Time for another look at tax relief on charitable giving

When George Osborne suggested that there should be a £50,000 cap on the tax relief permitted on charitable giving, we approved of the idea wholeheartedly. We even felt that this wasn’t going far enough.

As far as we can see, all tax relief does is allow donors to channel what is effectively public spending (with taxpayer cash) to their own pet causes – that’s undemocratic and open to wide abuse. You can read our original post on the matter here.

I finished my last post on this by saying that not only should all tax relief on charitable giving be instantly abolished, but that once this was done Osborne should take “a long look at charitable status and who should and shouldn’t have it, starting with pretty much every arts organisation in the country.” Nothing has happened in the last few months to make us feel any differently about this.

But an article in the Times today certainly brings the problem nicely into focus. It concentrates on the case of the Cup Trust – one of the UK’s bigger charities and also, says the Times, a front for tax avoidance.

In essence, it seems that wealthy “donors” were using the charity not to “improve the lives of young children and adults” (an aim so vague you might be surprised it ever got past the Charity Commission in the first place) but to trade in the gilt market in such a way that they got both tax relief on their money and most of their money back too. I say “their money” but given that it should have been money that ended up with HMRC, it would be more correct perhaps to say “our money”.

The point here, as the Times points out, is that those who opposed Osborne’s £50,000 cap suggestion can “now see what he was on about”. Hundreds of millions of pounds are claimed every year in gift aid and tax relief related to charities. This “is the equivalent of public spending and should be policed just as carefully as the money spent by the government on schools hospitals defence and benefits,” says the Times.

This is exactly the point we have been trying to make. Tax relief on charitable giving is effectively nothing but unaudited and uncontrolled public spending. And that is something we can all do without. Osborne needs to have another go at this.