Thes idea is being pushed by you know who:
Blair confirms that he gives “substantial amounts” to charities, of which he has set up three since being forced out of Downing Street. Each time that he makes a donation to one of his own charities, they are legally entitled to claim back gift aid and he can also claim tax relief.
The effect is to allow him to escape paying income tax on what he gives, while receiving further relief on top. According to experts, a donation of £500,000 by Blair to one of his organisations would amount to a donation of £625,000, including gift aid, with £125,000 subsidised by the British taxpayer.
Tony Blair would also be entitled to claim further tax relief at 30 per cent of the £625,000, equivalent to £187,500, which would be handed back to him. “These charities do good, but there is a lot in this for the benefit of Tony Blair,” claims Richard Murphy, an accountant, who is critical of the former Labour prime minister’s business dealings.
Look, this is nonsense.
Forget the flow of money for a moment and look at the stock before donation and after donation.
Assume Tone\’s on 50% (he is).
He earns £1 million. Pays 50% on it (there\’s no NI at this stage of the income game, or at least not enough that we\’ll worry about).
£500 k to the taxman, £500k to Tone.
OK, so instead of spending that dosh on himself, he donates it to a charity. The charity gets basic rate tax given back to it, the tax already paid, of £200,000 (the Telegraph\’s numbers above are wrong). Tone then gets tax relief on his own tax return of £300,000: the difference between the 20% basic rate and the 50% top rate.
So, at the end of all of this Tone has, out of that £1 million in earnings, £300,000 in his bank account. This is less than the £500k he would have had if he had paid the tax and not donated.
So how has he benefitted from making a donation?
If I\’ve got the numbers wrong and the Telegraph is correct then in fact Tone has £187,500 and not £500k. He\’s still, not in any manner that I can see, benefitted from making a donation to charity.
So what in buggery is Murphy playing at?
As to this:
A source at HM Revenue & Customs says: “It is perfectly legal [but] people are, effectively, using the mechanism of the tax system to make a contribution to a charity of their choice, while ignoring their responsibility to the state.
“People claim they want to do things out of the goodness of their own heart, but you cannot expect UK Plc to subsidise them. The claim that charities spend the money better than the state is absurd. The reason we have a welfare state is because charities cannot cope.”
That source at HMRC needs to be fired. Now.
That\’s a political argument you\’re making and you\’re not in politics, you\’re in the civil service. Shut it.