Standing Committee H
Tuesday 23 May 2000
[Dr. Michael Clark in the Chair]
(Except clauses 1, 12, 30, 31, 59, 102 and 113)
Gift aid payments by individuals
Amendment proposed [this day]: No. 130, in page 24, line 4, at end insert--
'(d) exclude donations from non-taxpayers from requirements for record keeping by both donors and charities.'.--[Mr. Stunell.]
Question again proposed, That the amendment be made.
The Chairman: I remind the Committee that with this we are taking the following amendments: No. 51, in page 25, line 9, leave out '(9)' and insert '(10)'.
No. 52, in page 26, line 32, at end insert--
'(10)The receipt by a charity of a gift which is a qualifying donation or which is otherwise the payment of a sum of money by an individual shall be treated for the purposes of the Tax Acts, in their application to the charity, as the receipt, under deduction of income tax at the basic rate of the relevant year of assessment, of an annual payment of an amount equal to the grossed up amount of the gift.'.
The Economic Secretary to the Treasury (Miss Melanie Johnson): Good afternoon--
Mr. Richard Ottaway (Croydon, South): On a point of order, Dr. Clark. I refer to the tonnage tax dealt with under clause 81 and schedule 22. Paragraph 16 of the schedule, which is on page 416, relates to companies and groups that are eligible for the tonnage tax. It lists three categories for qualification, but makes no reference to whether the ships should be British. The thrust of the tonnage tax is that it is designed to promote British shipping.
The Inland Revenue published its draft statement of practice at the end of last week. It tried to beef out what is meant by paragraph 16(c), which refers to ships that are "strategically and commercially managed". The statement suggested that whether the vessel is flagged in the United Kingdom is a key criterion. I would not seek to bother you, Dr. Clark, or the Committee, but I have taken soundings in the City and it is impossible to analyse the tonnage tax without knowing whether it applies to British shipping exclusively or applies on a wider scale.
The matter is complicated by the fact that the consultation period for the draft statement of practice expires on 30 June. That will be after the Committee has considered the matter. Under those circumstances, Dr. Clark, would it be appropriate for you to adjourn the Committee as far as clause 81 and schedule 22 are concerned and consider them at the end of the Committee in the beginning of July to enable the consultation period to close? Then we would at least know in what direction the tonnage tax will take us.
The Chairman: Mr. Ottaway, that is an interesting subject. The first part of what you said was not a point of order but a matter for clarification in debate. The second part, about the fact that we may not reach schedule 22 until after the due date, was something close to a point of order. The Government should take note of it and I hope that they will respond to it in the course of the Committee. Thank you for raising the matter. As you probably know, it is not directly a matter for the Chair. The Chair is a facilitator and has asked the Government to consider the latter matter.
Miss Johnson: It is always difficult to cast one's mind back to what was said before lunch on such matters, but I shall do my best.
Amendments Nos. 51 and 52 would allow charities to reclaim basic rate tax on gifts of money by any individual, whether a taxpayer or not. I see that the proposition would be attractive to charities. It would allow them to obtain an extra 28p for every pound in the collecting tin. Research shows that around 40 per cent. of donors are non-taxpayers, so a large sum of money paid to charities would not be repayment of tax but public expenditure.
I am more than a little surprised by the Opposition's sudden enthusiasm for public expenditure, particularly uncontrolled public expenditure. Other areas of public expenditure would be forced to compete for a reduced share of the public cake as donations to charities increase unchecked. A good deal of public money is going to the charitable sector through various arms of Government and those payments are more carefully targeted to ensure that we get the best use of public money. We are not prepared to see the tax repayment scheme reduced to a random allocation of public money.
Mr. Oliver Letwin (West Dorset): Could the Economic Secretary tell us, in her definition of public expenditure, whether the proportionality rule that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) mentioned, under which the amount of tax that the charity can claim back is the assessed likely outcome of the distribution across all taxpayers, would enable the scheme to be rescued as a tax rebate or whether it would still count as public expenditure?
Miss Johnson: I have not addressed that question. Perhaps I could come to the point made by the hon. Member for Arundel and South Downs this morning in a moment. I was about to point out that the cost of the amendments is estimated at around £1 billion. It is obviously open ended--
Mr. Howard Flight (Arundel and South Downs): indicated dissent.
Miss Johnson: The hon. Gentleman may shake his head, but I do not think that he listened to my point about the way in which the measure would work in terms of the many non-taxpayers who donate to charities.
Mr. Flight: The Minister's figure of 40 per cent. refers to the number of people giving, not to the volume of money. The estimate of the cost produced in association with the various tax laws is around £80 million.
Miss Johnson: There we have another Opposition commitment to spend money without any source of funding. I shall not embarrass the hon. Gentleman further by pressing him on where the money will come from because the Opposition are still looking for billions of pounds from previous Finance Bills as well as this one. I will give way to the hon. Member for West Dorset (Mr. Letwin) if he wants to dig an even bigger hole for himself.
Mr. Letwin: Obviously, neither I nor my hon. Friend the Member for Arundel and South Downs has made himself clear. I shall try again. The rule of proportionality might be applied, so that whatever the Treasury assessed as the net effect of the measure would be deducted as a proportion from each of the charitable receipts. Therefore, if a charity got, say, only 33 per cent. of what it currently gets--if it were assessed that the effect on taxpayers of allowing non-taxpayers into the bundle increased the total amount by the grossing up equivalent of 70 per cent.--there would be no extra tax loss. The next question that arises is whether the measure would also count as a tax rebate rather than as public expenditure. It would be better if the Financial Secretary addressed herself to the proposition that we are putting rather than to an imaginary figure.
Miss Johnson: If the hon. Gentleman were a little more patient, he would find that I was about to address the point that he has now made twice and which the hon. Member for Arundel and South Downs made earlier. I am well aware of the point, but I would have thought that there were considerable difficulties with it, not least the fact that, depending on the proportion of higher and basic rate taxpayers and of non-taxpayers who contribute to charities, one would need an empirical basis for working out such a formula, which would cause its own complications. In addition--to address the point made by the hon. Member for Arundel and South Downs--part of the reasoning behind the amendment was apparently the complexity of all those matters with which charities have to deal. I can help him considerably with his anxieties about that.
I have in front of me the charity repayment claim form which, as members of the Committee can see, is a single sheet of paper printed on both sides. It is an R68 (2000), if anyone is interested in getting an original of this exciting document to peruse. It is not a complicated form; it consists of a series of small boxes that must be completed. The charity must simply fill out the form on both sides and send with it a list of the names of donors, the date of the last payment and the total of the donations. It is an extremely simple process; the paperwork can be completed in a way that is hardly arduous.
Mr. Edward Davey (Kingston and Surbiton): What records will the Inland Revenue expect the taxpayer to keep?
Miss Johnson: Presumably, people will keep the sort of records that they would keep if they filled out their tax returns in an appropriate manner. That would not be too difficult. I shall explain the paperwork that is associated with the declaration, which is simple. Once a record had been made, a taxpayer would not have to make a further declaration in respect of the chosen charity. It will not be difficult for donors or charities; indeed, only donors claiming the higher rate relief will need to keep a record of the amounts that they give, the name of the charity and the date.
Mr. Davey: I am grateful to the Economic Secretary for that information. Will she confirm that the Inland Revenue will not expect non-taxpayers, especially those who are retired, to keep any records?
Miss Johnson: The scheme is not designed for non-taxpayers. The declaration applies only to taxpayers. The point of the scheme is to offer incentives to giving by allowing the tax element to return to the charity. If a person does not pay tax, he is obviously making a donation in the usual way, which will be welcomed by charities. However, the proposal is not designed to deal with that.
I shall return one last time to public expenditure. The advice from the Office for National Statistics is that a tax repayment means that more money must not be paid to the individual taxpayer by way of relief than had been collected from him by way of tax; it must be integral to the tax system. The situation envisaged by Opposition Members would comply with that.
My hon. Friend the Member for Broxtowe (Dr. Palmer) referred to Christian Aid, which has welcomed the proposals. It has said that the tax break has received much publicity. The charity has received additional money, although not through the route of collecting, which my hon. Friend mentioned--it has already received £100,000 of shares. The Charities Aid Foundation was set up to boost the resources of British charities so that the new deal could bring in more than 300,000 new donors each year.
A small amount of paperwork is involved for individual taxpayers. However, if people want Christian Aid or Oxfam, for example, to receive donations from them and to set them off against their tax liability, they need make only a one-off declaration to the charity and provide it with their name and address. Every year, when people come round collecting money, donors will simply put their name and address on the little envelopes provided. No further declarations about their tax affairs will be necessary. The information will automatically be fed through, as the charity will have the addresses on record and matters will flow from that. Charities will gain the benefit of the changes that the Government have introduced.
Amendment No. 130, which would be relevant only if the other amendments were accepted, would remove the requirement for the person and the charity to keep records when the donor is not a taxpayer. For the reasons that I explained, we believe that the scheme should continue to link repayments to charities to the tax paid by individuals. As I said, the scheme is not appropriate for non-taxpayers, so amendment No. 130 is unnecessary. I therefore ask the Committee to reject the amendments.