Clause 51 - Relief for gift aid and other income of charities etc

Finance Bill – in a Public Bill Committee at 3:30 pm on 14th June 2012.

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Question proposed, That the clause stand part of the Bill.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following:

That schedule 15 be the Fifteenth schedule to the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

To avoid the risk of pre-empting what the Minister will say, I will not go into any detail as to what the clause and schedule will do. I will make my comments in advance of our receiving that explanation  from the Minister. However, part of the clause’s purpose is to rectify an error in the Finance Act 2010 that occurred in a rewriting of the Corporation Tax Act 2010, which led to community amateur sports clubs not being treated in the same way as charitable companies for the purposes of gift aid legislation. The purpose of the clause and the schedule is to rectify that mistake. In this year of the Olympics, it is right and proper that community amateur sports clubs are given the same rights to tax relief and support as other charities.

Following on from comments made by my hon. Friend the Member for Leeds West, the issue raises general concerns about the Government’s treatment of charities and their lack of consultation regarding some of the provisions that would have had a devastating impact on charitable donations. Given that the Government have proclaimed their great belief in the somewhat vague concept of the big society, there is grave concern about any obstacles put in the way of charitable giving and its tax treatment. Therefore, we welcome the changes in the clause to rectify those anomalies. We trust that the Government will consult properly in the future on any taxation changes that would impact charitable giving in this country.

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury

Without straying too much over the boundaries, I suspect that in order to respond to some of the hon. Lady’s points, I shall have to refer to both clauses 51 and 52, if that is in line with your permission, Mr Amess. Would you prefer that I dealt with clause 51 on its own?

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 3:45 pm, 14th June 2012

Indeed. Together, clause 51 and schedule 15 will make a number of technical changes to ensure that charities and community amateur sports clubs can make claims for a repayment of income tax, including gift aid, outside of tax return. Crucially, these changes will not affect the way in which charities and CASCs claim repayments but will put the current practice regarding claims outside a tax return on a statutory footing.

To give the Committee a little background, HMRC makes repayments of income tax, including gift aid and tax deducted from bank interest, to charities and CASCs. Claims are nearly always made outside a tax return, but in most cases HMRC repays the tax on a concessionary basis. The legislation that allows that to happen relies on a number of provisions across the tax Acts—documents, Mr Amess, which I am sure you know all too well and indeed read every weekend. A number of changes to the legislation have been made over the past few years, including the tax law rewriting company tax and allowing charities claim repayments of tax outside a tax return, but they have either overlooked or failed to preserve the links between certain provisions in the tax Acts.

The effect of those changes is that, strictly speaking, CASCs may not claim gift aid repayments, and that charities should claim tax repayments, including gift aid, only in a tax return. That is clearly contrary to the intention that such organisations be able to make claims outside their tax return. HMRC has continued to make tax repayments to CASCs and charities outside tax returns since those problems came to light, but it does  not have the power to operate those concessions indefinitely. The changes being made by clause 51 and schedule 15 will put on a statutory basis HMRC’s current practice regarding the making of claims for repayment of income tax outside a tax return. The changes allow CASCs to claim gift aid repayments, and they allow charities and CASCs to claim repayments of gift aid and other income tax outside a tax return. It is important to note that charities and CASCs will not be affected by the changes that we are debating, because the law is being amended simply to reflect current practices in this area. It is a common-sense measure.

I will briefly respond to the points raised by the hon. Member for Newcastle upon Tyne North. A consultation process was, of course, undertaken for the measure. Draft clauses were published for consultation in December last year, as is often the case with parts of a Finance Bill, and no responses were received. Although the Government listen and learn at every available opportunity, in that case nothing was forthcoming. There has been no consultation on the rest of the provisions in the schedule, because the problems came to light only recently.

I am keen to make the changes now to put on a statutory basis HMRC’s operational practice regarding the making of claims outside a tax return. As I have said, I do not think that charities and CASCs will notice a difference as a result of the measure, because they may well have been unaware of the problems with the legislation. I ask the Committee to join me in giving HMRC a statutory footing for the approach that it has adopted as a matter of common sense. Not do so would have an unfair and unexpected effect on CASCs and charities.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Schedule 15 agreed to.