Articles and Speeches

Gift Aid in the Finance Bill 2005
07-Jun-05, House of Commons Debate - Second Reading of Finance Bill 2005.

"I am grateful for the opportunity to speak in such an important debate. Despite the haste with which I think the Bill was drawn up, dissected and delivered to the House, it will affect many people in their working lives and many hard-working people in their later lives, as was pointed out by my hon. Friend the Member for Chipping Barnet (Mrs. Villiers). It will determine the competitiveness of British business both here and abroad. It will have an impact not just on the good will of charitable people, but on the good work that charities do. I shall say more about that shortly.

I thank the Paymaster General for her clear explanation of the Bill. I also thank my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) for raising the issue of charitable donations and gift aid. That is the issue on which I want to concentrate.

The Finance Bill is perhaps one of the most important Bills in the Queen's Speech. It is disappointing that there is so little time to debate such an important measure in this House. It is complex, as many previous speakers today have observed, and although it has been truncated it still runs to some 160 pages. I do not believe that four hours is enough time to examine all those pages. I am confident that when it is considered in Committee, Members in all parts of the House will give the detail very serious consideration, irrespective of party politics. Indeed, it is in some of the Bill's detail that the devil lies.

I have chosen to contribute today because this Bill needs further fine-tuning and refinement. Although it contains some sensible measures on closing tax-avoidance loopholes, they are complex and I am concerned that they receive proper scrutiny. We must be sure that the Government do not drive through tax-avoidance measures that further erode British businesses' competitiveness, act as a disincentive for overseas firms to invest here, or create burdens for all businesses that undermine productivity and negate the benefits that will hopefully be gained from such tax-avoidance measures.

Lest we forget, British businesses are the engine of our economy. They generate all the jobs, incomes and taxes that make for a good society. British businesses, in a way, are the golden goose of our economy.

...Intervention by Tobias Ellwood (Bournemouth East, Con)

I thank my hon. Friend for giving way. Does he agree that the over-regulation imposed by this Government is stifling British businesses, which are calling for simpler and less regulation, rather than for more and more complex regulation?....

I thank my hon. Friend for that intervention and I agree wholeheartedly. My background is in business, and it is clear that the Government, via the European Union, have allowed in swathes of detailed regulations and guidance notes; indeed, there are some 100 pages on working time directives. The weight of that paperwork, regulation and red tape knocks out a whole layer of productivity in British businesses.

I turn to the charities, charitable giving and voluntary work that underpin our society. Giving is an expression of our humanity: it is an expression of the care that we have for others who may be less fortunate than ourselves. It is also an expression, for charities that focus on these areas, of our concern to preserve and promote our natural environment and heritage. Hundreds of charities are based in or operate in my Windsor constituency. The Windsor, Ascot and Maidenhead volunteers' organisation encourages voluntary work throughout the constituency. The friends of the King Edward VII hospital provide voluntary help to support our local hospitals. The Thames Valley hospice and the Paul Bevan hospice—now combined—would cease to function without charitable giving and the work of hundreds of selfless volunteers and helpers. And of course, in terms of gift aid we should consider Windsor castle, to which clause 11 is particularly relevant.

Thousands of people work voluntarily for these charities and good causes. They give of their time freely and willingly to help others, to preserve our national heritage and to protect and promote our environment and historic buildings. Of course, thousands of people give to charities as a way of expressing their good nature and good will to others. So charities, voluntary organisations and trusts are the fabric of a healthy society. On this basis, I want to draw the House's attention to clause 11 of the current Finance Bill and, by way of background, to section 25 of the Finance Act 1990, which provided tax relief or gift aid for qualifying gifts from individuals making donations to a charity.

Broadly speaking, the 1990 Act defined a qualifying gift as a monetary gift that was non-refundable and was not used to buy an asset. Section 25(2)(e) made it clear that the person making a donation could not receive a benefit outside of prescribed limits. An individual donating up to £100 to a charity could receive a benefit of no more than 25 per cent. For a donation of up to £1,000, the benefit had to be no more than £25, and for donations in excess of £1,000, the maximum benefit to the individual concerned had to be no more than £250. A special exemption for certain charities was laid down in subsection (5)(e), enabling them to bestow a right of admission to view certain charitable properties. Charities with that exemption are listed in subsection (5)(f). They consist of those whose main purpose is to preserve heritage property or to conserve wildlife for public benefit.

The problem is that this exemption remains in place, despite the changes made to the gift aid scheme in the Finance Act 2000. This is perhaps an example of insufficiently far-reaching Commons scrutiny of an incoming Act. The result is that a payment for admission is now eligible for gift aid. To put it simply, certain charities can offer free admission to certain properties equal to the entrance fee, and then claim gift aid on that contribution. That was not the intention of the Act, and although it is legal it is certainly unfair that certain heritage and wildlife charities benefit in this way.

Clause 11 of the current Bill aims to stop this inadvertent tax benefit of gift aid, if that gift allows the giver entry to an establishment of a certain type. My concern is that removing the benefit without proper scrutiny and consideration might cause some valuable charities to struggle, perhaps to falter, and even to fail in certain cases. Insufficient consideration has been given to the immediate effect of closing this gift aid loophole. Many charities may depend on the gift aid generated by allowing free admission, and they may experience a sudden drop in income. Just as the gift aid loophole was an unintended consequence of past Finance Acts, so this sudden failure of charities could be an unintended consequence of the current Finance Bill.

The charities concerned are doing their law-abiding business in undertaking good work in society. I am sure that it is not intended that this good work and these charities fail, so I ask the House that consideration be given in Committee to transitional arrangements, or to delaying introducing the proposed change to the gift aid scheme, so that the charities affected can have time to re-work their finances and to continue their good work. Such work is enjoyed not only by Members of this House, but by people throughout the country. I would hate them to be deprived of the pleasures of heritage, or of the charities that deal with our natural environment."

Adam Afriyie, MP for Windsor