Clause 54
Finance (No. 2) Bill
3:15 pm
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Good afternoon, Sir John. I compliment the hon. Member for Wycombe (Mr. Goodman). This is a complex set of amendments, and he advanced his arguments very clearly. He made it clear that they are probing amendments, and acknowledged that there are issues to be dealt with, as did the hon. Member for Falmouth and Camborne.
I should like to start by answering the hon. Gentleman’s questions about the National Trust. He looked perplexed as he was making his statements and I was startled. There were two points. The first concerned a charity that pays more than the market rate. I have to say that any charity that did that would be in breach of charity law; such a situation has nothing to do with the Bill. If he wishes to make the point differently after the debate, I would be happy for him to write to me. As I am sure Members would all agree, however, 99.9 per cent. of charities do not undertake that type of planning, and they comply with the generous reliefs that apply. Secondly, he asked about tenants in historical premises. My understanding on that point is that contractual arrangements will not be caught by the new rules—that is clear.
The two points made by the hon. Gentleman go to the heart of the difficulties with the clauses and to the substantive debate on them, so I should like to remind Committee members why the provisions are necessary. I assume that the hon. Member for Falmouth and Camborne wants to know how much abuse there is already. Substantial donors either make payments or transfer assets to charities, and then receive back money, shares or property. Reliefs in the form of gift aid payments or share relief payments are then triggered depending on which of those applies. Having obtained the relief, the donor then gets back a loan that may, for example, carry no repayment schedule with it—in fact, the charity may not want to be paid back at all. So the substantial donor status is used as a money box to attract more reliefs, which is clearly not a charitable function. I think that that is scandalous and despicable.
In its reaction to the proposed provisions the charity sector has made it clear that it takes the same view. I agree with the Charity Finance Directors Group when it said:
“It is essential that the charity brand is protected and not tainted by association with tax avoidance schemes.”
Furthermore, the Charity Reform Group said that it
“strongly welcomes the introduction of measures to prevent the exploitation of tax reliefs for charities by substantial donors for their own benefit”
—rather than that of the charity. I could go on with a long list of important organisations that have commented.
I shall deal in turn with each of the hon. Gentleman’s substantive points on the amendments and explain why the Government regard them as unnecessary, because it seems to me that the amendments are based on a misunderstanding of what the clauses seek to achieve. There was some recent unfavourable coverage in the magazine Charity Finance, but I do not believe that the fears that have driven the drafting of the amendments will materialise.
The trigger comes not when the substantial donor makes a payment or transfers property to a charity. The trigger comes if there is then a relationship between the charity and the substantial donor, whereby something comes out of the charity. That is what starts the clock. The terms are not unfavourable for the charity, but they are most definitely favourable for the substantial donor, and that is not the point of the charity reliefs and their support.
The point of the charitable reliefs is to assist people in charitable giving and to enable that to happen, not to allow wealthy individuals to find ways of getting reliefs to which they are not entitled and damaging the process or, as the hon. Member for Falmouth and Camborne said, attempting to apply undue pressure on charities in order to get that advantage.