One sector which is likely to be reasonably happy with the announcements made by George Osbourne on Wednesday is the Charity Sector, although it will have to wait a while to feel the benefit of the majority of the measures announced, as most will not come into effect until 2012, or later.
One change that will be made in the current tax year is an increase to the level of benefit which may be provided by a charity to those making donations of more than £10,000. At the present time where an individual makes a donation to a charity then in order for that individual to benefit from gift relief on the donation, any benefit received by the individual, or a connected person, must not exceed certain limits. Provisions in Finance Bill 2011 will increase the annual benefit limit per charity from £500 to £2,500, although the value of the benefits still cannot exceed more than 5% of the donation.
A raft of other changes, which are to come into effect in later years, were also announced, including:
- From April 2013 charities will be able to claim a "gift aid style repayment" in respect of small donations of £10 of less without the need to obtain a gift aid declaration, up to a maximum of £5,000 per year. A charity will need to meet a number of requirements to be able to claim this benefit. (We can provide you with further guidance, on request).
- A reduced rate of inheritance tax will be applied to a deceased's estate where 10% or more of the estate is left to charity. The bequest to the charity will continue to be tax-free, and the rate on the estate which passes to non-charities will be reduced from 40% to 36%. This will apply where death occurs on or after 6 April 2012.
- A new gift aid online filing system for charities to register their details for gift aid and make gift aid claims. This will take effect in 2012/13.
- The system which allows individuals to donate any tax repayment they receive to charity will be withdrawn for 2011/12 tax returns.
- A consultation is to take place on measures to encourage donations of works of art and historical objects of national importance to the State and to the Charity Sector.
The number of announcements relating to charities contained in the Budget indicates that the Government has a commitment to ensuring that the UK has a strong Charity Sector. Some commentators have criticised the measures, however, as in a time when charitable donations are falling charities need changes that will maximise their donations now, not two years from now when the majority of the changes announced will come into effect.
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The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
