GIFTS OF SHARES AND SECURITIES TO CHARITIES ETC (Hansard, 18 July 2000)

§ Mr. Flight
I beg to move amendment No. 132, in page 31, leave out lines 31 and 32.

Mr. Deputy Speaker
With this it will be convenient to discuss amendment No. 133, in page 31, line 46, leave out from beginning to end of line 4 on page 32 and insert— 'qualifying investment" shall mean all forms of property constituting an asset for the purposes of the 1992 Act;'.

§ Mr. Flight
The amendments are designed to give the same relief to all forms of security, property and art treasures gifted to charity as the Bill proposes for quoted equities. In Committee, the Government resisted the proposed extension of the new relief for gifts of quoted shares to charities to include unquoted shares on three grounds. The first was that charities should not be encouraged to hold unquoted shares as they were not 344 easily realisable. The second was that unquoted shares were difficult to value, making the relief more complicated to administer for both donor and donee. The third was that the relief provided was already generous enough.
The first point does not stand up to scrutiny. Charities have always held all sorts of assets, some of them more easily realised than others. The Trustee Bill will give most charities subject to proper standards of prudence the power to invest in any property capable of producing an income or capital return. The Government cannot, on the one hand, promote a measure that will allow charities to invest in almost any type of property and in broader categories of property, and, on the other, argue in the other direction in connection with this Bill.
The second objection is also unconvincing. The Inland Revenue has no difficulty valuing all sorts of assets gifted to charities for inheritance tax purposes. The Government are clearly not willing to commit the resources to facilitate evaluations for widespread giving to charity. An independent valuation can be obtained easily by a donor and donee for any type of property. The problem is the Government's unwillingness to commit resources to enable the Revenue to scrutinise the valuation.
The third objective was repeated consistently by the Government in Committee. They believe that they have been more than generous already with the reliefs that they have offered, and that those reliefs will serve as adequate compensation for the withdrawal from charities of the recovery of dividend tax credits and irrecoverable value added tax.
That conviction relies on two broad assumptions—that all charities are fundraisers, and that measures in the Bill will make a real difference to the amount given to charity. The first of those assumptions is not correct, and the second is debatable: the Government's estimate of the value of the changes to giving is less than the collective losses sustained by charities of some £500 million a year when advance corporation tax recovery phases out.
Since the Bill was considered in Committee, I have been approached by several entrepreneurs involved in key universities in this country. They told me that they had already purchased property that they had intended to give to the various universities but which they will not give if it does not enjoy the same tax position as listed shares.
The entrepreneurs also said that the argument against unquoted shares—that the right time to give them is when they are listed and their value fructifies—does not apply to many of the new high-tech industries. Those shares get bought for cash or loan stock by other businesses, and so would never qualify for gift aid reliefs.
The debate is especially relevant to gifts made to institutes of higher education. In the United States, giving amounts to some 2 per cent. of gross national product, but only to some 0.6 per cent. in this country. Do we want our universities to get really large gift aid from successful alumni? If so, it must be logical to extend to unquoted securities and all other forms of property the relief now being offered to quoted securities.
I do not believe that any good argument exists for not accepting the amendments.

§ Mr. Gardiner
The parliamentary day begins with the prayer "Prevent us, 0 Lord", and I have learned this 345 evening the appropriateness of that sentiment. I prevented the hon. Member for Arundel and South Downs (Mr. Flight) from speaking to this amendment earlier, but I was prevented from continuing in my error by my hon. Friend the Member for Wimbledon (Mr. Casale). However, my comments on the amendments and on the extension and maximisation of the relief proposed by my right hon. Friend the Chancellor are now apposite.
At present, shares that can be given and which qualify for relief are limited to shares traded on a recognised stock exchange. That leaves out a significant category of potential donor—the entrepreneur who has built a business, such as a dot.com company, up to the point at which he is about to sell a significant part of it. Technically, such a company would remain unquoted on an exchange.
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Although I recognise that the Inland Revenue would not want to get involved in the administrative burden of valuing small parcels of shares, and indeed charities would not want to receive them, I believe that the relief could be improved if it were to include this category of donor. I ask my hon. Friend the Economic Secretary to consider extending the definition of the shares or securities that can qualify for relief to include those that are able to be traded or realised. An existing definition is used for the purposes of pay-as-you-earn.
In practical terms, donors are most likely to consider using the relief when they know what their income tax bill is, as that represents the limit of the gift for which they can obtain the tax deduction. That happens at the self-assessment deadline of 31 January each year in respect of the income to the previous 5 April. I believe that donors would increase their gifts if they were able to obtain relief against their income of the previous tax year. Under the present rules, a donor who wants to make a gift has to anticipate his income for the current tax year to 5 April. That inevitably prompts individuals, or most certainly their advisers, to adopt a cautious estimate in order not to give more than is available for relief. A carry-back facility would encourage larger gifts.
A number of individuals realise significant capital gains in a particular year, and again entrepreneurs spring to mind. For such individuals, the amount they may be willing to give to a charity could be a proportion of their capital gains rather than of their somewhat smaller income. Again, by allowing the relief to be given where necessary as a deduction against capital gains in addition to income, it would encourage certain donors to give considerably more when they feel able to afford it.
Experience passed on from America, where there is a similar tax relief, is that a large proportion of the funds going to charities comes from a small number of donors who give significant amounts. Any measure that encourages those individuals to raise the level of their generosity is likely to help the new relief that the Chancellor has introduced succeed even more. I commend it for my hon. Friend's consideration.

§ Miss Melanie Johnson
I am grateful to my hon. Friend the Member for Brent, North (Mr. Gardiner) for his remarks and suggestions, and I shall give them due 346 consideration. It is probably best that I do so at not such a late hour, when my mind is clearer. I assure him that I will then be able to give him the benefit of total clarity.
I shall address the general point that has been raised in the debate on these two amendments. The point that we have made in Committee and that I reiterate now is that we designed the relief to ensure that it is applied to investments that are readily realisable and easy to value. I have made that point many times, and I know that it will be familiar to the hon. Member for Arundel and South Downs (Mr. Flight). That will allow a charity to make an unfettered decision on whether to add the gift to its investment portfolio, or to realise the gift immediately and use the proceeds for charitable purposes.
Amendment No. 133 would extend the range of qualifying investments that a donor can give to charity and get relief on to include all assets as defined in the Taxation of Chargeable Gains Act 1992, to which amendment No. 132 makes a consequential change.
I do not think that the amendment achieves the hon. Gentleman's intention. It would mean that certain investments, such as gilts, which qualify for relief under the provision as drafted, would no longer do so as they are not chargeable to capital gains tax. He may not be aware of that.
In addition, certain other assets, such as cars, would not qualify for relief, as they are not defined as assets for the purposes of capital gains tax. Many assets would come within that wider definition that would not be as easy to value or as readily realisable. There are no markets for some assets, so charities would be constrained in realising the value of the assets and using them for charitable purposes. That goes back to the basic principles that I mentioned earlier.
Clause 43 will introduce an exciting new relief for charities and their donors. We would like to see how that works in practice. There is already a very generous relief for works of art. There are additional significant reliefs from capital gains tax, inheritance tax and stamp duty for gifts of assets to charity. There are also already extremely generous reliefs from capital gains tax and inheritance tax for gifts and sales of pre-eminent works of art and heritage assets to museums and galleries. We have a tax relief for businesses that make donations to charities of trading stock and items of equipment that are used in business.
The assets that qualify for the new relief were carefully chosen to fulfil the criteria that I have already set out, so I hope that the hon. Gentleman will allow the full effect of the new changes to be seen in practice and will withdraw the amendment.

§ Mr. Flight
I will not press the amendment to a vote at this time of night, but I exhort the Government to step back and take the point that property in particular is an absolute natural for donation to higher education institutions. On the whole issue of unquoted investments, here we are in an age in which the Government want to encourage venture capital—the age of the internet and so forth—and if the issue is not addressed quickly, charities will lose out on a particular economic phase. It is by no means certain that venture capital investments will turn into licit investments suitable for relief. If the Government 347 are not willing to address the issue right now, which clearly they are not, I will put strong pressure on them to ensure that it is addressed next year, if they are still in power. I beg to ask leave to withdraw the amendment.