# Tax reliefs cause charities to lose £78 million in corporate donations

- Link: https://fundraising.co.uk/2002/11/13/tax-reliefs-cause-charities-lose-78-million-corporate-donations/
- Published: 2002-11-13T00:00:00+00:00
- Author: Howard Lake

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.

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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.

 
   ⌊[graph of corporate giving]⌉

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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