George Osborne under fire as Tory MPs target charity tax U-turn

Treasury admits ministers are preparing to lift controversial plans to place cap on donations scrap controversial plans to put cap on donations

George Osborne is preparing for a climb-down on his "charity tax" proposals amid claims from Labour that his March Budget has descended into "a total and utter shambles".

Click HERE to view graphic

Tory MPs, emboldened by U-turns over Budget moves to impose VAT on pasties and static caravans, stepped up calls yesterday for the Chancellor to scrap plans to limit tax relief on large charity donations to £50,000 a year from next April.

Critics of the planned cap on donations to good causes have warned that the moves will deter philanthropic giving and drive charities to the wall, undermining David Cameron's repeated exhortations to create a "big society".

Treasury sources confirmed that ministers were considering raising the proposed cap above £50,000 and allowing the tax relief to be rolled over between years. They are also examining whether the proposed rules can be redrawn to protect legitimate UK charities by specifically outlawing donations to bogus foreign charities.

The senior Tory MP David Ruffley, a member of the Commons Treasury Select Committee, said ministers were "already preparing the ground" for a rethink of the proposals.

He predicted the concessions could be announced in Mr Osborne's Autumn Statement, which is expected in November. "I think the political management here really does demand that there is some lessening of the hit to charities that his cap involves," he said.

Mr Ruffley told The Independent: "There are plenty of ways of ensuring mainstream charities continue to get the benefit of full relief."

He suggested ministers could "lift the cap or bear down on abuse by those trusts which don't provide tangible benefits for good causes in the UK."

Zac Goldsmith, the MP for Richmond Park, said: "The policy needs to be fundamentally rethought, and I'm sure it will be." He added: "The current proposal looks less like an attempt to prevent dodgy charities, and more like a tax grab. Without a doubt, it will massively depress giving in this country just at a time when it has never been more important."

Chris White, the MP for Warwick and Leamington, said: "This policy needs to be reviewed – we need to think again and I would hope the Chancellor does that. One of things we should be doing is encouraging a culture change for philanthropists to support charities with big donations." The expected concessions are unlikely to satisfy major charities which are pressing for the cap to be abandoned altogether – a move that would cost the Treasury an estimated £50m-£100m. They say they have made little progress so far in persuading the Government to abandon, rather than modify, its plans. John Low, the chief executive of the Charities Aid Foundation, said: "The Government has shown it is prepared to listen on issues like the pasty tax and the caravan tax.

"Now is the time for them to listen to charities, donors and their own supporters to do the right thing and exempt charitable donations from the damaging tax cap."

Mr Osborne has now completed three U-turns on Budget proposals. Two weeks ago he was forced to promise £30m to the Church of England in compensation for adding VAT for alterations to listing buildings.

The Chancellor was accused of waiting until the Commons was in recess until announcing two more retreats in the face of widespread opposition on Coalition benches.

The retreat on hot food means that 20 per cent VAT will now be charged only on cooked pies and pasties that are kept hot, but not those that are still warm after coming from the oven. Under the original Budget plans, VAT would have been levied on savouries until they had cooled to an "ambient" temperature.

The Treasury also backtracked on plans to impose 20 per cent VAT on static holiday homes following pressure from caravan manufacturers and will instead charge 5 per cent from April 2013 rather than October.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Austen Lloyd: Commercial Property Solicitor - Exeter

Excellent Salary: Austen Lloyd: EXETER - A great new opportunity with real pot...

Austen Lloyd: Senior Private Client Solicitor - Exeter

Excellent Salary: Austen Lloyd: EXETER - An outstanding senior opportunity for...

Sauce Recruitment: Retail Planning Manager - Home Entertainment UK

salary equal to £40K pro-rata: Sauce Recruitment: Are you available to start a...

Ashdown Group: Front-End Developer - London - up to £40,000

£35000 - £40000 per annum: Ashdown Group: Creative Front-End Developer - Claph...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower