HC Deb 04 July 2002 vol 388 cc449-55
Mr. Flight

I beg to move amendment No. 4, in page 75, leave out from beginning of line 39 to end of line 6 on page 76 and insert— 'or a series of qualifying donations made by him in one or more of the previous three years of assessment (a year in respect of which an election is made being an "elected year" for the purposes of this section). (2)Any such election may be made by notice in writing to an officer of the Inland Revenue before or at the time that the donor delivers the return required under section 8 of the Taxes Management Act 1970 (c. 9) (personal return) for the year in which the gift is actually made. (3)An election may be made in respect of an elected year only to the extent that the grossed-up amount of any gift or part-gift would, if made in that elected year, be payable out of profits or gains brought into charge to income tax or capital gains tax for that elected year. Where an election is made to treat a single gift as if it had been a series of qualifying donations made in one or more years, the sum of such qualifying donations may not exceed the amount of the actual gift. (4)On receipt of an election under this section, the Board of Inland Revenue shall make such payments and adjustments as appear necessary to them to leave the donor in the position he would have been in had he made the relevant gift or part-gift in the relevant elected year and the provisions of section 25(6) to (9A) of the Finance Act 1990 had then taken effect.'.

We have previously welcomed the Government's initiative to follow United States law and practice in terms of introducing incentives for the gifting of substantial assets. As hon. Members will be aware, when the first package was introduced, it was confined to listed securities. We then argued that it should be extended to land, unlisted securities and works of art, all of which qualify for gift-aid relief in the US. The package now includes land, but not the other two assets. At this rate, unlisted shares and works of art may be covered next year and the year after that.

In the case of land and unlisted securities, a wealthy potential donor may often be rich in assets but not particularly rich in income terms. As the incentives currently stand, they will not work particularly well and—dare I say it—there might be an element of intent that they should not. I hope that that is not so.

There are lessons to be learned from the United States, so our simple proposal is that those gifting substantial assets but who do not have the income in the year of gifting sufficient to qualify for the relief should be able to cast back three years or obtain relief against income in the previous three years. That would change the provisions in the Bill, which allow only a single year's carry-back, to make it easier to fit into the self-assessment regime. The amendment would allow an individual to go back three years by making a claim at the time that they submit their tax returns for the year of the gift and to split large gifts between years, through an adjustment outside the self-assessment return.

4 pm

The Minister may tell me that the amendment needs further technical improvement—I hope not—but we want an acknowledgement from the Government of the need for a bigger carry-back than one year if the gift aid scheme is to be really effective. That is particularly so with the gift of land and buildings, because in those cases the owners are more likely to be asset-rich but income not-so-rich.

Our objective is to make the welcome reform of gift aid relief work. The bigger the voluntary sector the better, and we want to encourage people to give to universities and schools to build up the voluntary sector which so often does things for better value and more efficiently than the public sector. That is the motivation behind the amendment.

Chris Grayling

I rise to speak briefly in support of amendment No. 4. Through gift aid, successive Governments have made a significant contribution to an important part of our society—the voluntary sector. As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, the voluntary sector makes a significant difference across our society in a variety of ways.

The amendment highlights the role played by more substantial gifts and endowments. In the US, major institutions, foundations and charities benefit from substantial donations from wealthy individuals who have often built their wealth in the form of assets, rather than in ready and available cash. Many people in this country—I know of some in my constituency—have the resources to be major contributors to the voluntary sector. I hope that our society will become more like the American model, with people more inclined to make substantial donations to support our major institutions or to enable significant charitable facilities to be established.

My hon. Friend has highlighted a potential extension of the gift aid provisions that would encourage substantial donors to take a major step towards enabling charitable and voluntary organisations to build substantial foundations for the work that they do. I hope that the Minister will accept the spirit of the amendment even if, as my hon. Friend suggested, it is not drafted in a way that he finds acceptable. I hope that the Government will recognise the potential that has been developed in the US and accept that it could make a significant difference in this country. If the Government cannot accept the amendment today, I hope that they will undertake to accept the principle in the future.

John Healey

I welcome the welcome for the tax breaks that the Government have provided to boost gifts to charity, especially through the extension of gift aid. In many ways, the arguments that we have heard from the hon. Members for Arundel and South Downs (Mr. Flight) and for Epsom and Ewell (Chris Grayling) were a brief reprise of the discussions that we had in Committee, which turned on a concern for those who may be asset-rich, but income not-so-rich. Amendment No. 4, however, relates to gift aid, which applies only to cash. The arguments that both hon. Gentlemen voiced are not relevant to gift aid, which is not effective for gifts of assets.

I recognise the spirit in which the amendment has been tabled, but it would add considerable complexity to a system that we have introduced to benefit both charities and taxpayers. The existing measure in the Bill will act as a prompt and an incentive to higher rate taxpayers by making gift aid relief immediately available.

The amendment would give further time for electing to gift aid a donation by extending the time limit, but the link to the filing of the self-assessment return for the previous year is a key part of the Government's planned measure in offering the incentive of claiming relief early rather than waiting until completion of the return for the year in which the gift was made. Allowing further time for an election to be made would dilute the incentive to take a decision and make a donation.

The amendment would go further by allowing the donation to be deemed to have been made not only in the previous tax year but also in one or more of the three previous tax years. For a small number of donors that would be beneficial, perhaps because they were unable to claim higher rate relief in the previous year but had higher rate liability in an earlier year. However, in practice, for higher rate taxpayers it would mean that earlier years would have to be reopened and tax liabilities recalculated. Clearly, taking advantage of a gift aid scheme would no longer be a straightforward part of the completion of the self-assessment return, which is the purpose of the provision.

The current measure uses the self-assessment return to provide a straightforward mechanism for the donor to make the gift aid election and claim the relief without the need to complete any further claim forms. For the reasons I have given, I hope that the hon. Gentleman will withdraw amendment No. 4 and allow the House to report clause 98 as it stands.

Mr. Flight

The Minister has responded negatively on the grounds that the amendment is defective. However, I had hoped to hear from him a response to the intention of the amendment. The intention was to ensure that if large donors to charities, whether by gifts of land, securities or cash, do not have sufficient income in the year of the gift to take advantage of the income tax offset, they should be able to cast back the value of the gift for up to three years and gain the full income tax incentive on the gift. I apologise for the imperfect wording of the amendment, but it is tricky territory.

The Government reject the amendment on technical grounds, because they want to limit the income tax incentive to the year in question. Our worry is that that would not encourage major gifts, especially of property, because the income tax write-off will not work.

I wanted the Minister to reply to the substance of my argument. Even if the amendment is defective, we will divide the House on it as a matter of principle. We want the tax incentives for gifting highly valuable assets to work as well in this country as they have worked in the United States.

Question put, That the amendment be made:—

The House divided: Ayes 151, Noes 260.

Division No. 294] [4.10pm
Ainsworth, Peter (E Surrey) Hogg, Rt Hon Douglas
Allan, Richard Holmes, Paul
Amess, David Horam, John
Arbuthnot, Rt Hon James Hughes, Simon (Southwark N)
Atkinson, David (Bour'mth E) Hunter, Andrew
Bacon, Richard Jack, Rt Hon Michael
Baron, John Jenkin, Bernard
Beggs, Roy Key, Robert
Beresford, Sir Paul Knight, Rt Hon Greg (E Yorkshire)
Boswell. Tim Laing, Mrs Eleanor
Bottomley, Peter (Worthing W) Lait, Mrs Jacqui
Brady, Graham Lamb, Norman
Brake, Tom Lansley, Andrew
Brazier, Julian Laws, David
Brooke, Mrs Annette L Leigh, Edward
Burnett, John Lewis, Dr Julian(New Forest E)
Burns, Simon Liddell-Grainger, Ian
Burnside, David Lidington, David
Burstow, Paul Llwyd, Elfyn
Burt, Alistair Luff, Peter
Butterfill, John MacKay, Rt Hon Andrew
Calton, Mrs Patsy Maclean, Rt Hon David
Campbell, Rt Hon Menzies (NE Fife) McLoughlin, Patrick
Malins, Humfrey
Cash, William Maples, John
Chapman, Sir Sydney (Chipping Barnet) Mates, Michael
Mawhinney, Rt Hon Sir Brian
Clappison, James Mercer, Patrick
Cotter, Brian Mitchell, Andrew (Sutton Coldfield)
Cran, James Moore, Michael
Curry, Rt Hon David Moss, Malcolm
Davey, Edward (Kingston) Murrison, Dr Andrew
Davies, Quentin (Grantham) Öpik, Lembit
Davis, Rt Hon David (Haltemprice) Osborne, George(Talton)
Djanogly, Jonathan Page, Richard
Doughty, Sue Paice, James
Duncan, Peter (Galloway) Prisk, Mark
Evans, Nigel Redwood, Rt Hon John
Ewing, Annabelle Reid, Alan (Argyll & Bute)
Fabricant, Michael Rendel, David
Fallon, Michael Robertson, Angus (Moray)
Field, Mark (Cities of London) Roe, Mrs Marion
Flight, Howard Ruffley, David
Flook, Adrian Russell, Bob (Colchester)
Forth, Rt Hon Eric Salmond, Alex
Foster, Don (Bath) Sanders, Adrian
Francois, Mark Selous, Andrew
Garnier, Edward Shephard, Rt Hon Mrs Gillian
George, Andrew (St Ives) Simmonds, Mark
Gibb, Nick Smith, Sir Robert (W Ab'd'ns)
Gillan, Mrs Cheryl Spelman, Mrs Caroline
Goodman, Paul Spicer, Sir Michael
Grayling, Chris Spink, Bob
Green, Damian (Ashford) Spring, Richard
Green, Matthew (Ludlow) Stanley, Rt Hon Sir John
Greenway, John Streeter, Gary
Grieve, Dominic Stunell, Andrew
Hague, Rt Hon William Swayne, Desmond
Hammond, Philip Swire, Hugo
Hancock, Mike Syms, Robert
Harris, Dr Evan (Oxford W) Tapsell, Sir Peter
Hayes, John Taylor, Ian (Esher & Walton)
Heath, David Taylor, John (Solihull)
Heathcoat-Amory, Rt Hon David Taylor, Matthew (Truro)
Hermon, Lady Taylor, Sir Teddy
Hoban, Mark Thomas, Simon (Ceredigion)
Tonge, Dr Jenny Willetts, David
Tredinnick, David Williams, Hywel (Caemarfon)
Trend, Michael Willis, Phil
Turner, Andrew (Isle of Wight) Wilshire, David
Tyler, Paul Winterton, Ann (Congleton)
Tyrie, Andrew Yeo, Tim
Waterson, Nigel Young, Rt Hon Sir George
Watkinson, Angela Younger-Ross, Richard
Weir, Michael
Whittingdale, John Tellers for the Ayes:
Widdecombe, Rt Hon Miss Ann Mr. Laurence Robertson and Mr. Charles Hendry.
Wiggin, Bill
Wilkinson, John
Adams, Mrs Irene (Paisley N) Cunningham, Rt Hon Dr Jack (Copeland)
Allen, Graham
Anderson, Rt Hon Donald (Swansea E) Cunningham, Jim (Cov'try S)
Curtis-Thomas, Mrs Claire
Armstrong, Rt Hon Ms Hilary Davey, Valerie (Bristol W)
Atkins, Charlotte David, Wayne
Austin, John Davidson, Ian
Bailey, Adrian Davis, Rt Hon Terry (B'ham Hodge H)
Baird, Vera
Barnes, Harry Dawson, Hilton
Begg, Miss Anne Dean, Mrs Janet
Bell, Stuart Dhanda, Parmjit
Bennett, Andrew Dismore, Andrew
Berry, Roger Dobbin, Jim
Best, Harold Dobson, Rt Hon Frank
Betts, Clive Donohoe, Brian H
Blackman, Liz Doran, Frank
Blears, Ms Hazel Dowd, Jim
Blizzard, Bob Drew, David
Borrow, David Drown, Ms Julia
Bradley, Rt Hon Keith (Withington) Eagle, Angela (Wallasey)
Bradshaw, Ben Edwards, Huw
Brennan, Kevin Efford, Clive
Brown, Rt Hon Nicholas (Newcastle E & Wallsend) Ennis, Jeff
Etherington, Bill
Bryant, Chris Farrelly, Paul
Buck, Ms Karen Field, Rt Hon Frank (Birkenhead)
Burden, Richard Fisher, Mark
Burgon, Colin Flint, Caroline
Cairns, David Flynn, Paul
Campbell, Alan (Tynemouth) Foster, Rt Hon Derek
Campbell, Ronnie (Blyth V) Foulkes, George
Caplin, Ivor Gapes, Mike
Casale, Roger Gardiner, Barry
Caton, Martin George, Rt Hon Bruce (Walsall S)
Challen, Colin Godsiff, Roger
Chapman, Ben (Wirral S) Goggins, Paul
Chaytor, David Griffiths, Win (Bridgend)
Clapham, Michael Grogan, John
Clark, Dr Lynda (Edinburgh Pentlands) Hain, Rt Hon Peter
Hall, Mike (Weaver Vale)
Clark, Paul (Gillingham) Hall, Patrick (Bedford)
Clarke, Rt Hon Tom (Coatbridge) Hamilton, David (Midlothian)
Clarke, Tony (Northampton S) Hanson, David
Clelland, David Harman, Rt Hon Ms Harriet
Clwyd, Ann Harris, Tom (Glasgow Cathcart)
Coaker, Vernon Healey, John
Coffey, Ms Ann Henderson, Doug (Newcastle N)
Cohen, Harry Henderson, Ivan (Harwich)
Coleman, Iain Hendrick, Mark
Connarty, Michael Hepburn, Stephen
Cook, Frank (Stockton N) Heppell, John
Cook, Rt Hon Robin (Livingston) Hesford, Stephen
Cooper, Yvette Heyes, David
Corbyn, Jeremy Hill, Keith
Cox, Tom Hinchliffe, David
Cranston, Ross Hodge, Margaret
Crausby, David Hood, Jimmy
Cruddas, Jon Hope, Phil
Cryer, John (Hornchurch) Hopkins, Kelvin
Cummings, John Howarth, Rt Hon Alan (Newport E)
Howarth, George (Knowsley N) Pickthall, Colin
Hughes, Beverley (Stretford) Pike, Peter
Hughes, Kevin (Doncaster N) Plaskitt, James
Hurst, Alan Pond, Chris
Illsley, Eric Pound, Stephen
Irranca-Davies, Huw Prentice, Ms Bridget (Lewisham E)
Jackson, Glenda (Hampstead) Prentice, Gordon (Pendle)
Jamieson, David Primarolo, Dawn
Jenkins, Brian Prosser, Gwyn
Jones, Jon Owen (Cardiff C) Quinn, Lawrie
Jones, Martyn (Clwyd S) Robertson, John (Glasgow Anniesland)
Joyce, Eric
Kaufman, Rt Hon Gerald Roche, Mrs Barbara
Keeble, Ms Sally Rooney, Terry
Keen, Ann (Brentford & Isleworth) Roy, Frank
Kelly, Ruth Ruane, Chris
Kemp, Fraser Ruddock, Joan
Kidney, David Ryan, Joan
Kilfoyle, Peter Salter, Martin
King, Ms Oona (Bethnal Green) Sarwar, Mohammad
Kumar, Dr Ashok Savidge, Malcolm
Ladyman, Dr Stephen Sawford, Phil
Lawrence, Mrs Jackie Sedgemore, Brian
Laxton, Bob Shaw, Jonathan
Lazarowicz, Mark Sheerman, Barry
Lepper, David Sheridan, Jim
Lewis, Terry (Worsley) Shipley, Ms Debra
Linton, Martin Simon, Siôn
Lloyd, Tony Singh, Marsha
Love, Andrew Skinner, Dennis
Luke, Iain Smith, Rt Hon Andrew (Oxford E)
Lyons, John Smith, Angela (Basildon)
McAvoy, Thomas Smith, Rt Hon Chris (Islington S)
McCabe, Stephen Smith, John (Glamorgan)
McCartney, Rt Hon Ian Smith, Llew (Blaenau Gwent)
McDonagh, Siobhain Steinberg, Gerry
MacDonald, Calum Stewart, David (Inverness E)
McDonnell, John Stewart, Ian (Eccles)
McFall, John
McKechin, Ann Stinchcombe, Paul
McKenna, Rosemary Stoate, Dr Howard
Mackinlay, Andrew Sutcliffe, Gerry
McNamara, Kevin Taylor, Rt Hon Ann (Dewsbury)
MacShane, Denis Taylor, Ms Dari (Stockton S)
McWalter, Tony Thomas, Gareth (Clwyd W)
McWilliam, John Thomas, Gareth (Harrow W)
Mahmood, Khalid Tipping, Paddy
Mahon, Mrs Alice Todd, Mark
Mallaber, Judy Touhig, Don
Mandelson, Rt Hon Peter Truswell, Paul
Marris, Rob Turner, Dennis (Wolverh'ton SE)
Marsden, Gordon (Blackpool S) Turner, Neil (Wigan)
Marshall, David (Shettleston) Twigg, Derek (Halton)
Marshall, Jim (Leicester S) Twigg, Stephen (Enfield)
Martlew, Eric Tynan, Bill
Meale, Alan Vis, Dr Rudi
Merron, Gillian Walley, Ms Joan
Mitchell, Austin (Gt Grimsby) Ward, Claire
Mole, Chris Wareing, Robert N
Moran, Margaret Watson, Tom
Morgan, Julie White, Brian
Mountford, Kali Whitehead, Dr Alan
Mudie, George Williams, Rt Hon Alan (Swansea W)
Munn, Ms Meg
Murphy, Denis (Wansbeck) Williams, Mrs Betty (Conwy)
Murphy, Jim (Eastwood) Winterton, Ms Rosie (Doncaster C)
Murphy, Rt Hon Paul (Torfaen) Wray, James
Naysmith, Dr Doug Wright, Anthony D (Gt Yarmouth)
Olner, Bill Wright, David (Telford)
O'Neill, Martin Wright, Tony (Cannock)
Organ, Diana Wyatt, Derek
Osborne, Sandra (Ayr)
Palmer, Dr Nick Tellers for the Noes:
Perham, Linda Jim Fitzpatrick and Mr. Ian Pearson.
Picking, Anne

Question accordingly negatived.

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