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  1. Wealth
March 22, 2012

Charities React to Budget With Anger

By Spear's

The National Council for Voluntary Organisations has released a Budget 2012 Scorecard, giving the chancellor a D-

Charities have reacted angrily to George Osborne’s Budget, which capped personal tax reliefs, meaning that philanthropists may be discouraged from giving major donations. The relief will be capped at £50,000 or 25 per of income, whichever is greater, thus large donations may no longer be as tax advantageous.

The National Council for Voluntary Organisations has released a Budget 2012 Scorecard, giving the chancellor a D- for the cap: ‘This sets alarm bells ringing for us, as it could negatively impact on donations. Although the Government has committed to ensuring this does not inhibit large donations, we do not think that this measure sits well with a push to encourage a culture of philanthropic giving.’

According to NCVO, 8 per cent of donors give almost half of all charitable donations. While it is to be hoped that donors do not just give for the tax relief, it certainly will not help charities for it to be capped.

At Withers’ Budget Breakfast this morning, partner Chris Groves said the government ‘has been encouraging giving but only on death and the effect of the change is to discourage lifetime giving’. He described the limiting of reliefs as ‘the blunderbuss approach’.

The failure of the chancellor (pictured left) to mention lifetime legacies, whereby a donor can pledge an asset to a charity but continue to receive the benefit of it in their lifetime, was a missed opportunity, he added.

A Withers press release said that this cap, added to the reduced rate of income tax (36 from 40 per cent) when bequeathing 10 per cent of your estate to charity ‘could lead some to prefer testamentary giving to lifetime giving. This is extremely unfortunate as charities facing funding crises in the here and now will be unlikely to welcome any measure which could have the effect of encouraging delay.’

UPDATE Clive Cutbill, head of Philanthropy at Withers, later told Spear’s that this was all bad news for charities: ‘If you take at face value what we’ve been told and unless it’s modified in some way, potentially those charities that rely upon very substantial donations will see a loss of funding. There could well be a shift towards testamentary giving, coupled with the inheritance tax changes.’

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Dan Corry, CEO of New Philanthropy Capital, wrote in a blogpost that he was concerned about the cap: ‘While a sensible sounding policy overall, it has the potential to adversely affect giving by high-net-worth individuals. The detail of the Budget document shows that the government plans to “explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations”.

‘Easy to say but no doubt hard to achieve. We shall wait and see the results of this exploration with interest.’

Spear’s launched its 1 Per Cent Campaign to encourage the wealthy to give their time, money and expertise to charities and voluntary organisations, and while time and expertise are not facing a cap, we hope that the new measure won’t discourage our readers from giving money either.

There were some measures received positively, however. As mentioned above, the chancellor confirmed that the 10 per cent donation of an estate on death will reduce inheritance tax liability from from 40 to 36 per cent.

Plum Lomax, a senior consultant at NPC, wrote that this was good because ‘it shows government commitment to improving the UK’s philanthropy culture through a practical measure’, but more so because ‘legal and tax advisors talking to their clients about their wills will now have to raise the issue of leaving money to charity.’

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