After last year’s positive Budget for charities, the sector has expressed deep disappointment at the Chancellor George Osborne's 2012 Budget.

The CFG described it as a budget for business, CAF warned tax changes could strangle major donations, the Charity Tax Group said it was very concerned about some of the Budget announcements, law firm Withers warned that the Budget could be a significant attack on charity funding, NCVO said this is not “George’s Marvellous Medicine” for the charity sector, NAVCA has warned the budget should have gone further, ACEVO is worried by the cap on tax reliefs, Citizens Advice Scotland has said there is nothing in the Budget to help people struggling and Justice for All said the Budget revealed there is no long term plan for the advice sector and New Philanthropy Capital said it showed the Chancellor is not a fan of the Big Society.

Plans to cap income tax reliefs to £50,000 or 25% of income from April 2013 announced in the Budget could cast a huge shadow over charitable giving in the UK, sector experts warn.

CFG: A budget for business
Caron Bradshaw, CEO at CFG, said: “This is very much a budget for business, with little recognition of the contribution that the charity sector makes - we’re disappointed we’ve returned to just passing references this year. It is important that with continued difficulties for many people in the UK, charities and social causes are not forgotten.

“There are concerns regarding the cap on personal tax reliefs, especially given the Chancellor’s implication that this would relate to reliefs on charitable giving. It would be devastating if there was a blow to philanthropy without proper consultation and impact assessment.

"The detail in the budget documents does pick up this point, stating that the Government will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations.

"However, this is not a strong commitment that the cap will not apply to charitable giving. Given that the only mention of the sector in the budget speech was relatively negative in emphasis it appears recognition of the value of the sector is falling off the agenda.”

CFG expressed disappointment that despite focus on growth and opening public services, more has not been done to address difficulties in the operational environment for charities and other business.

Bradshaw added: “CFG highlighted a number of areas where the Treasury should look to improve the tax and regulatory framework for charities, many of which would also benefit social enterprise and other small to medium sized business.

"The Chancellor pledged to prioritise a fairer, more efficient tax system, however, failed to consider charities in this endeavour. More is needed to address legal structures around multi-employer defined benefit pension schemes, making TUPE regulations and Fair Deal work, VAT, and other anomalies which dramatically impact on market diversification.”

Though Bradshaw added: “We welcome the emphasis on growth and development, but strongly urge the Government not to disenfranchise the not-for-profit sector from this aim - the sector is an important contributor to the economy and offers significant benefits to society.

"It’s promising to see reference to social investment in the budget documents, however further detail will be needed to establish whether Government is genuinely nurturing this evolving market.”

“It is important that provisions made in Budget 2011 continue to be prioritised and that Ministers are committed to ensuring that they yield long-term benefits for the sector.”

CFG's submission to the Budget 2012 can be found here

CAF: Tax changes could strangle major donations
Major philanthropists may be put off making substantial donations to charities because of changes unveiled in today’s Budget, warned the Charities Aid Foundation (CAF).

Under changes to tax relief announced by the Chancellor, those wanting to make major lump sum donations could be hit by lower tax relief on donations of more than £200,000.

Following the announcement, CAF has called for urgent talks with the Treasury to ensure caps on tax relief announced in the budget do not strangle major donations by wealthy philanthropists.

CAF fears that the changes could reduce the amount donated to charity by millions of pounds each year.

CAF chief executive John Low said: “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.

“These changes represent a huge cut in tax relief on major donations to charity by wealthy philanthropists whose generosity is supporting some of the most vulnerable people in society.

“Tax relief on major donations is not tax avoidance. It is supporting major donations by people who in some cases are donating the proceeds of a lifetime’s work to charity.

“Such a change risks reducing major donations by Britain’s richest individuals at a time when charity budgets are being squeezed. We need urgent talks with the Treasury to ensure that this does not affect charity finances.

“Now more than ever we should be making it easy for people to donate to charity. It is vital that Government does all it can for charities in these challenging times. Demand for the services of charities is on the rise, but revenues remain under threat; the recent accounts filed with the Charity Commission in 2012 show a two per cent drop in revenues compared to the start of last year.”

Charity Tax Group: Very concerned
The Charity Tax Group said it was very concerned about some of the announcements in this year’s Budget, which could have a very significant, adverse impact on parts of the sector.

Measures that CTG welcome include the:

Confirmation that the Gift Aid Small Donations Scheme will be introduced with an increase on eligible donations to £20 – CTG has been working closely with HMRC to ensure that this new scheme is workable and looks forward to commenting on draft legislation in due course

Reduction of administrative burdens on charity shops that claim Gift Aid on donations – CTG welcomes the Government’s commitment to work with the sector to simplify the administration of the Gift Aid system and hopes that through the Charity Tax Forum wider simplification of the system will be achieved through the advent of a Gift Aid Database.

Confirmation that the cost-sharing exemption will finally be introduced in Finance Bill 2012 – CTG welcomes this confirmation after campaining on this issue for over seven years. However, we still have concerns about its implementation and scope and look forward to commenting on draft guidance in the coming weeks. If it turns out that the new arrangements do prevent wider take-up of the exemption, CTG will ask the government to review their position.

Confirmation of the temporary arrangements on the VAT treatment of freight transport services performed wholly outside the EU - CTG is pleased that HMRC is formalising these arrangement that we helped to secure in early 2010, to prevent the VAT impact on aid charities providing emergency relief.

Confirmation of the new IHT rate for deaths on or after 6 April 2012 where 10 per cent or more of a deceased person’s net estate is left to charity.

Announcement that the Treasury will conduct an internal review looking into the financial barriers to social enterprise.

Despite some small positive announcements, having examined the finer detail of the Budget, CTG is very concerned at:

The withdrawal of zero rate on alterations to listed buildings – CTG is concerned about this development and expresses regret that despite consultation with the sector charities have been removed from the reduced rate without notifying key stakeholders. This estimated cost to charities and businesses is £85m a year and is likely to affect 1,000 buildings. CTG anticipate the cost to charities will be at least £50m. There are transitional measures for those locked into contracts entered into before 21 March 2012 and the measure takes effect from 1 October 2012.

The capping of tax reliefs at 25% of income for anyone seeking to claim more than £50,000 of reliefs – while the Government suggests that it will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations CTG is concerned that these changes will prove to be a disincentive for charitable giving. If sufficient efforts are not made to support philanthropists, this policy will clearly be at odds with the government’s attempts elsewhere in the Budget and more generally to promote the philanthropy agenda and giving to charities.

The withdrawal of charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials – while not wholly unexpected (due to a lack of vires), CTG is concerned at the loss of the reduced rate for charities.

John Hemming, CTG chairman commented: “Overall, the Budget seems to contain more bad news for charities than good. This is of concern to the sector which has been looking to the Government for active support for its work which includes: protecting the most vulnerable in society, conserving the built heritage, protecting the environment and undertaking pioneering medical research – to name but a few areas.

"Many of the positive announcements in the Budget simply confirm previous commitments on which CTG has been closely liaising with HMRC. We welcome this consultative process with the tax experts within the sector which can lead to practical and balanced legislation. Where there is less engagement with the sector the position of charities is sometimes forgotten, with potentially serious financial implications.”

Withers: Budget a significant attack on charity funding
Chris Groves, partner in the wealth planning team at international law firm Withers, reinforced this concern.

He said: “Charities may well come to regard the 2012 Budget as a significant attack on their funding. One of Gordon Brown’s first actions as Chancellor in 1998 was to remove the cap on gift aid donations. The introduction of the cap on tax reliefs to 25% of an individual’s income effectively reinstates that cap.

“This measure will particularly affect large donations made by philanthropists, who may have donated amounts significantly in excess of their annual income and will now see their tax relief and incentive for giving reduced.

“When coupled with the rules to be introduced that will reduce the rate of inheritance tax for estate where 10% is left to charity are likely to have the effect of delaying donations to charities until death, creating a significant funding gap. It is to be hoped the Government’s commitment today to explore with philanthropists ways to ensure that there will not be a significant impact on charities will result in greater incentives for lifetime giving to be introduced sooner rather than later.”

UHY Hacker Young: A shadow over large scale donations to charity
Gary Shortman, partner at UHY Hacker Young, the National Accountancy Group, commented: “A cap on tax relief for charitable giving 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. The third sector has become increasingly dependent on big donations from wealthy individuals as the economy has stuttered, so this is the worst possible timing to threaten that source of income.

“High earning Britons have been closing the gap on philanthropic giving in the UK compared to the US, but this change threatens that. People who do want to contribute a substantial portion of their income to charity may wish to bring forward their donation so that they can benefit from the existing rules.

“The Government has said that it will consult with charities before making this change and it is vitally important that it implements the cap in a way that doesn’t put a huge dent in UK philanthropy.”

NCVO: Not George’s Marvellous Medicine
Sir Stuart Etherington, chief executive of NCVO, was also unimpressed. He said: "This is certainly not “George’s Marvellous Medicine” for the charity sector, and only goes a little way towards sweetening the bitter pill of the multiple financial pressures currently hitting the sector.

"The cap on income tax reliefs for donations really sets alarm bells ringing, as it could impact negatively on income from donations.

"Eight per cent of donors give almost half of the amount that is given to charities every year, so this measure could have very serious consequences. It is positive though that the Government has pledged to work with philanthropists to explore ways of reducing this impact.

"There are positive early signs around the rising significance of social investment. We hope that the Treasury will use their review to look more comprehensively at the benefits that specific technical tax changes can make to the level of investment in social ventures. There is some way to go to support what could be a world leading industry.

"We also await with interest clarification on whether some of the measures announced – such as credit easing, simplification of tax for small businesses and enterprise loans for young adults to set up their own businesses – will also be extended to the voluntary sector and social enterprises.

"The advice services fund is a step in the right direction for supporting these vital organisations, which were hit particularly hard by falling income and escalating demand during the recession.

"Given that that advice sector stand to lose around £100m in the next year as a result of spending cuts and changes brought in by the Legal Aid Bill, we hope that the Government will do all that it can to support these vital organisations."

NCVO and other leading voluntary sector organisations wrote to George Osborne ahead of the Budget recommending a number of simple measures to help the sector in the current economic climate.

The letter can be read here

NAVCA: should have gone further
Joe Irvin, chief executive of NAVCA, noted: “The budget included a promise of £40 million to be made available for the not for profit advice sector over two years as well as measures to simplify gift aid. These are welcome at a really difficult time for our sector.

“However, this budget should have gone further. Charities supporting the most deprived communities are facing the double whammy of cuts in funding and rocketing demand. This budget is a squandered opportunity to help Britain's hardest hit communities. This government needs to understand that the big society only works if the local society works as well.”

ACEVO: Worried by the cap on tax reliefs
ACEVO chief executive Sir Stephen Bubb said: “We welcome the HMT review of social investment – the next decade could see an explosion in social finance, and to unleash it we are calling on the Chancellor to bring forward concrete proposals by the autumn statement.

"But we are worried by the cap on tax reliefs– which could end up hitting the poor more than the rich if they hit levels of donation to charity. And economic recovery must not come at the expense of our natural and architectural heritage – many charities will be worried by the changes to the planning regime in this regard.”

CAS: Nothing to help people
Citizens Advice Scotland have said there is nothing in today’s budget that will really help people who are struggling financially, and that the Government does not understand the problems hardworking families are facing.

CAS Acting chief executive Susan McPhee said: “There is nothing in the budget that will seriously relieve the pressure on those who are suffering the most. People are crying out for some kind of financial help, and they did not receive it today.

“The Government doesn’t seem to realise that many people are finding it difficult just to get through the week. Incomes have fallen as the cost of living has risen. People are really struggling to get by. Many can’t meet their mortgage or rent payments, or even feed their families. Personal debt is on the rise and young people in particular are finding it hard to get work. This is the real picture of life for many people in Scotland. CAB advisers see it every day and it is bleak.

“We are particularly concerned that there will be welfare cuts of a further £10 billion over the next three years, and that 85,000 hard working families are already set to lose working tax credits this year. Further cuts in the welfare system will only push families into poverty – and will also take money out of the local economies across Scotland.

“The reduction of the higher income tax rate from 50p to 45p would give someone earning £300,000 a year an extra £7,500 a year. That’s 34 times more extra income than the £220 the average standard taxpayer is set to gain from increasing the personal tax allowance to £9,205. That increase of £220 works out as an extra 60 pence a day, just enough to buy a pint of milk.

“Today the Government has missed a real opportunity to support low-income households and instead has increased financial support for high earners. The government need to provide more support for those who really need it.”

Justice for All: Not a long term plan for the advice sector
Will Horwitz of the Justice for All campaign said: “£20m a year for just two years is not nearly enough to cover the £100m annual shortfall charity advice providers are facing.

"And it is not a long term plan for the advice sector. It is no substitute for legal aid, so we urge Government to accept the amendment won in the House of Lords this month to keep legal aid for advice on welfare benefit appeals and reviews."

Justice for All is a broad coalition including advice charities Citizens Advice, Law Centres Federation and Advice UK.

According to the Government’s impact assessment charities will lose £51m a year as a result of the Legal Aid Bill, when it is introduced in April 2013 here

According to Citizens Advice, frontline CABs around the country will receive £51.3m less in 2012/13 than they did in 2010/11 - this is before the legal aid cuts are introduced a year later.

This is a very conservative figure, since it does not include the non-legal-aid losses of 60 Law Centres and 800 Advice UK members, for whom reliable figures are not available.

Government last year announced a one-off £20m fund which has now been distributed to be spent in financial year 2012/13.

It was hugely oversubscribed.

New Philanthropy Capital: Chancellor is not a fan of the Big Society
Dan Corry, chief executive of New Philanthropy Capital, observed: "For the sector, this Budget was more about what George Osborne didn’t say than what he did. It was ‘steady as you go’ on the macroeconomic front. What was noticeable was that there was hardly any mention of the charitable sector in the Chancellor’s speech.

"And the once key phrase ‘the Big Society’ did not get a look in this year. Clearly the politically savvy Chancellor is not a fan. In the small print the sector did get a review of financial barriers to social investment, but with little sense of urgency. Overall the main news for the sector is that growth will be poor in 2012/13, so needs will continue to rise, and money to address them will remain tight. People will debate the case for scrapping the 50p rate but for the sector it wont be a budget to remember."

The Work Foundation: Little to alter long-term prospects
Ian Brinkley, director at The Work Foundation, added: “This was the Budget that could have done much more to set out a growth strategy. There were some welcome hints of what could have been – measures that support key industries such as life sciences and the digital sector, help create a modern infrastructure and boost to the science base.

“But these tentative measures were over shadowed by more traditional cuts in corporation tax and more Enterprise Zones. Not surprising, this Budget does little to alter long-term prospects for the UK economy.”

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