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GBP1bn Tax Boost For UK Charities

by Robert Lee, Tax-News.com, London

29 December 2011


UK charitable donations could be 'turbo-charged' under new plans from a think-tank which include proposals for the introduction of a new tax relief.

The proposals are outlined in a report from the Centre for Social Justice (CSJ), in which it is predicted that a scheme to encourage firms to subsidise voluntary work carried out by their employees would boost total private gifts to charities by around GBP1bn a year. At present, private individuals and companies contribute GBP12bn a year to the charitable sector, meaning the Centre's projected top up would represent a significant increase.

The plans, labelled 'C-Volunteering' by the CSJ, have been drawn up in conjunction with ‘C’, a new social enterprise group led by three senior business professionals. According to the report, C-Volunteering has the potential to revolutionise corporate philanthropic culture and to create a new culture of volunteering and giving, with far-reaching benefits to society.

The CSJ wishes to see the introduction of a tax incentive for firms to run C-Volunteering schemes, similar to the relief system currently in place for research and development (R&D). Ideally, the government would set no limit to the amount of tax relief that could be reclaimed by firms supporting the C-Volunteering scheme. However, the report notes that were the relief capped at what it believes to be a reasonable level – for example, GBP330m a year – it would still be able to generate an extra GBP1.3bn for charities, an increase of about 10% in their annual income.

Under the scheme, companies would enrol in the "C-Volunteering Initiative" and so qualify for tax relief. Employees would be encouraged to give up some of their working time to a charity of their choice and the firm would boost the value of their contribution by agreeing an hourly rate for the voluntary work. For instance, the report states that if an employee gave up 19 hours a month, and the matching funding was set at the minimum wage of GBP6.08 an hour, the charity's funds would be boosted by 19 x £6.08 a month or GBP115.52.

In addition, a special C-Account would be set up to receive the company's donations and the money would be paid over to the chosen charity. The whole process would be managed simply and efficiently on line. Firms, meanwhile, would be able to recoup some of the costs by setting their gifts against corporation tax in much the same way as they can offset R&D bills.

CSJ Executive Director Gavin Poole said: "These proposals are a practical blueprint for revitalising Britain's hugely important and valuable third sector and helping them at a local level to rebuild shattered lives. Britain has a great track record for charitable donations and for people freely giving up their time as volunteers. But we are still far behind the United States, where the charitable impulse is more deeply ingrained. In the US, charitable donations run at USD212bn (GBP136bn) a year - proportionately almost double the UK’s. We need to move closer to the American culture of corporate giving."

TAGS: individuals | tax | business | tax incentives | employees | corporation tax | United Kingdom | professionals | tax rates | United States | tax breaks | charities | research and development

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