Small Charitable Donations Bill

Nigel Evans Excerpts

Monday 26th November 2012 Commons Chamber

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

New clause 2—Post-legislative review—

‘The Government shall, within 24 months of this Act coming into force, undertake a review of the operation and administration of the Gift Aid Small Donations Scheme and lay a report of the review before the House of Commons.’.

New clause 3—Complementary gift aid for small donations to small charities—

‘(1) Smaller charities, community amateur sports clubs or recently established charities, which do not meet the eligibility criteria in section (1) shall be eligible to apply to HM Revenue and Customs for complementary gift aid for small donations.

(2) “Small donations” for the purposes of complementary gift aid shall be as provided for in section 3 and the Schedule.

(3) That maximum donations limit for complementary gift aid shall be £5,000.

(4) The “connected charities” conditions in sections 4 and 5 shall also apply for charities making claims for complementary gift aid for small donations.

(5)

(a) HM Revenue and Customs may stipulate the supporting verification it may require from relevant agencies or authorities or designated persons in respect of any claims for complementary gift aid for small donations to small charities;

(b) such agencies, authorities or designated persons may include charity commissions, local government officers, police or police and crime commissioners, members of relevant professional bodies or others designated by devolved administrations in agreement with HM Revenue and Customs for these purposes.

(6) This section shall come into force on 6 April 2014.’.

This would provide for a separate scheme of supporting payments from HM Revenue and Customs, in the spirit of gift aid, to smaller or newer charities including those formed in response to a particular event.

Amendment 9, in clause 1, page 2, line 7, leave out subsection (6) and insert—

‘(6) The “specified amount” for a charity for a tax year is (subject to section 2(1))—

(a) £5,000 for a charity eligible for the full specified amount; or

(b) £2,000 for a charity eligible for the reduced specified amount.’.

This amendment is consequential on amendment 8.

Amendment 8, in clause 2, page 2, line 11, leave out subsection (1) and insert—

‘(1) A charity is an eligible charity for a tax year if—

(a) it has made a successful gift aid exemption claim in at least three of the previous seven years. In such cases, a charity will be eligible for the full specified amount; or

(b) it has made successful gift aid exemption claim in the previous year. In such cases, a charity will be eligible for the reduced specified amount.

This amendment introduces a probationary period for charities that do not have the claims history required in subsection (1)(a) of this clause. It allows them to benefit from a reduced specified amount until a claims history has been established. This also removes the requirement for a start-up period.

Government amendment 24.

Amendment 32, page 2, line 14, at end insert ‘or

(c) the charity is a “small charity”;

(d) the charity has been established for a specific event or project which has concluded.’.

This amendment extends the meaning of eligible charity to small charities and those established for specific events or projects.

Government amendments 25 and 26.

Amendment 10, page 2, line 26, leave out paragraph (a).

This amendment is consequential on amendment 8.

Government amendment 27.

Amendment 11, in clause 4, page 3, line 9, leave out paragraph (b) and insert—

‘(b) are eligible for the same rate of specified amount (subject to section 2(1)) for the tax year.’.

This amendment is consequential on amendment 8.

Amendment 12,  page 3, line 15, leave out paragraph (a) and insert—

‘(a) the specified amount (subject to section 2(1)), divided by’.

This amendment is consequential on amendment 8.

Amendment 13, in clause 6, page 4, line 41, leave out paragraph (b) and insert—

‘(b) if less, the specified amount (subject to section 2(1))’.

This amendment is consequential on amendment 8.

Amendment 14, page 4, line 45, leave out paragraph (b) and insert—

‘(b) if less, the specified amount (subject to section 2(1))’.

This amendment is consequential on amendment 8.

Government amendments 28 and 29.

Amendment 15, in clause 9, page 6, line 20, leave out paragraph (a) and insert—

‘(a) two or more charities (“connected eligible charities”) are connected with one another in a tax year and are charities eligible for the same rate of the specified amount (subject to section 2(1)) for the tax year, and’.

This amendment is consequential on amendment 8.

Amendment 16, page 6, line 37, leave out paragraph (b) and insert—

‘(b) if less, the specified amount (subject to section 2(1))’.

This amendment is consequential on amendment 8.

Amendment 21, page 7, line 10, at end add—

‘(8) The Treasury must, within 24 months of this Act coming into force, prepare a report assessing the impact of—

(a) the connected charities provisions; and

(b) the community buildings provisions

on the ability of charities to benefit from the Gift Aid Small Donations Scheme and lay it before the House of Commons.’.

Government amendment 31.

Amendment 33, in clause 18, page 12, line 20, at end insert—

‘“small charity” means a charity whose gross income for a tax year is no more than £25,000.’.

This amendment defines a small charity as one whose gross income for a tax year is no more than £25,000. This figure is consistent with that given for lower-income charities in the Charities Act 2011 and the Office of the Scottish Charity Regulator’s Routine Monitoring Policy.

[Cathy Jamieson]

I look forward to further interesting debates on the proposals—we had interesting debates both on Second Reading and in Committee. This large group includes significant proposals, although a number are consequential on acceptance of the main amendments.

We discussed a number of the significant proposals on Second Reading and in Committee. They follow a pattern. I thank the Minister—it might be one of the few times I do so—for listening to some, but not all, of the concerns raised in Committee. At the time, it was not always clear that he would introduce amendments or deal with other things, but I thank him for listening. Crucially for the charities, if not for the Opposition, he has responded to points that the charitable sector raised with us.

Today we have once again heard concerns from the wider charity sector about the reported deficit of more than £300 million in 2011, which it has brought to public attention. That shows the current difficulty of getting donations and income into charities while at the same time they are facing increased burdens on the services they provide—not that the sector sees its services as burdens. Hopefully, more charities will benefit from the Bill now than would have benefited from it when we debated it in pre-legislative scrutiny, on Second Reading and in Committee.

We had long debates in Committee on some clauses and amendments. I am sure the House will be relieved to know that I have no wish to repeat them verbatim—that would be unhelpful—but it is worth noting that the same issues came up in Committee time and again, which suggested that further work needed to be done to amend the Bill. We also need to continue to scrutinise what the Bill will do in the light of subsequent amendments.

There is an extensive list of proposals in the group, and I want to refer to a number of them. It would be wise of me to put on record that we have tabled new clauses 1 and 2 because they would deal with a number of concerns that the Opposition and the charity sector have raised throughout the Bill’s progress. Perhaps the Government have acknowledged—in their amendments in Committee and on Report—that the original Bill was not drafted as tightly as it might have been, or in a way that ensured as much fairness and equity as possible.

It is therefore right and proper that we return to the issue of formally reviewing the Bill after a two-year period. The Minister said many times in Committee that he was willing to look again at the measures and acknowledged that he wished to amend the Bill—we will discuss that later. However, when the Chancellor first announced the scheme, he said he wanted it to deliver

“gift aid on the contents of the collecting tin and the street bucket”—[Official Report, 23 March 2011; Vol. 525, c. 962.]

He also pledged that the reforms would be “bureaucracy-lite”. That theme has run throughout our discussions.

The Bill will doubtless benefit a number of charities and community amateur sports clubs, which is welcome, but the Government need to reassure charities that they are committed to making the Bill the best it can be. Given that many of the concerns that have been outlined will not result in changes to the Bill before Royal Assent, we can know how well the scheme is performing in practice only if there is a formal review. In any event, it would be good practice to review legislation after a period of its operation. That theme ran through a number of proposals that the Opposition tabled in Committee.

The Minister will note that we are trying in new clauses 1 and 2 to add extra detail to the report that we originally asked for in Committee. Let me say a few words about why a detailed report is so important. I do not want to go through all the arguments again, but we heard in Committee that anywhere between a third and a fifth of charities would benefit as a result of both the strict eligibility criteria and the community buildings and connected charities provisions, which we have debated extensively at various stages. The corollary to that is that a significant number of charities will be unable to benefit. The scheme could therefore be divisive, favouring some types of charities over others. That theme also ran through the debate.

Attempting to solve one problem often produced unintended consequences and difficulties—I am thinking of our debates on churches, and on large versus small charities—and that is why we ask in the new clauses for a breakdown and a review that gives more detail. That is important. New clause 1 mentions registered charities, exempt and excepted charities, and charities in different regions. That would mean that we can fully understand the impact of the scheme once it is in operation and redress any inequalities as soon as possible.

We spoke extensively in Committee about the complexity of the Bill. As we heard, it is estimated that 160 pages of guidance on Her Majesty’s Revenue and Customs website will be needed to explain it. There are 80 pages on registering for gift aid, so perhaps we can agree that the Bill is more complex than we would like it to be. Not just the Opposition and the charity sector understood that and raised such particulars; the Minister, in the sixth sitting of the Bill Committee on 23 October, admitted that the rules were complex in response to one of my hon. Friends. He said:

“I readily admit that this part of the Bill is complex and that we do not know exactly how it will work until it comes into practice.”––[Official Report, Small Charitable Donations Public Bill Committee, 23 October 2012; c. 207.]

In another Committee sitting, he said that

“the very nature of trying to capture issues such as connectivity—whether it is here where we are dealing with charity, or in other laws where we are dealing with trusts—is complex.”

He has also said that:

“Clearly HMRC is like any organisation; mistakes can always be found.”––[Official Report, Small Charitable Donations Public Bill Committee, 25 October 2012; c. 223-5.]

I make those points simply to reinforce the rationale for building into the process a formal review, because of the nature and complexity of the Bill and the amount of guidance that will be required. At one point in Committee, I said that if a charity had £1 for every word of guidance needed, there would be a fairly significant donation to good causes. It is important that the Bill requires a formal review, so that we can understand the provisions and ensure that we keep tabs on the costs of the scheme.

In the Minister’s deliberations in Committee, he often spoke of having to be a good guardian of the public purse. I would have thought that it would therefore be only right and proper for the Government to commit formally to reviewing the costs of the scheme after an appropriate period—reviewing the spending, because the Minister said that as many charities as were eligible would be able to take part in the scheme, and to ensure that the money was equitably distributed, identifying any problems in the regions of the different nations that make up the UK.

There are a number of concerns about the data on which we begin the process. The Minister was good enough to write to the Opposition to answer a number of the questions we raised in advance of the debate. He mentions in his letter amending the matching rate; amending the eligibility period to two years; introducing a power to amend the eligibility criteria in future; and changing the powers in some of the clauses. He goes on to give some information about organisations that can claim gift aid but are not covered by Charity Commission data. He gives figures, and that is helpful, although—as is often the case in these scenarios—the answers to questions immediately prompt a series of other questions. Some of the responses that we have subsequently had from the charity sector suggest confusion in some areas, and I hope that the Minister will be able to clear that up. He could also help us to establish that baseline from which the success or otherwise of the scheme could be judged in the future.

For example, in the Minister’s letter he suggests that 60% of the organisations claiming gift aid in 2009-10 were registered charities. I am not entirely sure what that 60% represents. Was that 60% of the 68,357 charities to which gift aid repayments were made in 2009-10? That figure comes from HMRC’s own release. If that is the case, it would suggest that just over 41,000 registered charities were claiming gift aid in that year, which of course means that some 40% of the total were claiming other types. It would be helpful if the Minister could clarify the point and reassure us.

The Minister also indicates in his letter that HMRC does not hold data on the number of charities making gift aid claims. That is a bit confusing because HMRC has been able to provide some statistics and figures, so it seems that it does hold some underlying data, if perhaps not all of the data that we have sought. It would be helpful to have some clarity on that point. Does HMRC not hold up-to-date data on the number of registered charities or have we somehow misunderstood the Minister’s letter? If so, the charitable sector is saying that it too could have misunderstood, and that does not bode well for good communications.

It would be helpful if we were able to ensure that we have such provision in the Bill. As we know, Ministers come and Ministers go. This Minister is relatively new in post and it is good to see that he is still here to reap the benefits and take the plaudits when the Bill passes—as it no doubt will—but another Minister may come along in due course who may not have paid quite so much attention to the Bill and perhaps has not fully appreciated the amount of attention to detail from this Minister and the commitments that he made in Committee. For that reason, it would be helpful to have something on the face of the Bill, as outlined in new clauses 1 and 2.

I fully appreciate the fact that the Minister has tabled some amendments, to which he will speak in due course. Depending on what he has to say, those amendments may make some of the amendments that we have tabled superfluous or redundant, but it is important to place on record our reasons for tabling them.

A whole series of consequential amendments flow from amendments 8 and 9, which provide for a sort of probationary period for charities before they qualify. The Minister will no doubt already be thinking that his amendments on the claims history would give more benefits to some charities than our amendments. That may well be the case, but the counter-argument would be that under our amendments charities would be able to benefit sooner.

The Minister will also remember that in Committee we tabled several amendments pushing him to reconsider various aspects of clause 2. We did that because the sector essentially felt that the three-year history of successful gift aid claims and the requirement that charities must have been in existence for at least three complete tax years before they could benefit from the scheme were overly onerous and out of proportion to any risk of fraud. The Government have tabled some amendments in this area and I take that as a sign that they have listened to our concerns and taken steps in the right direction.