Hints of a U-turn on the ‘charity tax’

The pressure is ramping up on the government to reverse its decision to cap tax reliefs on charitable donations. The Times is against it — their leader this morning calls the move a ‘blunder’. And the Telegraph doesn’t like it either, saying that ‘Even from a distance of 8,000 miles, it must be apparent to David Cameron that the Government made a mistake in the Budget by capping tax relief on charitable giving’. Even Tory MPs are speaking out against the measure, including Mark Pritchard, Conor Burns and, in a piece on ConservativeHome, Chris White.

And Number 10 does seem to be preparing the ground for a U-turn — or a compromise at least — with David Cameron saying yesterday that ‘We will look very sympathetically at these concerns’. And the FT reports that

‘Aides to the chancellor have told the Financial Times he is looking for ways to make sure that those organisations that are funded by one or two significant donors do not lose out as a result of the cap, but has ruled out exempting the charitable sector altogether.’

But what might such a climb-down look like? According to the Guardian,

‘One proposal being circulated is to treat gifts to UK-based charities differently from those to charities based abroad.’

This would help assuage the criticism, while still dealing with the sort of abuse Cameron was talking about when he said

‘Some people have been using charities established in other countries to funnel money in, to get their tax rate so they’re not paying 50p tax or 45p tax but in some cases 10p or 20p tax. I think that isn’t right’

As I said on Tuesday, this one still has a while to run, with even the consultation document not due for a few months. But it seems the government has accepted that it will have to demonstrate a willingness to compromise on this sooner rather than later.