According to CAF (Charities Aid Foundation), charities have lost out by £78 million since changes to tax-reliefs on corporate giving were introduced in April 2000.
Before April 2000, companies made their gifts to charities after tax, leaving charities to reclaim the tax paid from the Inland Revenue. Since April 2000, however, companies have been able to make their gifts to charity gross, and claim their own tax reliefs. This change has served to cause confusion in companies, with the result that charities have lost out.
New estimates from CAF, which analysed the trends before and after the Government’s tax changes, demonstrate “a dramatic drop” in the total level of cash which charities receive from companies.
These figures show that after adjusting for inflation and adding in the amount of tax repaid to charities, levels of company giving grew steadily between 1992/93 and 1998/99. However the total cash gift figure for 2000/01 of £286 million, returned cash giving to the levels of 1996.
This drop in income was not only due to loss of tax paid back to charities; CAF has estimated that while a shortfall of about £65.8 million probably arose because of the tax changes, a further loss of £12.2 million occurred because the average growth rate reached in the ’90s was not maintained into 2000/01. Taken together, these losses amount to a drop in expected charitable income from companies of £78 million in 2000/01.
A further twist is that not only did companies fail to compensate charities for the change from gross to cash giving in 2000/01, but their cash gifts actually ‘cost’ them less because they were able to claim tax relief on the gifts they made.
According to CAF’s Director of Research, Cathy Pharoah: “Government clearly intended these changes to increase tax-effective giving by making the whole process easier and cheaper; but things have obviously backfired. It is time that companies addressed this issue and started to give charities the financial support they deserve.”
While many companies have taken care to increase their gifts to account for the shift from net to gross giving, the figures reveal that many have not. CAF’s research suggests that this is not due to ignorance of the change: some companies appear to have set a cap on – or reduced – their charitable giving in an increasingly difficult economic climate; others have simply not implemented procedures to deal with the changes. The resulting loss represents a likely drop of 21% in corporate income to charities since 2000, but is a negligible proportion of company profits.
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