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Charities criticise plans to cap tax relief on charitable donations

Plans to restrict tax relief on charitable donations could lead to a fall in philanthropic gifts, according to some of the UK’s leading charities.

The warning follows the Chancellor’s decision to impose a cap on income tax reliefs claimed by individuals where they are currently unlimited.

For anyone seeking to claim more than £50,000 in reliefs, including those available on charitable giving, a cap will be set at 25% of income (or £50,000, whichever is greater).

The Government says the changes, due to come into effect from April 2013, will help to prevent wealthy individuals from abusing loopholes in the tax system.

But some charities have reacted angrily to claims that wealthy charitable donors are trying to avoid paying tax, adding that the measures could lead to a fall in donations.

‘The Treasury has always been rather distrustful of the philanthropists,’ leading philanthropist Dame Stephanie Shirley told the BBC. ‘To look at philanthropists as if they were just being tax avoiders is really rather disgusting.’

Meanwhile John Low, chief executive of the Charities Aid Foundation, said: ‘This is not a ploy to save tax. Philanthropists who make large donations give away far, far more than they could ever claim in tax relief. That money goes to fund projects for the public good, such as medical research and help for the most vulnerable in society.’

However, the Deputy Prime Minister, Nick Clegg, has defended the changes, adding that the new system will still allow ‘people to make very significant contributions to charity in a way that is preferential to their tax arrangements’.