Jane Kennedy (Financial Secretary, HM Treasury; Liverpool, Wavertree, Labour)
This has been a helpful, brief discussion. All the proposals made during the consultation were considered and discussed across government. I met a number of organisations that made representations. The proposals are complex, requiring a full assessment of any risks to the current system and the funds that flow to charities through it. We are continuing to develop our thinking on gift aid, but at present our priority is to protect the status of this popular tax relief, rather than risk losing the benefits of the system.
We carried out a full and open consultation. As one might expect in such a broad area, views vary widely across the charitable sector. We responded to issues on which there was consensus: transitional relief, the provision of better guidance—and there has been a lot of effort from HMRC to offer a simpler approach, and tools to help charities drive up gift aid. In response to my hon. Friend the Member for Broxtowe, the consultation showed that opinions on higher-rate gift aid varied widely, with some people believing that the relief should go directly to the charity, and some people believing that basic rate relief should also go to donors. There was a wide divergence of opinions.
The transitional period is a three-year breathing space to allow charities to adjust to the change in the basic rate tax without it affecting their existing expenditure plans. During that period, charities can drive up more gift aid income with support from the rest of the gift aid package announced in the Budget. In addition, we will work with donors and charities to develop an understanding of donor behaviour, using that to inform further thinking about gift aid—again, in order to continue driving up the take-up.
The hon. Member for Runnymede and Weybridge asked specifically about condition D, and posed a fair question. The transitional relief will be due to a charity where only the underlying donation and claim meet the requirement of the gift aid scheme—it is an application. Condition D in paragraph 1 ensures that transitional relief will not be payable when the underlying claim is invalid. A claim for gift aid may be invalid for a number of reasons—for example, the claim form may not contain the required information. HMRC cannot be expected to pay the aid in those circumstances and it would be unsustainable to make transitional relief payable, but not the underlying gift aid, in such circumstances
Without the provision, if donor behaviour remained as it is today, it has been estimated that losses for charities would be significant across the whole sector, running to more than £100 million next year. The amount received by charities from the supplement will be proportionate to their eligible gift aid claims. For every £1 of gift aid that is donated, charities will receive 3.2p in supplements, so the charities will continue to receive 28.2p in total for every £1 donated under gift aid.
The proposals in the Budget were widely welcomed by the sector. I acknowledge that, for some, there was a feeling of relief that they could have certainty going forward. There is continuing dialogue with the sector, which was as keen as we were to maintain the nature of gift aid. That formed the basis of much our discussions, and I am sure that there will be a continuing dialogue in the area.