The coalition are keen to be seen as clamping down on irresponsible tax avoiders, but George Osborne seems to be going after charities instead. The government have cited tax evasion as a reason for reducing tax reliefs in the budget — a move which hits charities reliant on large donations.
Despite offering reassurances that they would explore ways to avoid impacting charities, the government are yet to bring proposals forward. Over to Plan B: smear the charity sector! A Number 10 spokesperson said:
“In certain instances they may be giving to charities and those charities don’t, in all cases, do a great deal of charitable work.”
Whilst the government argues that the wealthy are taking advantage of charity tax exemptions to avoid paying income tax, HMRC seem unable or unwilling to provide estimates on the extent to which individuals are cheating the system.
The process for tax-exempt charitable giving is separate to that required to register as a charity — and obligates organisations to provide evidence of their activities.
- A charity must first apply for a charity reference number from HMRC
- They must give details on its to work to ensure their operations are charitable
- The applicant must undergo a “fit and proper person” test
If Number 10 believes certain bodies are not performing good works, why not simply revoke their eligibility for tax-exempt giving with HMRC?
Or is George using tax avoidance as an excuse to take money from charities?
HMRC got in touch with their take on the issue – but we still haven’t seen evidence of these “sham charities”:
“HMRC does see and tackle abuse of donor charitable reliefs through sham charities (bodies that purport to be charities but in fact aren’t) but these bodies are set up in the UK as well outside the UK. A new definition of a charity for UK tax purposes was introduced in 2010 which includes a requirement for the managers of the charity including its trustees to be “fit and proper persons”.
At the same time HMRC introduced a number of new security checks on charities claiming tax reliefs, including repayments of tax under Gift Aid. HMRC works very closely with charity regulators to identify and deal with both sham and non-compliant charities.”