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We do not believe that that is as burdensome as it may sound. The Inland Revenue has made it clear that it would look first to the charity to repay the tax and that it would look to the donor only in the unlikely event that the charity refused. The amendment would give effect in law to what the Revenue has said would happen in practice. It is surely better that practice should be the servant of the law and the law should put matters right.

Mr. Flight: I agree with the amendment, which is designed to address important matters that we raised in Committee. Individuals giving to charity but not paying tax could find themselves being pursued for tax that a charity had reclaimed accidentally. That would clearly be undesirable and unjust. The remedies that we suggested were, we felt, the best means of dealing with the problem, but this remedy at least addresses the problem.

Mr. Gardiner: The relief proposed by the Chancellor could be both extended and maximised. At present, shares

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that can be given and qualify for relief are limited to those listed or dealt in on a recognised stock exchange. That leaves out a significant category of potential donors--namely, the entrepreneur who has built up a business to the point at which he is about to sell a significant part of it but at which the company is technically still unquoted.

I recognise that the Inland Revenue would not want to become involved in the administrative burden of valuing small parcels of shares--indeed, charities would not want to receive them--but the relief could be improved if it were to include other categories of donor. I would ask my right hon. Friend the Chancellor to extend the kind of shares or securities that would qualify for relief to include those effectively able to be traded or realised. An existing definition is used for the purpose of pay-as-you-earn.

Mr. Roger Casale (Wimbledon): I am following my hon. Friend's argument with care and it contains much of merit. I wonder, however, whether it might not be more appropriate to make these points under amendments Nos. 132 and 133, which appear later on the amendment paper.

Mr. Gardiner: My hon. Friend has made an extremely good point, for which I am very grateful.

Miss Melanie Johnson: The intention of the amendments is to save people on low incomes from having to face a tax bill because they have mistakenly used gift aid when they had paid insufficient tax to allow the charity to reclaim the tax on their donation. In those circumstances, the donor would be liable to be assessed on any shortfall. I agree that that is not a position in which we wish people on low incomes to find themselves, but I do not believe that the amendment is the best way in which to deal with the problem.

The gift aid scheme works by allowing charities to reclaim basic rate income tax paid by donors on payments made to the charity. That means that, under the changes that we have introduced this year, a donor must have paid basic rate tax on income equal to the amount of his gift to the charity under either a deed of covenant or gift aid. We have extended gift aid so that a donor need pay only an amount of income tax or capital gains tax at any rate equal to the amount reclaimed by the charity.

The changes allow more people to use gift aid, but it is still not suitable for non-taxpayers, or, except for modest gifts, for those who pay very little tax. For those people, prevention is better than cure.

We will be publishing information for donors that will make it clear that gift aid is not appropriate for those who pay little or no tax. The declaration must contain a suitable explanation of the requirement to pay sufficient tax, as we discussed in Committee. The charities need to give the same message when recruiting donors. The scheme is not designed to trap the unwary into a tax charge. People for whom the gift aid scheme is not appropriate can still give to charity outside the scheme.

Let me deal with why the amendments are not a suitable way in which to tackle the perceived problem. The gift aid scheme is very straightforward. The donor simply gives a gift aid declaration which must contain the health warning about having paid sufficient tax to cover the tax that the charity will reclaim. The donor needs to disclose nothing further about his or her tax affairs.

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The charity can then, with certainty, proceed to recover tax on the gift. I hope that, as a matter of practice, charities will remind the donor from time to time of the need to meet the tax to cover the requirement. The onus to comply with that requirement is on the taxpayer.

If the charities were made liable for any shortfall, they would need to know more about the donor's tax position as well as any other gift aid payments to other charities in the year in question so that they could satisfy themselves that everything was correct. That would be a most unwelcome burden for charities and an unacceptable intrusion for donors.

We believe that it is more important for people to be made aware by Inland Revenue leaflets and in the charities' own literature about the requirements of the scheme. The amendments would add complexity to the gift aid scheme, which we have endeavoured to make as simple and straightforward as possible. I believe that they would be most unwelcome to charities and donors alike. For those reasons, I hope that the hon. Member for Torridge and West Devon (Mr. Burnett) will withdraw the amendment.

Mr. Burnett: This matter was discussed in Committee, and I think that all right hon. and hon. Members are aware of how gift aid works. We do not claim that the amendment is perfect. However, my point is that the circumstances of individuals can change dramatically during a tax year. I was hoping that there would be rather more sympathy for individuals who had suffered a dramatic change in their circumstances.

The Minister says that the Inland Revenue will be publishing information to donors making the pitfalls clear should they cease to be taxpayers during a year of assessment and if they enter into a gift aid scheme. Given that that information will be available, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43

Gifts of shares and securities to charities etc

Amendments made: No. 87, in page 30, line 1, leave out "83A" and insert "587A".
No. 88, in page 30, line 3, leave out "83B" and insert "587B".--[Dawn Primarolo.]

Mr. Flight: I beg to move amendment No. 132, in page 31, leave out lines 31 and 32.

Mr. Deputy Speaker: With this it will be convenient to discuss amendment No. 133, in page 31, line 46, leave out from beginning to end of line 4 on page 32 and insert--

'"qualifying investment" shall mean all forms of property constituting an asset for the purposes of the 1992 Act;'.

Mr. Flight: The amendments are designed to give the same relief to all forms of security, property and art treasures gifted to charity as the Bill proposes for quoted equities. In Committee, the Government resisted the proposed extension of the new relief for gifts of quoted shares to charities to include unquoted shares on three grounds. The first was that charities should not be encouraged to hold unquoted shares as they were not

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easily realisable. The second was that unquoted shares were difficult to value, making the relief more complicated to administer for both donor and donee. The third was that the relief provided was already generous enough.

The first point does not stand up to scrutiny. Charities have always held all sorts of assets, some of them more easily realised than others. The Trustee Bill will give most charities subject to proper standards of prudence the power to invest in any property capable of producing an income or capital return. The Government cannot, on the one hand, promote a measure that will allow charities to invest in almost any type of property and in broader categories of property, and, on the other, argue in the other direction in connection with this Bill.

The second objection is also unconvincing. The Inland Revenue has no difficulty valuing all sorts of assets gifted to charities for inheritance tax purposes. The Government are clearly not willing to commit the resources to facilitate evaluations for widespread giving to charity. An independent valuation can be obtained easily by a donor and donee for any type of property. The problem is the Government's unwillingness to commit resources to enable the Revenue to scrutinise the valuation.

The third objective was repeated consistently by the Government in Committee. They believe that they have been more than generous already with the reliefs that they have offered, and that those reliefs will serve as adequate compensation for the withdrawal from charities of the recovery of dividend tax credits and irrecoverable value added tax.

That conviction relies on two broad assumptions--that all charities are fundraisers, and that measures in the Bill will make a real difference to the amount given to charity. The first of those assumptions is not correct, and the second is debatable: the Government's estimate of the value of the changes to giving is less than the collective losses sustained by charities of some £500 million a year when advance corporation tax recovery phases out.

Since the Bill was considered in Committee, I have been approached by several entrepreneurs involved in key universities in this country. They told me that they had already purchased property that they had intended to give to the various universities but which they will not give if it does not enjoy the same tax position as listed shares.

The entrepreneurs also said that the argument against unquoted shares--that the right time to give them is when they are listed and their value fructifies--does not apply to many of the new high-tech industries. Those shares get bought for cash or loan stock by other businesses, and so would never qualify for gift aid reliefs.

The debate is especially relevant to gifts made to institutes of higher education. In the United States, giving amounts to some 2 per cent. of gross national product, but only to some 0.6 per cent. in this country. Do we want our universities to get really large gift aid from successful alumni? If so, it must be logical to extend to unquoted securities and all other forms of property the relief now being offered to quoted securities.

I do not believe that any good argument exists for not accepting the amendments.

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