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Charities: Tax Relief On Accumulated Income

Volume 479: debated on Monday 21 July 1986

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2.48 p.m.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows: To ask Her Majesty's Government whether, under the new measures announced in the Budget, charities will be able to accumulate income for genuine charitable purposes without loss of tax relief.

My Lords, under the revised proposals announced in another place by my right honourable friend the Chancellor of the Exchequer on 4th June, charities will be able to accumulate income for genuine charitable purposes without loss of tax relief.

My Lords, I thank my noble friend the Minister for that reassuring reply. Now that the anxieties on Clause 29 of the Finance Bill seem to have been allayed, would it be possible for my noble friend the Minister to estimate the expected added cash that will be available to charities as a result of measures in the Budget?

My Lords, it is a difficult estimate to give because it depends very much on the uptake of the various schemes which the Government proposed in the Budget. However, a figure of £120 million has been given as an estimate for next year, and it could possibly be more.

My Lords, while the Minister's statement today is very satisfactory, is it not disquieting that provisions were included in the Finance Bill as introduced which suggested, to use a kindly word, that those concerned had precious little knowledge of how charities actually work? My understanding is that the Charity Commission was not consulted; and if that is so, is it not carrying Budget secrecy to absurd lengths when the Government cannot even consult their own experts if they happen not to be in the Treasury?

My Lords, there is always a difficult problem about how much consultation can take place before a Budget, especially when one is trying to bring forward measures to curb abuse. If one consults too widely before announcing measures to curb abuse, obviously the bird is apt to fly from the nest. Fortunately, of course, consultations have taken place since then and now everyone seems to be reasonably happy.

My Lords, in the light of the Question asked by my noble friend Lady Lane-Fox and the fact that donations to charities are rising, may I ask what extra resources are being allocated to the Charity Commission?

My Lords, I cannot give an answer to that. The Charity Commission is a different question to that on the Order Paper, which concerns the Inland Revenue and tax relief.

My Lords, is the noble Lord aware that the Chancellor has given an encouraging start to those charities who spend a great deal of money on goods which are covered by VAT and, therefore, have a very large VAT bill? Does the noble Lord not agree that for those charities which are heavily involved in making purchases on which they have to pay VAT, although the relief that has been given is a good start, it is worth pursuing and ought to be increased?

My Lords, that question goes rather wider than the Question on the Order Paper, but I should point out that the Budget gave a further estimated £10 million VAT relief to charities.

My Lords, what steps are the Government taking to make certain charities aware of the new measures?

My Lords, I very much hope that two leaflets are being published today—I have not received confimation whether they have yet gone out—explaining tax relief which is available to individuals and businesses. I hope that charities will collect the leaflets and use them to their advantage.

My Lords, is the noble Lord aware that a more detailed and more explanatory Inland Revenue leaflet giving full particulars of the concession granted by the Chancellor would be very much appreciated? Is the noble Lord further aware that we on this side of the House certainly appreciate this degree of flexibility by the Chancellor of the Exchequer in considering representations made to him following the Budget, and that all we really want is a far greater degree of flexibility in the broad general public interest as well?

My Lords, as regards the noble Lord's second point, he has his views on that. On his first point regarding the employee payroll scheme, the Inland Revenue has published a prospectus for that; it did so, I believe, on 26th June. That gives the suggestions for the scheme, and there will be a further draft to the detailed rules which will be published shortly.

My Lords, I should like to revert to my noble friend's reply to my first supplementary queston. Is he aware that what is proposed will considerably improve the clout of charities in carrying out the programme of work which, in most instances, is excellent, and that his brochure should be of great help to them in making the most use of the new measures that have been taken?

My Lords, I am grateful to my noble friend for that supplementary question, and I entirely agree with her.