Gift Aid: transitional relief
As mentioned in the Personal Tax section, the basic rate of income tax will be cut from 6 April 2008 to 20%.
Donations to charity under Gift Aid are made under deduction of basic rate tax which the charity is then able to reclaim. With a 22% basic rate, a cash donation of £100 grosses up to £128.20 in the hands of the charity. At a 20% basic rate, the same donation will only gross up to £125 for the charity.
UK charities and Community Amateur Sports Clubs (CASCs) that claim repayments of tax in respect of qualifying Gift Aid donations, and charitable intermediaries making claims on their behalf, will be entitled to a transitional relief to mitigate the effect of the change in the basic rate.
A transitional relief payment will be paid by HMRC to the charity, CASC, etc when a claim for repayment of tax is made relating to qualifying Gift Aid donations made in the tax years 2008/09 to 2010/11.
The government also intends to implement a package of measures aimed at reducing the administrative burden for charities in operating the Gift Aid scheme.
Review of HMRC powers, deterrents and safeguards
In 2007 legislative provisions on a new penalty regime were introduced. Further provisions will be implemented by HMRC covering:
- the power to obtain information and documents
- the production of documents
- restrictions on powers to obtain information and documents
- appeals against notices
- offences in relation to documents
- powers to inspect businesses
HMRC also want to extend the new penalty provisions introduced last year to cover all taxes, not just the five main taxes that they administer. Most of these new provisions will take effect for 2009/10 onwards.
One of the most contentious areas is the power to inspect business premises. Currently HMRC have the power to inspect records only for the purposes of PAYE and VAT. The VAT legislation also gives a right of access to premises but no equivalent power exists in direct tax. HMRC consider it to be a very important part of the new investigation process. They state that the procedure has advantages for both taxpayers and HMRC, although the reasons they give for this do seem to be largely in their own favour!
Payment, repayment and debts
HMRC intend to introduce new legislation to:
- enable HMRC to introduce a credit card payment service from autumn 2008
- enable HMRC, later this year, to set the repayments they must make to individuals and businesses against amounts owed to them
- modernise and align HMRC's debt enforcement powers to collect unpaid sums by taking control of goods in England and Wales or by taking action through the civil courts.