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Deloitte comment from Toby Bushill, a director of tax at Deloitte, the business advisory firm, on the Budget’s implications on charities and charitable giving:

“In today’s Budget, the Chancellor announced a number of measures to support charities and charitable giving. Not surprisingly, given the state of the public finances, there was no great tax give away for charities, although he did announce a creative proposal to allow a 10% credit against inheritance tax for charitable bequests from 6 April 2012. The Government will also consult on a new tax relief for gifts of major works of art or historical objects of national importance to charity.

“It is reassuring that, despite the financial pressures, the Coalition Government remains committed to keeping gift aid - the main tax break for charitable giving – broadly in its current form. The Chancellor announced proposals aimed at simplifying the compliance processes for charities reclaiming the income tax credit on gift aid donations from individuals, including a move to online filing of gift aid claims for 2012-13. There will also be a reduction in the paperwork required, from April 2013, for smaller charities on donations of up £10 on donations of up to £5,000 a year per charity.

“What the Chancellor failed to mention, though, is that from 6 April charities will be losing out on £3.21 for every £100 donated by individuals when the supplementary relief for the reduction in the basic rate of tax from 22% to 20% comes to an end. The Government has resisted calls from the charities sector to extend this temporary relief.

“There will also be some welcome relaxation of the anti-avoidance rules around gift aid. The Government has listened to representations from the charities sector over replacing the controversial ‘substantial donors’ regime which could in certain circumstances unfairly penalise charities. This will be replaced by a more targeted measure designed to prevent people obtaining tax relief for gift aid if they expect as a result to receive a financial advantage from the charity.

“Large donors making gifts of more than £10,000 will from April 2011 be able to receive benefits of up to £2,500 from the charity without losing tax relief. The previous limit of £500 was certainly too restrictive and could be an obstacle, for example, to arts charities wishing to show their appreciation to major donors by giving them reduced ticket prices, donors’ receptions or invitations to private viewings.”

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