We’re listening to criticism on charity tax cap, says William Hague

The government will “find a solution” to resolve complaints about its changes to tax on charitable donations, the Foreign Secretary has said.

William Hague said the government had been clear it was sympathetic to the worries but added the Budget measure was looking to fix a genuine problem.

Mr Hague spoke out in the wake of criticism from Conservative Party Treasurer Lord Fink and Tory MP Zac Goldsmith, who said he was “ashamed” his party appeared to have “declared war” on the very people who should be at the heart of the government’s Big Society project.

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Finance Secretary John Swinney also yesterday warned the plan to cap tax relief for charitable donations will damage the voluntary sector. Mr Hague said: “The Prime Minister said this week that we’d look very sympathetically at such concerns and indeed the Treasury has said all along that it would listen to, and they would work with, charities and philanthropists to look at any impact on charities that rely on big donations, so they have started on that work.

“The important point here... [is] some people have used charitable giving in order to reduce their tax bill to almost nothing.

“That is not acceptable in the eyes of the country, in the eyes of the government, but finding a solution that takes account of the concerns that are being expressed, that is something that the Chancellor and the Prime Minister have said they’re open to.”

A Treasury spokeswoman said: “It is right to cap reliefs so wealthy individuals cannot use them to reduce their tax bill to practically zero.

“Someone earning £4 million can still give £1m with reliefs, and more if they want to.”

Earlier, millionaire Lord Fink, one of the country’s most generous supporters of good causes, said the move would inevitably reduce the amount they received.

“If you have to pay out of your capital the tax on your income you give, it will put people off,” he said. Shadow chief secretary Rachel Reeves said: “The government has talked about some people giving money to dodgy charities. If that’s happening then the Charities Commission need to investigate.

“We’ve got our major charities, universities, and arts organisations in this country saying it is going to cost them.

“Yes we want to make sure people are paying their fair share of tax, but the people who seem to be losing out from this change aren’t tax avoiders – it’s the charities and people who rely on the charities.”

Former Liberal Democrat leader Paddy Ashdown said the measure was tackling a real problem.

He said: “Just imagine everybody did this, that everybody said I’m not going to pay my taxes, I’m going to donate to a charity of my choice.

“No taxes – no hospitals, no schools, no welfare. There is a sensible balance to be struck here. If the government has to recalibrate, retreat if you like, to find that balance, it is right and proper they should do so.”

The UK government argues that the cap is necessary to prevent abuse of the system by wealthy individuals.

From 6 April next year the maximum will be £50,000 per year, or 25 per cent of the donor’s income, to qualify for the relief.

The Scottish Government fears this will result in a substantial reduction in the amount of tax philanthropists can claim back.

Mr Swinney said: “The Scottish Government does not support a measure which may prove detrimental to charitable giving, and I have written to the Chancellor to express my concerns about these new measures.”