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Gift aid: election to be treated as if gift made in previous year

Mr. Flight: I beg to move amendment No. 4, in page 75, leave out from beginning of line 39 to end of line 6 on page 76 and insert—

'or a series of qualifying donations made by him in one or more of the previous three years of assessment (a year in respect of which an election is made being an "elected year" for the purposes of this section).
(2) Any such election may be made by notice in writing to an officer of the Inland Revenue before or at the time that the donor delivers the return required under section 8 of the Taxes Management Act 1970 (c. 9) (personal return) for the year in which the gift is actually made.
(3) An election may be made in respect of an elected year only to the extent that the grossed–up amount of any gift or part-gift would, if made in that elected year, be payable out of profits or gains brought into charge to income tax or capital gains tax for that elected year. Where an election is made to treat a single gift as if it had been a series of qualifying donations made in one or more years, the sum of such qualifying donations may not exceed the amount of the actual gift.
(4) On receipt of an election under this section, the Board of Inland Revenue shall make such payments and adjustments as appear necessary to them to leave the donor in the position he would have been in had he made the relevant gift or part–gift in the relevant elected year and the provisions of section 25(6) to (9A) of the Finance Act 1990 had then taken effect.'.

We have previously welcomed the Government's initiative to follow United States law and practice in terms of introducing incentives for the gifting of substantial assets. As hon. Members will be aware, when the first package was introduced, it was confined to listed securities. We then argued that it should be extended to land, unlisted securities and works of art, all of which qualify for gift-aid relief in the US. The package now includes land, but not the other two assets. At this rate, unlisted shares and works of art may be covered next year and the year after that.

In the case of land and unlisted securities, a wealthy potential donor may often be rich in assets but not particularly rich in income terms. As the incentives currently stand, they will not work particularly well and—dare I say it—there might be an element of intent that they should not. I hope that that is not so.

There are lessons to be learned from the United States, so our simple proposal is that those gifting substantial assets but who do not have the income in the year of

4 Jul 2002 : Column 450

gifting sufficient to qualify for the relief should be able to cast back three years or obtain relief against income in the previous three years. That would change the provisions in the Bill, which allow only a single year's carry-back, to make it easier to fit into the self-assessment regime. The amendment would allow an individual to go back three years by making a claim at the time that they submit their tax returns for the year of the gift and to split large gifts between years, through an adjustment outside the self-assessment return.

4 pm

The Minister may tell me that the amendment needs further technical improvement—I hope not—but we want an acknowledgement from the Government of the need for a bigger carry-back than one year if the gift aid scheme is to be really effective. That is particularly so with the gift of land and buildings, because in those cases the owners are more likely to be asset-rich but income not-so-rich.

Our objective is to make the welcome reform of gift aid relief work. The bigger the voluntary sector the better, and we want to encourage people to give to universities and schools to build up the voluntary sector which so often does things for better value and more efficiently than the public sector. That is the motivation behind the amendment.

Chris Grayling: I rise to speak briefly in support of amendment No. 4. Through gift aid, successive Governments have made a significant contribution to an important part of our society—the voluntary sector. As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, the voluntary sector makes a significant difference across our society in a variety of ways.

The amendment highlights the role played by more substantial gifts and endowments. In the US, major institutions, foundations and charities benefit from substantial donations from wealthy individuals who have often built their wealth in the form of assets, rather than in ready and available cash. Many people in this country— I know of some in my constituency—have the resources to be major contributors to the voluntary sector. I hope that our society will become more like the American model, with people more inclined to make substantial donations to support our major institutions or to enable significant charitable facilities to be established.

My hon. Friend has highlighted a potential extension of the gift aid provisions that would encourage substantial donors to take a major step towards enabling charitable and voluntary organisations to build substantial foundations for the work that they do. I hope that the Minister will accept the spirit of the amendment even if, as my hon. Friend suggested, it is not drafted in a way that he finds acceptable. I hope that the Government will recognise the potential that has been developed in the US and accept that it could make a significant difference in this country. If the Government cannot accept the amendment today, I hope that they will undertake to accept the principle in the future.

John Healey: I welcome the welcome for the tax breaks that the Government have provided to boost gifts to charity, especially through the extension of gift aid. In

4 Jul 2002 : Column 451

many ways, the arguments that we have heard from the hon. Members for Arundel and South Downs (Mr. Flight) and for Epsom and Ewell (Chris Grayling) were a brief reprise of the discussions that we had in Committee, which turned on a concern for those who may be asset-rich, but income not-so-rich. Amendment No. 4, however, relates to gift aid, which applies only to cash. The arguments that both hon. Gentlemen voiced are not relevant to gift aid, which is not effective for gifts of assets.

I recognise the spirit in which the amendment has been tabled, but it would add considerable complexity to a system that we have introduced to benefit both charities and taxpayers. The existing measure in the Bill will act as a prompt and an incentive to higher rate taxpayers by making gift aid relief immediately available.

The amendment would give further time for electing to gift aid a donation by extending the time limit, but the link to the filing of the self-assessment return for the previous year is a key part of the Government's planned measure in offering the incentive of claiming relief early rather than waiting until completion of the return for the year in which the gift was made. Allowing further time for an election to be made would dilute the incentive to take a decision and make a donation.

The amendment would go further by allowing the donation to be deemed to have been made not only in the previous tax year but also in one or more of the three previous tax years. For a small number of donors that would be beneficial, perhaps because they were unable to claim higher rate relief in the previous year but had higher rate liability in an earlier year. However, in practice, for higher rate taxpayers it would mean that earlier years would have to be reopened and tax liabilities recalculated. Clearly, taking advantage of a gift aid scheme would no longer be a straightforward part of the completion of the self-assessment return, which is the purpose of the provision.

The current measure uses the self-assessment return to provide a straightforward mechanism for the donor to make the gift aid election and claim the relief without the need to complete any further claim forms. For the reasons I have given, I hope that the hon. Gentleman will withdraw amendment No. 4 and allow the House to report clause 98 as it stands.

Mr. Flight: The Minister has responded negatively on the grounds that the amendment is defective. However, I had hoped to hear from him a response to the intention of the amendment. The intention was to ensure that if large donors to charities, whether by gifts of land, securities or cash, do not have sufficient income in the year of the gift to take advantage of the income tax offset, they should be able to cast back the value of the gift for up to three years and gain the full income tax incentive on the gift. I apologise for the imperfect wording of the amendment, but it is tricky territory.

The Government reject the amendment on technical grounds, because they want to limit the income tax incentive to the year in question. Our worry is that that would not encourage major gifts, especially of property, because the income tax write-off will not work.

I wanted the Minister to reply to the substance of my argument. Even if the amendment is defective, we will divide the House on it as a matter of principle. We want

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the tax incentives for gifting highly valuable assets to work as well in this country as they have worked in the United States.

Question put, That the amendment be made:—

The House divided: Ayes 151, Noes 260.

Division No. 294
[4.10 pm


Ainsworth, Peter (E Surrey)
Allan, Richard
Amess, David
Arbuthnot, Rt Hon James
Atkinson, David (Bour'mth E)
Bacon, Richard
Baron, John
Beggs, Roy
Beresford, Sir Paul
Boswell, Tim
Bottomley, Peter (Worthing W)
Brady, Graham
Brake, Tom
Brazier, Julian
Brooke, Mrs Annette L
Burnett, John
Burns, Simon
Burnside, David
Burstow, Paul
Burt, Alistair
Butterfill, John
Calton, Mrs Patsy
Campbell, Rt Hon Menzies
(NE Fife)
Cash, William
Chapman, Sir Sydney
(Chipping Barnet)
Clappison, James
Cotter, Brian
Cran, James
Curry, Rt Hon David
Davey, Edward (Kingston)
Davies, Quentin (Grantham)
Davis, Rt Hon David (Haltemprice)
Djanogly, Jonathan
Doughty, Sue
Duncan, Peter (Galloway)
Evans, Nigel
Ewing, Annabelle
Fabricant, Michael
Fallon, Michael
Field, Mark (Cities of London)
Flight, Howard
Flook, Adrian
Forth, Rt Hon Eric
Foster, Don (Bath)
Francois, Mark
Garnier, Edward
George, Andrew (St Ives)
Gibb, Nick
Gillan, Mrs Cheryl
Goodman, Paul
Grayling, Chris
Green, Damian (Ashford)
Green, Matthew (Ludlow)
Greenway, John
Grieve, Dominic
Hague, Rt Hon William
Hammond, Philip
Hancock, Mike
Harris, Dr Evan (Oxford W)
Hayes, John
Heath, David
Heathcoat–Amory, Rt Hon David
Hermon, Lady
Hoban, Mark
Hogg, Rt Hon Douglas
Holmes, Paul
Horam, John
Hughes, Simon (Southwark N)
Hunter, Andrew
Jack, Rt Hon Michael
Jenkin, Bernard
Key, Robert
Knight, Rt Hon Greg (E Yorkshire)
Laing, Mrs Eleanor
Lait, Mrs Jacqui
Lamb, Norman
Lansley, Andrew
Laws, David
Leigh, Edward
Lewis, Dr Julian (New Forest E)
Liddell–Grainger, Ian
Lidington, David
Llwyd, Elfyn
Luff, Peter
MacKay, Rt Hon Andrew
Maclean, Rt Hon David
McLoughlin, Patrick
Malins, Humfrey
Maples, John
Mates, Michael
Mawhinney, Rt Hon Sir Brian
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr Andrew
Öpik, Lembit
Osborne, George (Tatton)
Page, Richard
Paice, James
Prisk, Mark
Redwood, Rt Hon John
Reid, Alan (Argyll & Bute)
Rendel, David
Robertson, Angus (Moray)
Roe, Mrs Marion
Ruffley, David
Russell, Bob (Colchester)
Salmond, Alex
Sanders, Adrian
Selous, Andrew
Shephard, Rt Hon Mrs Gillian
Simmonds, Mark
Smith, Sir Robert (W Ab'd'ns)
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob
Spring, Richard
Stanley, Rt Hon Sir John
Streeter, Gary
Stunell, Andrew
Swayne, Desmond
Swire, Hugo
Syms, Robert
Tapsell, Sir Peter
Taylor, Ian (Esher & Walton)
Taylor, John (Solihull)
Taylor, Matthew (Truro)
Taylor, Sir Teddy
Thomas, Simon (Ceredigion)
Tonge, Dr Jenny
Tredinnick, David
Trend, Michael
Turner, Andrew (Isle of Wight)
Tyler, Paul
Tyrie, Andrew
Waterson, Nigel
Watkinson, Angela
Weir, Michael
Whittingdale, John
Widdecombe, Rt Hon Miss Ann
Wiggin, Bill
Wilkinson, John
Willetts, David
Williams, Hywel (Caernarfon)
Willis, Phil
Wilshire, David
Winterton, Ann (Congleton)
Yeo, Tim
Young, Rt Hon Sir George
Younger–Ross, Richard

Tellers for the Ayes:

Mr. Laurence Robertson and
Mr. Charles Hendry.


Adams, Mrs Irene (Paisley N)
Allen, Graham
Anderson, Rt Hon Donald
(Swansea E)
Armstrong, Rt Hon Ms Hilary
Atkins, Charlotte
Austin, John
Bailey, Adrian
Baird, Vera
Barnes, Harry
Begg, Miss Anne
Bell, Stuart
Bennett, Andrew
Berry, Roger
Best, Harold
Betts, Clive
Blackman, Liz
Blears, Ms Hazel
Blizzard, Bob
Borrow, David
Bradley, Rt Hon Keith (Withington)
Bradshaw, Ben
Brennan, Kevin
Brown, Rt Hon Nicholas
(Newcastle E & Wallsend)
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Cairns, David
Campbell, Alan (Tynemouth)
Campbell, Ronnie (Blyth V)
Caplin, Ivor
Casale, Roger
Caton, Martin
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clapham, Michael
Clark, Dr Lynda
(Edinburgh Pentlands)
Clark, Paul (Gillingham)
Clarke, Rt Hon Tom (Coatbridge)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann
Coaker, Vernon
Coffey, Ms Ann
Cohen, Harry
Coleman, Iain
Connarty, Michael
Cook, Frank (Stockton N)
Cook, Rt Hon Robin (Livingston)
Cooper, Yvette
Corbyn, Jeremy
Cox, Tom
Cranston, Ross
Crausby, David
Cruddas, Jon
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Rt Hon Dr Jack
Cunningham, Jim (Cov'try S)
Curtis–Thomas, Mrs Claire
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davis, Rt Hon Terry
(B'ham Hodge H)
Dawson, Hilton
Dean, Mrs Janet
Dhanda, Parmjit
Dismore, Andrew
Dobbin, Jim
Dobson, Rt Hon Frank
Donohoe, Brian H
Doran, Frank
Dowd, Jim
Drew, David
Drown, Ms Julia
Eagle, Angela (Wallasey)
Edwards, Huw
Efford, Clive
Ennis, Jeff
Etherington, Bill
Farrelly, Paul
Field, Rt Hon Frank (Birkenhead)
Fisher, Mark
Flint, Caroline
Flynn, Paul
Foster, Rt Hon Derek
Foulkes, George
Gapes, Mike
Gardiner, Barry
George, Rt Hon Bruce (Walsall S)
Godsiff, Roger
Goggins, Paul
Griffiths, Win (Bridgend)
Grogan, John
Hain, Rt Hon Peter
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)
Hamilton, David (Midlothian)
Hanson, David
Harman, Rt Hon Ms Harriet
Harris, Tom (Glasgow Cathcart)
Healey, John
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Hepburn, Stephen
Heppell, John
Hesford, Stephen
Heyes, David
Hill, Keith
Hinchliffe, David
Hodge, Margaret
Hood, Jimmy
Hope, Phil
Hopkins, Kelvin
Howarth, Rt Hon Alan (Newport E)
Howarth, George (Knowsley N)
Hughes, Beverley (Stretford)
Hughes, Kevin (Doncaster N)
Hurst, Alan
Illsley, Eric
Irranca–Davies, Huw
Jackson, Glenda (Hampstead)
Jamieson, David
Jenkins, Brian
Jones, Jon Owen (Cardiff C)
Jones, Martyn (Clwyd S)
Joyce, Eric
Kaufman, Rt Hon Gerald
Keeble, Ms Sally
Keen, Ann (Brentford & Isleworth)
Kelly, Ruth
Kemp, Fraser
Kidney, David
Kilfoyle, Peter
King, Ms Oona (Bethnal Green)
Kumar, Dr Ashok
Ladyman, Dr Stephen
Lawrence, Mrs Jackie
Laxton, Bob
Lazarowicz, Mark
Lepper, David
Lewis, Terry (Worsley)
Linton, Martin
Lloyd, Tony
Love, Andrew
Luke, Iain
Lyons, John
McAvoy, Thomas
McCabe, Stephen
McCartney, Rt Hon Ian
McDonagh, Siobhain
MacDonald, Calum
McDonnell, John
McFall, John
McKechin, Ann
McKenna, Rosemary
Mackinlay, Andrew
McNamara, Kevin
MacShane, Denis
McWalter, Tony
McWilliam, John
Mahmood, Khalid
Mahon, Mrs Alice
Mallaber, Judy
Mandelson, Rt Hon Peter
Marris, Rob
Marsden, Gordon (Blackpool S)
Marshall, David (Shettleston)
Marshall, Jim (Leicester S)
Martlew, Eric
Meale, Alan
Merron, Gillian
Mitchell, Austin (Gt Grimsby)
Mole, Chris
Moran, Margaret
Morgan, Julie
Mountford, Kali
Mudie, George
Munn, Ms Meg
Murphy, Denis (Wansbeck)
Murphy, Jim (Eastwood)
Murphy, Rt Hon Paul (Torfaen)
Naysmith, Dr Doug
Olner, Bill
O'Neill, Martin
Organ, Diana
Osborne, Sandra (Ayr)
Palmer, Dr Nick
Perham, Linda
Picking, Anne
Pickthall, Colin
Pike, Peter
Plaskitt, James
Pond, Chris
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Primarolo, Dawn
Prosser, Gwyn
Quinn, Lawrie
Robertson, John
(Glasgow Anniesland)
Roche, Mrs Barbara
Rooney, Terry
Roy, Frank
Ruane, Chris
Ruddock, Joan
Ryan, Joan
Salter, Martin
Sarwar, Mohammad
Savidge, Malcolm
Sawford, Phil
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn
Singh, Marsha
Skinner, Dennis
Smith, Rt Hon Andrew (Oxford E)
Smith, Angela (Basildon)
Smith, Rt Hon Chris (Islington S)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Steinberg, Gerry
Stewart, David (Inverness E)
Stewart, Ian (Eccles)
Stinchcombe, Paul
Stoate, Dr Howard
Sutcliffe, Gerry
Taylor, Rt Hon Ann (Dewsbury)
Taylor, Ms Dari (Stockton S)
Thomas, Gareth (Clwyd W)
Thomas, Gareth (Harrow W)
Tipping, Paddy
Todd, Mark
Touhig, Don
Truswell, Paul
Turner, Dennis (Wolverh'ton SE)
Turner, Neil (Wigan)
Twigg, Derek (Halton)
Twigg, Stephen (Enfield)
Tynan, Bill
Vis, Dr Rudi
Walley, Ms Joan
Ward, Claire
Wareing, Robert N
Watson, Tom
White, Brian
Whitehead, Dr Alan
Williams, Rt Hon Alan
(Swansea W)
Williams, Mrs Betty (Conwy)
Winterton, Ms Rosie (Doncaster C)
Wray, James
Wright, Anthony D (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Wyatt, Derek

Tellers for the Noes:

Jim Fitzpatrick and
Mr. Ian Pearson.

Question accordingly negatived.

4 Jul 2002 : Column 455

Clause 99

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