Posted on | April 11, 2012 | Comments Off
For a long time those who have contributed to charity have been able to see a benefit in terms of a lower tax bill. For British taxpayers this era may be coming to an end with Chancellor George Osborne seeking to close what he sees as a loophole.
With the current government having come to power partially on a platform of “the big society”, a move to curb philanthropic donations seems slightly surprising. The idea of the “the big society”, as far as anyone was able to divine, was to replace aspects of the public sector with work by the charity and voluntary sectors.
It is not proposed to end tax relief for charitable donations altogether, but rather for there to be a cap put in place. There has been criticism of this proposal however, with many pointing out that wealthy individuals are donating much more to charity than they are saving on their tax bills.
There can be little doubt that tax chiefs see a problem in the way that things stand at the moment. Through canny accounting the amount income tax paid some of the wealthier Britons is thought to be just around ten percent.
While low tax returns are obviously a concern for the government, it is far from clear that this is a problem either for society or the economy at large. For instance large amounts of money are given to fund medical research and to help vulnerable groups. At the same time the argument against the 50p tax rate was that it is a force stopping the job creators from creating jobs, and surely that would also apply to any measure designed to increase the tax take from the wealthy.
Minimising the amount that you pay in tax, within the law, is perfectly legitimate – by definition. Planning your tax affairs in a way that makes sense for you does not make you a ‘cheat’ or a ‘tax-dodger’. Indeed if you cannot even be bothered to take the allowances you are entitled to with regards to your own money, should you be trusted with other peoples, for instance in a work situation.
It is perhaps true that the tax system is too complicated. It is very hard for the individual to avoid being ripped off by the taxman. In order to get the best deal it is often necessary to involve accountants and other professionals who are knowledgeable in the field.
Whether Osborne’s reforms go through as planned or not the British tax system, like all others, will continue to have its idiosyncrasies, and there will continue to be ways to avoid being stung for the full whack when it comes to tax time. Hopefully also charitable donations (which have fallen in recent years) will continue to be made.
Pamela Chimbonda wrote this content on the behalf of Adam & Co. who specializes in private wealth management.