Reforming charity tax reliefs – a chance to have your say

Sir Nick Montagu is the chair of the Charity Tax Commission. As chairman from 1997, he led the Inland Revenue through the greatest changes in its 200-year history, spearheading the drive to make it more customer-focused. Nick is currently chairman of the Financial Ombudsman Service and until August 2017 was Chairman of Council at Queen Mary University of London.

When I chaired the Inland Revenue, I saw at first-hand what a powerful tool tax reliefs could be in promoting socially beneficial behaviour and worthwhile causes. Since I left, the number and value of tax reliefs have changed, but their importance in achieving certain policy objectives remains crucial. That’s particularly true of the reliefs that support charities in their vital work in meeting a huge range of needs and delivering help to disadvantaged communities and those on the margins of society.

So I was delighted when NCVO asked me to chair the Charity Tax Commission which they established last year to undertake a full review of the charity tax system. The value to society of charitable tax reliefs – estimated to be worth around £3.7bn a year – may seem self-evident to some people, but it’s been around 20 years since the system was last reviewed. In many respects, society has moved on, and with it the role that charities play in contributing to a thriving civil society has changed. The scope of the sector, in terms of both size and its contribution to the economy, has grown, and charities now play an even larger part in addressing some of the most pressing social issues of our time through the delivery of public services.

We want to hear from you

Today the Charity Tax Commission has launched its call for evidence. This is a key stage in our work. It’s how we get to hear from the people affected by the system of charitable tax reliefs – either directly or indirectly – on what they think about the effectiveness of current reliefs, and importantly, about whether the existing system could be improved to help charities better serve their beneficiaries. The key to our success will be creating an operating environment in which charities can maximise the public benefit they generate.

We want to hear from anyone with relevant knowledge, expertise or experience of the system of charitable tax reliefs in the UK and elsewhere, including charities, donors, academics, think tanks, representative bodies, accountants, philanthropy and financial advisers, tax professionals and of course, members of the public.

To be clear, the aim of the commission isn’t about making unrealistic recommendations to government which are either politically or economically unachievable. We need to make practical, evidence-based recommendations that will be taken seriously by policymakers, focussed on increasing the effectiveness of the spend that goes on current reliefs.

That’s why we’ve asked people responding to the call for evidence to demonstrate how ideas for reform keep within current spending by indicating where else in the system savings or efficiencies could be found to allow expenditure in other areas. We are particularly interested in views on how far the current system of charity taxation succeeds in benefiting beneficiaries and what, if anything, needs to change to create maximum public benefit. We are also keen to hear whether people think the current system is successful in channelling the activities and behaviour of charities in the right direction.

In addition to getting opinions about the various tax reliefs currently available to charities and the areas of taxation that impact on the sector’s work, we also want to know what people think about the principles that underpin the tax treatment of charities. For example, to what extent should tax reliefs be used to support charities to provide public services, to promote certain values such as voluntarism, or to encourage donations. Or do fiscal privileges amount to a grant of public money without democratic control and represent an inappropriate forgoing of tax by the exchequer?

Answers to some of these big questions will help inform the work of the commission as we analyse the responses to the call for evidence and develop recommendations that will be put to government in spring 2019.

We look forward to hearing your thoughts. In the meantime, please do get in touch if you have any questions or want to know about the commission’s work.