Charities raise concerns over tax relief cap on donations

UK charities have criticised Chancellor's George Osborne's comments regarding tax avoidance by top earners in the UK, claiming they will damage philanthropic giving.

The Chancellor was reportedly 'shocked' at the level of tax-avoidance undertaken by some individuals who had taken advantage of tax-breaks on charitable donations. According to the Financial Times, a spokesman for the Government had said that in many cases money was being given away to 'bogus' charities, with the system being 'abused.'

The comments further exacerbate concerns voiced by charities over plans announced in last month's Budget to cap the amount of money that donors can give away tax free.

From April 2013, all uncapped income tax reliefs will be limited to 25 per cent of an individual's income, or £50,000, whichever is the greater - including relief on charitable donations.

Responding to the Government's comments, John Low, chief executive of the Charities Aid Foundation, said that large single donations from individuals were 'not a ploy to save tax.'

"Philanthropists who make large donations give away far, far more than they could ever claim in tax relief. That money goes to fund projects for the public good, such as medical research and help for the most vulnerable in society," he said.

"Imposing a blanket cap on tax relief will cost charities millions of pounds by making it more difficult for philanthropists to make major donations and undermine the idea of the Big Society which the Government is trying to promote."

In his Budget 2012 speech, George Osborne maintained that it was right to promote charitable giving through tax-breaks, but added, 'it can't be right that some people make unlimited use of these reliefs year after year.'