The government has unveiled plans for a 'full' and 'formal' consultation on its proposals for reduction of tax relief on charitable donations.

The move has prompted speculation that the policy will no longer go ahead after the spokeswoman for Number 10 said, "we want to ensure we don't [have an] impact on charitable giving".

Earlier today, in an apparent admission that charities will suffer as a result of recently proposed tax changes, David Gauke, the Exchequer Secretary, has said that there "will be an impact" on donations.

The changes would involve capping charitable giving at £50,000 or a quarter of income to ensure higher rate tax payers cannot avoid paying their fair share of tax.

Currently donors can claim back half of the tax paid on earnings subsequently funnelled to charities.

Gauke insisted that while charities will suffer an impact, the wealthiest members of society should not be able to "opt out" of paying tax, and added that the government was looking at ways to ensure charities did not miss out.

Speaking to the BBC's Radio 4 Today programme, Gauke said: "The broader point is that at the moment people are able to give to charities and indeed make use of other reliefs [sic] within the tax system that gets their rate down. The concern that we have [is] we don't think it is fair that people are able to get the rate down that low even when the donations are to perfectly legitimate charities."

"We don't think it is entirely fair that the tax system, as currently designed, does mean that there are some very wealthy individuals who are essentially able to take themselves out of the income tax system."

Her Majesty's Treasury said that almost one-tenth of people earning more than £10m a year is paying less than the 20% basic rate of income tax.

The Treasury said that 6% of UK residents earning more than £10m a year paid less than 10% in tax last year and another 3% came in below the basic 20%. The proportion of people paying more than 40% on their £10m-plus earnings was less than three-quarters.

Backbench conservative MP, Zac Goldsmith, has spoken of his shame that his party have "declared war" on charities and said if the government did not come up with a "more intelligent measure which deals with the loopholes", they would be remembered as the government that "destroyed the charities sector".

Also speaking on Radio 4, Goldsmith said: "The same government that talked about the big society relentlessly before the election, the same government that has taken over at a time when charities have never been more important. This is a massive issue for this government."

Goldsmith is certainly not alone, with a survey out at the weekend showing that 65% of backbenchers believe that "tax relief on charitable donations should be exempt from the proposed cap".

The survey, which was published by the Charities Aid Foundation, also revealed that 68% of backbenchers agreed "the government should review its proposal to apply this cap on tax relief for charitable donations".

John Low, Chief Executive of the Charities Aid Foundation, responded by saying: "The government now needs to listen and act on to this clear message from coalition backbenchers, as well as from ministers, charities and donors, and reverse this ill-thought through tax change.

"Clearly, any abuse of the system is quite wrong and damaging to the work of charities. We absolutely must work with government to ensure that where any abuse occurs, all necessary measures are taken to eradicate it."

NR

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