Thursday, 5 December 2013

Charities reclaiming on lump sum donations: A Budget Amendment Passed.

In 2010, I spoke out in my blog in support of a gift aid scheme for Jersey. Chris Stone very kindly interviewed me on radio, and I was also asked to do a short piece to camera for the BBC local news bulletin, who were very helpful in making my arguments more widely known.
My blog posting can be seen here:  
Philip Ozouf, the Treasury Minister, was opposed, and former States member, Jean Le Maistre rang me up to wish me luck, but mentioned that he had tried to get something similar through, without success.
Senator Ozouf said:
"The UK system is slightly different as Tax rates are much higher.  We have a low administrative tax system, an easy collect tax system. I don't want to change that but am happy to look at the whole gift aid arrangements.
And that was that!
But as the recession deepened, I wondered if it was possible to improve matters instead by a simple alteration to the existing tax law. So I began in July 2013 to lobby various States members. This was my argument:
Charities reclaiming on lump sum donations: Proposed Amendment to Income Tax Law
The background details on giving to charity and reclaiming tax can be found at
This is to do with charities reclaiming tax paid on donations from tax payers, where the donation is either covenanted over several years, or is paid as a lump sum over £100.
The relevant part of the Income Tax law is given below. I would have thought it a simple proposition to amend 87B F
(f)     the sum paid is not less than £100;
to replace with the words
(f)     the sum paid is not less than £50;
The argument is a simple one. With these times of economic constraint, charities need all the help they can muster from taxpayers. As there are many calls on the public from differing charities, a reduction to £50 would both enable them to benefit more from lump sum donations, and ensure that those wanting to donate £50 to two different charities would also enable the two charities to gain from the donations. Sanctuary House, for example, could benefit by this simple change in the law.
This is not a move to gift aid, and it still retains the lump sum, and existing methods of claiming by completing forms, and I would suggest that the slight increase in administration would certainly be outweighed by the benefits which would accrue to charities.
While there is a general consultation on charities, this is part of the income tax law, and can be addressed simply and separately without any need for delay, especially as the consultation does not in fact address this, as it is part of the income tax law. The need of charities for extra income would, I have thought, meant that the sooner it could be implemented, the better.
Deputy John Young takes action
I'm not going to name the people who didn't respond, as there are many calls on a States Member's time, and it is quite understandable that matters can be pushed onto the "back burner" and forgotten. I should mention that I don't usually send out blanket emails to all States members; I like to send it to individuals whom I feel may be receptive to a suggestion. Otherwise, it becomes "overkill".
But I bumped into Deputy John Young at a meeting at the Parish Hall, and mentioned it to him, and forwarded my email to him. He seemed very keen to progress it, and had emailed Philip Ozouf on my behalf. Philip was broadly in favour, and in his reply (which I have permission to quote) he said:
"Thank you for your email. Treasury has looked at this in some detail during this year as we are considering introducing a form of gift aid relief with lower qualifying donations than the current £100 limit, precisely for the reason you set out in your email."
However, he wanted more figures on the matter:
"The outcome of that work was that there is currently insufficient information to enable us to determine the cost of reducing the qualifying limit."
And he suggested that should be part of the raft of changes under the new Charities Law, after the review, rather than just a matter under the Tax Law.
So it seemed that delays were again happening. I resigned myself to the inevitable, although I was encouraged by an exchange of emails with Deputy Young again, who wanted to ask about whether reducing the amount might reduce charitable giving.
I thought that was most unlikely. People who gave £100 or more would have that kind of commitment, but a reduction to £50 would hopefully generate a bonus commitment from people who had not been able to benefit charities in that way. Deputy Young was definitely on the case. And actually much to my surprise, I saw it voted on in the States as part of this year's budget debate!
Here is the proposition, and the notes on it, which show how well Deputy Young presented the case, and did his homework to reply to the question of costs raised by Senator Ozouf.
The Proposition
As part (b) of the fourth amendment to the Budget, Deputy Young brought this small but significant change:
"The estimate of income from taxation during 2014 shall be decreased by £20,000 by reducing the de minimus limit on charitable donations on which the charity may reclaim the tax applicable from £100 to £50"
Deputy Young's Notes to the Proposition
For many years Jersey has had a successful scheme which allows local charities to benefit from repayment of tax suffered by local taxpayers making lump sum donations subject to certain conditions. The cost of administering this tax repayment scheme is an important consideration. Charities are required to submit an annual schedule of donations received, together with the documentation, and can do so more frequently, but not more than monthly. In 2012, £786,725 tax was repaid to 151 charities.

On 17th April last year, the Minister for Treasury and Resources, in answering a question from Deputy S. Pinel of St. Clement said: "I want to support the philanthropic sector in Jersey. The arrangements we have are slightly different to that of the United Kingdom; it is that charitable donations are not given but then the charity benefits from the 20 per cent tax concession, so it is a slightly different arrangement up to a cap of £500,000, as I think it is. I am certainly going to be looking further at boosting with the Chief Minister the philanthropic and third sector. The third sector is vital; we need to give it resource, we need to give it encouragement and certainly we need to encourage local Islanders to give and certainly I am not proposing any changes to our arrangements, in fact I want to improve them."

In this year's Budget, the Minister is proposing to amend Article 87B of the Income Tax (Jersey) Law 1961 to relax the requirement for the taxpayer making the donation to 3 years' prior residence; however, the minimum donation to qualify for this scheme is still set at £100. The Law was altered to reduce the minimum sum to £100 from £250 in 2001, but has remained unaltered since that time.

I believe in these stringent times the old saying "watch the pennies and the pound will look after themselves" applies. Thirteen years later, in the middle of the post-credit crunch recession, there is a strong case for assisting charities by reducing this de minimus limit on individual donations to £50, which my amendment proposes.

It is anticipated by the Income Tax Department that the total cost of the reduction in the de minimus limit of individual donations to £50 is unlikely to exceed £20,000.

The Outcome: The Vote
Unlike many of the budget amendments, this one was passed by all the 41 States Members present in the Chamber, with no dissent!
I would like in this blog to express my deep felt thanks to Deputy John Young, for not just listening to me, but taking action to prepare and present a proposition on the matter, so that at last, sooner rather than later, charities can benefit more as a result of this budget.
As far as I am concerned, it is a great Christmas present come early!

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