Rich 'use charities to cut tax'

 

Some of the wealthiest people in the country are donating to charities which "don't do a great deal of charitable work" in order to "wipe out" their income tax bills, Downing Street said today.

No 10 strongly defended controversial plans in Chancellor George Osborne's Budget to cap tax relief on charitable donations, saying it was necessary to prevent "abuse" of the system.

The move has prompted an outcry from charitable organisations, who fear that big donations will dry up as a result.

However, the Prime Minister's official spokesman said that ministers had acted to stop wealthy individuals "exploiting" the system to pay less in tax than the average family.

"In certain instances they may be giving to charities and those charities don't, in all cases, do a great deal of charitable work," the spokesman said.

"The reason that the Chancellor decided to bring in the cap was that certain individuals in this country on very high incomes are exploiting these reliefs to reduce their tax bills.

"We cannot be in a situation where very wealthy individuals are able to wipe out their bills by using these reliefs.

"We don't think it is right that someone on a very high income is paying far less tax than the average family in this country."

In an interview with The Daily Telegraph, Mr Osborne said he had been "shocked" to discover that some of the wealthiest people in the country were paying "virtually no" income tax.

The Chancellor said he had seen "anonymised" tax returns submitted by multi-millionaires using aggressive avoidance schemes to dramatically reduce their taxbills.

HM Revenue and Customs (HMRC) found that the income tax rate among some of the highest earners was, on average, only 10%.

Mr Osborne said the HMRC study had convinced him of the need to take action to ensure high earners paid more tax.

In last month's Budget he limited how much people could offset their tax bills by investing in businesses or donating to charity.

Anyone seeking to claim more than £50,000 of tax relief in any one year will have a cap set at 25% of their income from 2013.

"I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it's within the tax laws, so that they were regularly paying virtually no income tax. And I don't think that's right," Mr Osborne said.

"I'm talking about people right at the top. I'm talking about people with incomes of many millions of pounds a year.

"The general principle is that people should pay income tax and that includes people with the highest incomes."

Charities have warned that limiting tax relief on donations will reduce philanthropic giving.

But Mr Osborne said: "I was very clear in the Budget that we are specifically looking at making sure we are still encouraging philanthropy and charitable giving. But that is a specific issue we can deal with."

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Trainee Vehicle Inspectors / Purchasers

£20000 - £40000 per annum: Recruitment Genius: Trainee Vehicle Inspectors / Pu...

Recruitment Genius: Vehicle Broker / Purchaser

£18000 - £45000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Executive - OTE £45,000

£18000 - £45000 per annum: Recruitment Genius: A Sales Executive is required t...

Recruitment Genius: Call Centre Manager - OTE £50,000

£25000 - £50000 per annum: Recruitment Genius: This innovative online car purc...

Day In a Page

Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high
How to find gold: The Californian badlands, digging out crevasses and sifting sludge

How to find gold

Steve Boggan finds himself in the Californian badlands, digging out crevasses and sifting sludge
Singing accents: From Herman's Hermits and David Bowie to Alesha Dixon

Not born in the USA

Lay off Alesha Dixon: songs sound better in US accents, even our national anthem
10 best balsamic vinegars

10 best balsamic vinegars

Drizzle it over salad, enjoy it with ciabatta, marinate vegetables, or use it to add depth to a sauce - this versatile staple is a cook's best friend
Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'