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

Part of Finance Bill – in a Public Bill Committee at 3:45 pm on 14 June 2012.

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Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 3:45, 14 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.