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
News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
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

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'