year to charity or more than 25% of their income, whichever is the greater of those two. The issue when that proposal was analysed was that it would lead to a major fall in donations to charities of all sizes, not just those that are receiving huge gifts like the arts and the education sector, but it would filter down to charities as a whole, particularly those giving to a charity like Stewardship, and then asking for grants to be made from their account with us, say for example their local church, which may be £100 to £200. Those gifts would be cut back to compensate for the restriction in tax relief and that's where our concern really lies.

Sarah J: There was quite a lot of lobbying to Government about this wasn't there? Wasn't the concern that as a result of this you might see aspects of the charitable sector beginning to close down some of the services that they provide the community?

Kevin: Yes that's right. That was our major concern that the most vulnerable in society would be impacted and even if it was a large gift to a charity helping the homeless, services would have to be cut. We were certainly aware that, for example, large donors were funding individual staff posts within charities. If those staff posts go then that would mean a cut to services at the local level to the most vulnerable in society.

Sarah J: In terms of challenging government on some of these decisions, what was the kind of work that Stewardship was involved in, in order to make those challenges?

Kevin: The way we operate in these things typically is to work behind the scenes with the key personnel in HMRC, in the treasury and with Government ministers rather than publicly shouting. Even from the day after the budget I was emailing the policy staff at the revenue saying this is dynamite. We publicly encouraged people to join the Give it Back George Campaign, which was in the public eye campaigning against this measure, but one of the key things that we did was to gather evidence from major donors, of the sorts of reactions that would result if this measure was brought into place. Mathematically we calculated that it would lead to a drop of 30% in donations, but some of our donors were saying that their accountants had calculated in their personal circumstances that they would cut their donations to charity by up to 65% and one mentioned that he would actually emigrate to a country with a more favourable tax treatment and take his family with him, because he had business links as it happened in Asia. We were very much working with the treasury through my work as Vice Chair of the Charity Tax Group. I'm also part of the HMRC Charity Tax Forum. We were engaging with the media. I did some BBC interviews. We've met with David Guake who's the Exchequer Secretary to the Treasury; getting those messages across as to what the true impact of this measure would be and how damaging it would be to the sector.

Sarah J: As a result of the lobbying that you've been involved in, we've had some good news come through haven't we?

Kevin: Yes indeed. The Government's announced that they are going to retract on this and that although they're going to proceed with a cap on some of the other tax relief's, they would not include any caps on the charity tax relief, so that's brilliant news for us.

Sarah J: That's fantastic. In terms of the sector it means that nothing's changed in terms of the tax picture with charities at the moment?

Kevin: Nothing will now change from a perspective of the way that the tax system will work. We do need to get the message out again to those major donors, because we were hearing, although this measure was going to take place from April next year, and that's no longer the case, that donors were starting to cut back their giving already for fear and for uncertainty. We need to get the message out to say that it's all actually as it was.

Sarah J: So there's a couple of messages there, there's the message to existing donors that if you want to donate large quantities of money to charitable sector organisations, there isn't going to be a cutback and all is well with that and also a plea out there for the charitable sector, if you have got that level of money then please give it to us as well.

Kevin: Yes; so the fundraising side of things continues very much as before but we hope with renewed vigour.

Sarah J: So we've heard a little bit about the good news for large based donations to charity and the tax situation with that. What about small donations? I know we have this fantastic scheme called Gift Aid where charities can claim back on the tax on small donations, but unless people filled in some paperwork for that it meant they couldn't claim back for other donations that they had received that are quite small. What's happened with that?