Changes to tax relief announced in the budget will hit the arts sector

In last week’s budget, Chancellor George Osborne announced changes to the amounts of tax relief individuals will be able to claim that are almost certain to hit big gift donations to the arts sector, as well as the wider charitable sector.

In his budget statement the Chancellor said, “From next year, anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25 per cent of their income”. In essence, the changes mean that from April 2013, the maximum tax relief that major philanthropists will be able to claim is £50,000 per year. If they want to give more, they will not be able to claim tax relief on all of their donation, even if they are donating a large amount to, say, establish a foundation or an endowment.

These changes should surely be a concern for the arts sector, given the government’s insistence that philanthropy needs to play a larger part in the funding of arts activity. As philanthropist Vernon Ellis said on Radio 4′s The World This Weekend, this change is likely to result in a ‘double whammy’.
Firstly, major philanthropists will simply feel able to do less, and so will do – and give – less to the arts. Secondly, this potentially creates a bigger strain on the public purse as the government will have to step in to plus this gap. Here the fear of course is that the government won’t do ‘step in’ in the case of the arts, meaning that we’ll end up with less private money coming into the sector AND less public subsidy.

What sense is there in capping this area of tax relief at a time when the government wants to ramp up philanthropic giving?

John Low, Chief Executive at Charities Aid Foundation, said of these changes, Government can’t have a philanthropy agenda on the one hand and then introduce measures like this on the other. This change seems to run counter to the very idea of Big Society.”

Meanwhile, Gary Shortman, a partner at accountants UHY Hacker Young, said that the move “casts a huge shadow over large scale donations to charity by wealthy individuals…Very high earners, encouraged by the relief, often make substantial lump sum charitable donations that dwarf their income and that behaviour is now threatened”.

On TWTW, Vernon Ellis finished by saying that he thought there was still time to influence government policy on this, and that the Treasury would be open to discussions about this. So, as well as asking Vernon to speak up for us, perhaps the answer is for us all to club together, raise the requisite £200K and get ourselves a dinner invitation?