§ Lord Houghton of Sowerby
asked Her Majesty's Government:
What is the current estimate of the cost to the Inland Revenue of tax reliefs given to charities under the Income Tax Acts, and how this compares with the cost to the Inland Revenue on contributions to, and investment income received by, occupational pension schemes.
The Earl of Caithness
The total cost of direct tax reliefs benefiting charities is not available. Information on the cost of tax reliefs to charities in 1991-92 including donations by individuals and companies and relief for charities in corporate form is available as follows:
£ million Income of charities1 565 Donations under the payroll giving scheme 3 1 The figure comprises the total sum repaid to charities and scientific research associations in respect of tax credits on dividends, and income tax deducted at source from other investment income, payments under deeds of covenant and single donations by individuals and companies under the gift aid scheme plus an estimate of the higher rate relief received by the payers of covenanted sums and
single donations under gift aid. Information is not available about income received by these bodies without deduction of tax and no allowance is made for this in the figures.
The total cost of tax reliefs for occupational pension schemes is estimated at £9.1 billion in 1991–92. A breakdown of the total into component parts is shown in the table below. A description of the methodology used to produce the estimates is contained in Chapter 6 of Inland Revenue Statistics 1991. The cost of tax relief on capital gains of funds is not included in the estimates as lack of information on the length of time that pension funds hold various types of assets means that a reliable estimate for the amount of that relief cannot be made.
Occupational Pension Schemes Cost of tax relief 1 2 for 1991–92 Amounts £ million) Relief for: Employee contributions 2,200 Employer contributions3 3,400 Investment income of funds4 7,000 Lump sum payments from unfunded schemes4 5 350 Less tax liable on: Pension payments6 3,500 Refunds by funds to employers in connection with pension fund surpluses 400 Total (rounded to nearest £100 million) 9,100 1 On the basis that the rules for unapproved schemes are used as a benchmark to represent a non tax-privileged regime. 2 Estimates of relief for capital gains realised by pension funds are not available because of estimation difficulties. 3 On the basis that under present arrangements, employers' contributions are not taxable as a benefit in kind of the employees. 4 Assuming relief at the basic rate of tax. 5 Assuming that lump sum payments in unfunded schemes represent the same proportion of total benefit as that observed for funded schemes. 6 Assuming that occupational pensions represent the top slice of taxable income.