Chancellor of the Exchequer George Osborne has unveiled a range of measures in his budget that are intended to help encourage private giving to the arts.
These changes will include a number of simplifications to Gift Aid as well as changes to inheritance tax to encourage charitable giving in wills. The government has also said it will to consult on extending the acceptance in lieu scheme on works of art from inheritance tax to other lifetime taxes.
Osborne said: “A society should not just be judged by the strength of its economy, but also the compassion of its people. The culture secretary [Jeremy Hunt] and I have been working on a series of substantial reforms that will support giving, from the largest donations to the coins collected in the charity bucket.”
Under these changes, Gift Aid will shift to a “much easier online system” by 2013. Gift Aid benefit limits will also be increased from £500 to £2,500 so that charities and museums can spend more money on celebrating major donations.
Meanwhile, on small donations, charities will be able to claim up to a total of £5,000 a year without the need for donors to fill in any forms at all. According to Osborne, 100,000 charities will benefit to the tune of £240 million from this change.
There are also significant changes to inheritance tax from next April, which will mean that if you leave 10% or more of your estate to charity, then the government will take 10% off your inheritance tax rate.
Arts accountant Anthony Pins, from Nyman Libson Paul, said that it was “hard to assess the impact” of the changes.
He added: “As far as arts organisations are concerned, the change increasing the benefit limit to £2,500 may be the most relevant, although whether it will actually encourage donors to give more remains to be seen. It certainly will not do any harm.
“The inheritance tax incentive is a fresh idea, as far as I am aware. Charitable legacies are already exempt for inheritance tax purposes, so this is just a further incentive to reduce the overall inheritance tax bill. Whether it will actually encourage people to donate at least 10% of their estates to charity is debatable.”
According to Pins, for an estate of £1 million, giving away £100,000 to charity would save £63,000 in tax and would leave the beneficiaries £37,000 worse off. He added: “It’s not a bad incentive on the face of it and looks good politically, but again, whether it will actually change people’s behaviour in practice, where charity tends to start (and in some cases ends) at home, remains to be seen. I think it will require a big educational push on the part of the charities to explain the mechanics.”
However, the changes were welcomed by Arts Council England. ACE chief executive Alan Davey said: “The necessary change to the Gift Aid regime is something the Arts Council highlighted in our report on endowments in the arts, so I am delighted to see this reflected in the Budget. It will make a real difference to arts organisations, large and small. Anything that improves the ability of the arts to attract income from legacies is also welcome.
“We look forward to playing our part in the consultation on Acceptance in Lieu, and we hope this will be extended to other tax proposals to encourage planned giving in one’s lifetime.”
A spokesperson for Arts & Business said that the announcements in the budget were “undoubtedly steps in the right direction”. He added: “In his budget today, the chancellor has made eight important announcements, each of which could have a significant impact on the level of cultural philanthropy in the UK. There are two areas in particular on which Arts & Business has campaigned – Gift Aid benefits and the gift of works of art.
“We welcome the increase in the Gift Aid benefit limit to £2,500 but are particularly pleased to see the government commit to better guidance on what constitutes a benefit. Confusion in this area has caused problems for both cultural charities and their donors. Arts & Business hopes to feed into this thinking through the Treasury / HMRC Charity Tax Forum.
“We naturally welcome the added incentive on Inheritance tax and hope that this move will encourage more cultural organisations to develop a legacy campaign. We also welcome the development of online filling and hope that thought will soon be given to ways in which higher rate tax payers on PAYE can also make claims more easily.”