May 31, 2016 : Jenny Bloomfield
The devolution of income tax, what could it mean for Gift Aid?
Last week I chaired a joint SCVO-ICAS event on charity tax. We had speakers from the UK Treasury and Revenue and Customs, and from the Charity Tax Group. ICAS also spoke. It was a good session, with about 30 attendees – a mix of sector (large and small) and chartered accountants.
The first topic was on devolution of income tax, and the effect that could have on Gift Aid. The officer from the Treasury was keen to stress that they were very much in the listening stages of development and were keen to have everyone’s thoughts.
The main discussions centred around whether Gift Aid should stay linked to the rates of tax paid by the individual donor – which would mean that donors would have to tell charities whether they are a Scottish or rest-of-UK taxpayer; or whether Gift Aid on donations by Scottish taxpayers should remain coupled to the rate of income tax in the rest of the UK and so ignore any changes to income tax rates in Scotland.
The first of these options would mean that Gift Aid would remain clearly linked to the tax system wherever you were in the UK, and would allow charities in Scotland to receive Gift Aid at a level that matched the amount of income tax people were paying in Scotland – whether that be more or less or the same as in the rest of the UK. However, it would involve various changes compared to existing Gift Aid processes. For example, it would rely on donors knowing whether they were a Scottish or rest-of-UK taxpayer, and keeping charities up-to-date should they move.
The second option removes the need for this admin, but would mean that if income tax rates started to differ between Scotland and the rest of the UK, then Gift Aid claimed by charities on donations made by Scottish taxpayers would no longer match the basic rate of income tax in Scotland. In my opinion, this could lead to a knock-on effect to Scotland’s block grant: should the UK Government feel it was topping up Scottish Gift Aid claims by a significant amount of money due to the income tax rate in Scotland being lower than in the rest of the UK, they might then look to reduce the block grant accordingly. On the other hand, Scottish charities might feel aggrieved if in fact the income tax rate of Scotland increased substantially more than that of the rest of the UK and Scottish charities were ‘losing out’ on receiving Gift Aid at what would have been the Scottish rate.
Any thoughts on these two options would be welcome!
We also had presentations about VAT, and a wee bit of chat about the Gift Aid donor benefit rules and the Gift Aid Small Donation Scheme, which the UK Government is consulting on until 1 July as they are seeking to make it easier for charities to claim.
So, all in all a good event with lots to think about. If you have any thoughts about any of the issues raised here, please do get in touch: firstname.lastname@example.org