Universities, including Oxford and Cambridge, are amongst those unhappy about government plans to hold back on tax breaks on donations to charity. Chancellor, George Osborne, has received private letters from the vice-chancellors of both Cambridge and Oxford, claiming that the culture of university philanthropy risks being undermined by his plans.
A massive £560m was raised last year by universities from charitable gifts, who would like the chancellor to think again. Amounts of legal tax avoidance can be huge and ministers would like it stopped. However, as universities receive large gifts, often over £1m, they would be extremely hard hit if the change went ahead.
People who pay a higher-rate of tax have been able to donate large amounts of cash to charities, to avoid paying tax on it, under current rules. This can bring the tax bill to zero, if it is correctly offset. Uncapped tax reliefs, inclusive of donations to charity, are to be capped from 2013 at 25% of an individual’s income or £50,000, whichever is higher.
Vince Cable, the Business Secretary, is openly concerned about the way that the changes could affect universities and opposition to plans are gathering pace. In a private letter to Mr Osborne Andrew Hamilton, Oxford’s vice-chancellor, pointed out how much the university relies on charitable donations. Over £1.25bn has been raised over the last eight years by the leading university, many gifts were over the £50,000 limit.
Almost 44.5% of philanthropic funds are met by Oxford and Cambridge universities. Chief executive of Universities UK (the umbrella body Universities UK), Nicola Dandridge, has meanwhile claimed that without the sums raised by universities they would be able to offer less.
A limit will be set on the amount of tax relief any person can claim from April 2013. There is no limit, currently, on the amount of money one can donate to charity. This makes it possible to bring a tax bill to zero. Unlike normal taxpayers, a donor is choosing where their money is spent, although no personal profit is made.
The cap will be set at whichever is greater; either 25% of the person’s income or £50,000 per year. On an income of £4million, an individual would still be able to donate £1million and receive tax relief for that. To donate a larger amount, they would be required to use taxed income. Scholarships, student bursaries, improvement to facilities and research have, in the past, been funded in this way