Charity Tax cap will cost society up to £1.5 billion a year

10 May 2012

The Government’s decision to cap tax relief on charity donations will cost British society up to £1.5 billion a year, according to new research.

A study by Oxford Economics, the leading economic forecasting consultancy, analysed studies into the value of charitable work to show that a potential £500 million a year cut in charity incomes due to the cap would cost between £1.2 billion and £1.5 billion in lost benefits to society.

The study also found that falls in charity income due to the tax cap could also cost nearly 19,000 jobs in charities and the wider economy.

The research, commissioned by the Charities Aid Foundation, show the potential scale of the damage to charities and the causes they support from the Government’s decision to cap tax relief on major donations.

It comes as Ministers meet charity leaders later today (Tuesday 10 May) at the "Giving Summit” hosted by the Cabinet Office and aimed at increasing charitable giving.

More than 1,000 charities are campaigning for charitable donations to be exempt from the Chancellor’s cap on tax relief of £50,000 or 25 per cent of income. There is anger and despair among many charities who fear the measure will cost millions of pounds.

Treasury Ministers have acknowledged that the charity tax cap will produce £50 million - £100 million a year in additional tax revenue. That is likely to equate to up to £500 million a year in lost donations.

Figures calculated by the Charities Aid Foundation, which works with charities and donors to increase giving, show charities are already squeezed with an eight per cent real terms fall in voluntary donations since the start of the economic downturn in 2008.

John Low, Chief Executive of the Charities Aid Foundation, said:

“This research shows that the Government’s tax changes will cause real harm to the services charities provide. That means less medical research, less support for vulnerable people and less help for the causes we all care about.

“The reality is that this tax change will yield relatively small amounts for the Treasury, but threaten large cuts in charities, which are already hard-pressed in the current economic climate. Jobs will go, but more importantly, charities will be able to do less and the country will suffer both socially and economically.

“We have told Ministers directly that this change is already damaging charities and runs counter to the very idea of a Big Society. It is good that Ministers want to talk to charities and want to promote giving. But we need the Government heed the stark warnings in the Oxford Economics study and drop this damaging charity tax.

“We have said all along. It is not the rich who will lose from this tax change, it is vulnerable people and the causes we all care deeply about.”

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