REVIEW OF CHARITY TAXATION - CONSULTATION DOCUMENT PUBLISHED

Proposals to encourage more individuals and businesses to give to
charity, and to simplify the tax system for donors and charities, are
set out in a consultation document published today as part of the
Government's Review of Charity Taxation. In addition, to further
encourage gifts from business, Budget 99 extends the number of
charitable causes to which they can donate equipment and get tax
relief against their profits.

Economic Secretary, Patricia Hewitt, said:

"We want the tax system to encourage more people to give to charity
and to be as simple as possible for donors and charities to operate.
There has been a decline in recent years in the number of people
giving to charity, particularly amongst the young. We need to create
a more dynamic giving environment. This document sets out a range of
options for achieving just that."

The document contains proposals to:

- improve Gift Aid to make it a more accessible means of
tax-effective giving by reducing the minimum limit for
donations from #250 to #100 and allowing that limit to be
reached by instalments - to take effect when the current
Millennium Gift Aid scheme finishes at the end of next year;

- make the Payroll Giving scheme more flexible by removing the
maximum limit for donations and allowing employers to
distribute employees' donations directly to charities;

- encourage greater take-up of the Payroll Giving scheme through
a "kick start" supplement from the public purse to add an extra
10 per cent to donations made over a limited period, backed by
a campaign to encourage more employers to set up schemes;

- modernise the existing VAT reliefs for charities to make them
simpler and more consistent, including the relief for
advertising costs;

- simplify the tax system for charities, for example, by
exempting from direct tax the profits of small charity
businesses, extending and aligning the direct and indirect tax
reliefs for fund-raising events, and providing a single
telephone helpline that charities can ring for advice on all
aspects of tax.

In addition, to encourage more giving by businesses, the number of
good causes to which businesses can donate equipment and get tax
relief against their profits is being widened to cover all charitable
causes. The necessary legislation will be brought forward in the
forthcoming Finance Bill.

Inviting responses, Patricia Hewitt added:

"We have had an excellent response so far to the Review. Charities
have told us many ways in which the tax system, particularly VAT,
causes them genuine difficulties. The consultation document we are
publishing today gives all interested parties a real opportunity to
continue to work with us to help shape future reforms."

"We want an active dialogue with charities and look forward to
receiving their views and suggestions in this phase of the Review. We
will also be carrying out new research into changing attitudes to
giving which will help us evaluate responses and put in place a
flexible tax system which provides effective incentives to donors."

Responses to the document are invited by 31 August 1999. Following
evaluation of those responses, and of further research into
charitable giving, reforms will then be introduced.

Notes For Editors

The Review of Charity Taxation was launched in July 1997. During the
first phase of open consultation, over 3,000 charities, individuals
and interested parties sent in their views on a wide range of
subjects. Today's consultation document contains the Government's
options for further discussion.

Charities already receive over #2 billion of tax reliefs each year,
including #1.1 billion relief from direct tax, #200 million relief
from VAT and the rest in business rate relief.

Charities' income and gains are in general exempt from direct tax
provided they are used for charitable purposes. In broad terms,
trading income is exempt from direct tax if the trade is carried on
as part of the charity's primary purpose or if the work is carried
out mainly by the beneficiaries of the charity. Income from certain
small-scale fund-raising events is also exempt from direct tax, by
concession.

There are a number of existing tax incentives to encourage giving to
charities:

- Gift Aid provides tax relief for individuals and businesses on
single cash gifts of at least #250;

- Millennium Gift Aid provides tax relief for individuals on cash
gifts of at least #100 provided they are made to benefit
educational or anti-poverty projects in the world's 80 poorest
countries. The amount of #100 may be made up by instalments
but must be paid before 31 December 2000;

- Payroll Giving provides tax relief for employees on donations
made through their pay, up to a limit of #1,200 a year;

- Deeds of Covenant provide tax relief for individuals and
businesses on regular payments made for a period exceeding
three years;

- Businesses can get tax relief against their profits for gifts
of trading stock and equipment which they sell or use in the
course of their business. This can include items such as
computers and minibuses. The relief is currently limited to
gifts to schools and colleges in the UK and, under changes
introduced last year, to gifts for educational and medical
purposes in the world's poorest countries.

There are also reliefs from Inheritance Tax and Capital Gains Tax for
gifts to charity.

Charities currently also benefit from a wide range of VAT reliefs on
the supplies that they buy, and supplies that they make. For
example, charities do not pay VAT on certain advertising services for
fund-raising purposes, construction of new buildings for their
non-business use and certain building alterations to facilitate
disabled people. Charities are also not required to charge VAT on
the sale of donated goods, supplies they make in connection with
certain fund-raising events and welfare services supplied on a
not-for- profit basis.

The consultation document is available from:

Windy Kwok
Inland Revenue
Room 108 New Wing
Somerset House
Strand
London WC2R 1LB

Fax : 0171 438 7134
E-mail: wkwok.ir.sh@gtnet.gov.uk
Telephone : 0171 438 6742/7623

Copies are also available on the Treasury, Inland Revenue and Customs
and Excise Internet sites:

http://www.hm-treasury.gov.uk
http://www.inlandrevenue.gov.uk
http://www.hmce.uk

A Draft Regulatory Impact Assessment is also available at the above
address and on the above Treasury Internet site.

HM TREASURY PRESS OFFICE
Press enquiries to: 0171 270 5238
Non-media enquiries to: 0171 270 4558

If you have access to the Internet you can find this news release at
http://www.hm-treasury.gov.uk. Other Treasury material can also be
found at this address.

# = pounds sterling