Sector urges give and take to stop 'charity-tax' policy deterring donors

Big donors to universities are already being put off by the "charity-tax" row and institutions need clarity urgently, according to the executive director of the Council for Advancement and Support of Education in Europe.

Kate Hunter co-signed a letter sent to George Osborne, the chancellor, at the end of March, which warned that universities could be among the worst hit by plans to curb tax relief on charitable gifts because they attract a disproportionate amount of large donations.

The changes, which would come into effect from April 2013, cap the amount of tax relief that philanthropists can claim from their donations at £50,000 or 25 per cent of their income, whichever is higher.

Ms Hunter, who signed the letter alongside Nicola Dandridge, chief executive of Universities UK, said: "The longer this goes on, the more uncertainty it causes."

To judge from a recent Case event, philanthropists have been unsettled by the Treasury plans and are already expressing doubts about donating next year, she said.

The Financial Times reported early this week that the Treasury was considering alternative plans, such as raising the tax-relief limit on charitable donations to half of a person's income or allowing donors to roll over the relief to subsequent years.

Ms Hunter said that the charities sector, along with Case, was still lobbying to keep the status quo of no cap.

"The worry about all [the alternative proposals] is [that they] make tax quite complicated if you're asking for gifts," she said.

The letter, which was sent before the row over the changes made national headlines, warns the chancellor that universities are "seriously concerned that these measures might have the unintended consequence of reducing the size of donations, without increasing the amount of tax gathered".

UUK and Case confirmed that they had not been asked about the potential impact of the plans before they were unveiled.

A spokeswoman for the Treasury said that it does not share planned changes to tax policy before the Budget and that consultation with charities and philanthropists is now taking place in advance of draft legislation.

She said that the changes were part of a broader package of measures that would stop the wealthy reducing their tax bills to close to zero.

According to the latest Ross-Case survey of philanthropy in the sector, higher education institutions received a cash income of £560 million from donations in 2010-11, up from £517 million the previous year. This makes up about 2 per cent of the sector's total income.

Some 44 per cent of the cash income went to the universities of Oxford and Cambridge in 2010-11, while the other members of the Russell Group netted 26 per cent.

Roger Brown, professor of higher education policy at Liverpool Hope University, said that the changes could have an impact on Oxford, Cambridge and some other Russell Group universities but "for the majority of the sector it's not a big issue".

david.matthews@tsleducation.com.