#giveitbackgeorge! A short blog post.

It was very good this morning to see one of the national newspapers, the Guardian, leading with the article George Osborne faces revolt over 'tax on giving...'

Everyone within the charity sector has been aware of the unpleasant implications of the cap of higher rate tax reliefs since the day of the budget, which I think were well set out in a blog by Rhodri Davies, Policy Manager at CAF (see goo.gl/h1KEP). Hopefully, the rest of the world might now start to cotton on to how bad an idea the cap is for charitable donations as well.

For those without the time to read Rhodri Davies's very good blog in full, the cap on higher rate tax reliefs applies to Gift Aid, and is likely to deter charitable donations of more than £200,000 (probably, although it has not been made crystal clear how the cap will work) in any tax year.

This won't be an issue for the majority of people (research by NCVO and CAF indicates that the median amount given by people to charity in the UK is £11 per year - see page 4 of this report), but some very large charitable gifts are made by the wealthy each year, and these are much needed by the charity sector.

The thing that I find most frustrating about the whole situation is the lack of consistency from the Government. I know, I know... By now I should have learnt that consistency is not necessarily a feature of this government. But I don't understand this particular move from a government which:

• wants to promote the "Big Society", and wants charities to play their part in that vision;
• knows that a number of charities have, in the recent past, been heavily reliant on funding from national and local government; and also
• knows that government funding has been substantially cut as a result of the economic crisis, with the result that charities are now trying very hard to find other sources of funding.

How can deterring the big donors from making substantial gifts help? And the cap will be a deterrent - a definite 'nudge' in the wrong direction.

The cap also seems bizarre, given the Government's recently declared support for the Legacy 10 campaign, and introduction of a lower rate of Inheritance Tax for people leaving 10% of their net estates to charity.

HMRC tells us that only 3% of all estates actually bear Inheritance Tax, which requires the estate of an individual to be worth more than £325,000 and the joint estate of a married couple to be worth more than £650,000 before any tax is payable.

Therefore, the reduction in Inheritance Tax available on death is very much an incentive for the wealthy to be charitable, rather than the majority of people in this country. That is, the same people who are most likely to be making significant donations to charity during their lifetimes, whether through altruism or as a result of tax planning.

So, the wealthy are only meant to be encouraged to be philanthropic on their deaths? There seems to be a somewhat mixed message here...