GIFTS TO CHARITIES (Hansard, 14 July 1983)

§ Mr. Straw
When capital transfer tax was originally introduced in the Finance Act 1975, gifts to charities of up to £100,000 were exempted from a charge to tax. In 1980 that was increased to £200,000, and to £250,000 in last year's Finance Act. Under clause 9 that facility for charities is greatly extended, because the limit is lifted altogether. We shall not divide the House on this issue, but there are two points that I wish briefly to raise.
First, what loss of revenue is anticipated as a result of this change? Secondly, is the Treasury satisfied that with the lifting of the limit sufficient powers exist to cover what I would describe as "bogus charities"? I refer to trusts that have charitable status but which exist simply as fronts for tax avoidance schemes. The Minister will be aware that there was a theatrical company and trust that was not unknown to the Revenue for offering a facility for such schemes. Is the Treasury satisfied that with the lifting of the exemption, thus making greater the attractiveness of bogus charitable trusts, there are sufficient powers to ensure that they do not take advantage of the new provision?

§ Mr. Timothy Yeo (Suffolk, South)
I welcome the lifting of capital transfer tax on charities to bring them into line with the National Trust, but the change will be of primary benefit to the larger charities. Out of 140,000 charities, only 70 last year had an income from legacies in excess of £250,000. The concession will, therefore, be of interest only to the larger charities. Many medium-sized charities have no concession. That underlines the need for VAT relief for all charities. In the past the Treasury has argued against granting VAT relief on the ground that it would benefit only the larger charities. That is inconsistent with the decision to offer relief from CTT.
I share the concern that some less desirable charities — not necessarily in the tax avoidance category, but whose objectives could be considered to be not entirely charitable—may be most likely to benefit from CTT relief. We should examine carefully the overall package of fiscal concessions for charities. The change is welcome, but it underlines the need for a further examination of the VAT issue.

§ Mr. Hayhoe
I am glad that the Opposition welcome the clause.
My hon. Friend the Member for Suffolk, South (Mr. Yeo) has a long-standing interest in charities which is recognised throughout the House. I am not surprised that he put in a dig about VAT and charities in a discussion on a clause which has nothing to do with VAT. My hon. Friend is learning fast about how things are done. The 1050 reason that the Treasury is not able to help charities through the VAT route is wider than the one to which he referred. I am glad that he welcomes the clause.
The cost of the clause this year is negligible. It will involve about £1 million in a full year. Comments have been made about the freedom from CTT being used as a tax avoidance route. That is more because of publicity than knowledge. Lifetime gifts are already exempt. All that the clause does is to extend that relief to gifts linked to the death of the donor. I do not believe that the extra risk—if there is an extra risk — of its being used for tax avoidance will cause difficulty. I am sure that it is a risk that we should take.
If hon. Members have any information about the way in which the provision could be, or is being, used as a tax avoidance route, I hope that they will make it available. I am sure that the Inland Revenue will take action against any misuse of the provisions.