I want to reflect on some comments that John Hodge from the Law Society of Scotland made in the evidence that he gave us last Tuesday. He raised concerns about the drafting and purpose of clause 3(2), which talks about how a small donation made to a charity
“applied to purposes other than charitable purposes” cannot be treated as a small donation. He pointed out that a charity has to apply all its funds for charitable purposes. He wondered whether Ministers were intending that small donations be applied only to primary charity purposes—for example, the food going to a homeless person rather than towards the administrative costs of the charity that was ensuring that the food was dispensed to that homeless person. He asked whether small donations to be counted under the scheme would have to be put in a separate account from donations that might help to cover the administrative costs of the charity.
What is the purpose of subsection (2)? If someone as distinguished as Mr Hodge is not clear that he understands the purpose behind a particular subsection, it underlines concerns about the complexity of the Bill, and HMRC will have to be extremely active in explaining the purpose of the different parts of the Bill to the small charities not currently claiming gift aid, as well as those that are claiming.
Lastly, I want to ask about subsection (3), which specifically references the Trustees of the National Heritage Memorial Fund; the Historic Buildings and Monuments Commission for England; the Trustees of the British Museum; and the Trustees of the Natural History Museum. I did not get—the Minister will forgive me for saying so—a clear answer when I asked about the motivation behind subsection (3). I recognise that it is in line with gift aid provisions, as he stated. However, has there been specific lobbying by the four organisations concerned? They are somewhat different in size from the types of charities that Ministers once said would be the prime beneficiaries of the scheme, although I do not suggest that they should not be beneficiaries. Interestingly, one of the four organisations that is so affected, English Heritage—the Historic Buildings and Monuments Commission for England—has been subject to cuts of some 32%. Did Ministers include it in the list as some small compensation for the scale of the cuts that it faced? It would be good to hear from the Minister the purpose of subsection (2). Is he absolutely confident that he and his officials have drafted it right? Will he set out in more detail the purpose and intent behind subsection (3)?
Clause 3 sets out the meaning of small donation for the purpose of the scheme. A small donation as defined in the Bill means a gift made to a charity, provided that it meets each of the conditions set out in the schedule to the Bill. The clause states that membership fees cannot be small donations. A small donation must be used by a charity for charitable purposes, and any part of a donation that is not used for charitable purposes does not qualify for the top-up payment.
In answer to the hon. Gentleman’s question, the purpose of subsection (2) is to exclude from the definition of small donation any income that is used by a charity for non-charitable purposes. For example, a charity may make a loan to a trustee, which is a non-charitable purpose. If funds were raised but used for a non-charitable purpose, that portion would be excluded from eligibility under the terms of the scheme.
Just to be clear, does that mean that administrative costs are not a problem, and that there is no need for two separate accounts to pay for the food that goes to a homeless person and the administrative costs of the homelessness charity? It would be good to get 100% clarity on that. Is the loan to a trustee the only example that the Minister and his officials can think of where subsection (2) would apply, or are there other similar examples? For the benefit of those who seek to understand the legislation, it would be useful to have further clarity if there are other scenarios in which subsection (2) would apply.
The example of a loan to a trustee is the only one I can think of. For clarification, administrative costs are not caught by subsection (2), because they are a legitimate use of charitable donations.
I am interested to hear the Minister say that the loan to a trustee is the only example that he can think of. Does he have information on how many times that has happened? In my experience of being involved in running charities, it is not something that happens regularly.
As the hon. Lady said, I do not believe that it happens regularly, but I do not have any numbers at hand to show how often it happens. I am happy to try to find out if there is more information available from HMRC on that. If such information is available, I will see whether I can provide it.
The hon. Member for Harrow West asked about the four organisations that are mentioned in subsection (3). These organisations are listed to provide absolute clarity in the Bill. They are all state-created organisations and as such, and in accordance with the regulations under which they were created, they are not permitted to use money for unauthorised purposes.
The Minister will remember the evidence from David Warrellow from the National Trust, which maintains similar sorts of buildings to those maintained by English Heritage. As a result of the Government’s proposals on community buildings, he believes that the bulk of National Trust properties will not be able to claim under the Bill. If clause 3(3) stays in the Bill, as the Minister clearly intends it should and we would not want to prevent, it creates another form of division between National Trust properties on the one hand and English Heritage properties on the other.
I do not believe that this subsection creates a division. It recognises an established fact: as the law currently stands, these organisations are not permitted to use money for unauthorised purposes and so they are excluded from the provisions of clause 3. The requirement for the donation to be used for charitable purposes does not apply to the trustees of certain national museums or the Historic Buildings and Monuments Commission for England. The reason for this is simply to maintain consistency with the gift aid rules.