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Budget fallout: tax avoidance definitions ‘hurt charities’

The Charity Tax Group has taken umbrage at the new Budget, remarking that new tax avoidance definitions hurt charities and let tax evaders off with impunity.

Chancellor George Osborne’s latest Budget has received no love from the Charity Tax Group, thanks to the announcement of the Government’s consultation on ways to stamp out tax avoidance through the use of charities established for that exact purpose. The consultation proposes new definitions that would see tax relief abrogated for any charity that was founded to obtain tax advantages in the first place, and while that may sound like a positive step in theoretical terms – the idea of individuals forming a charity simply to take advantage of its status as eligible for tax relief sounds perfectly reprehensible after all – the bare truth of it is much more complex and nuanced, says the Charity Tax Group.

The Group did say that stamping out such behaviour is an excellent goal, but the legislative changes proposed by the consultation do nothing to stop tax avoiders but instead go after charities. Using the term ‘tax advantage’ is also misleading, according to the industry body, because tax relief – which the Government expressly intends to provide to charities – is a form of tax advantage, and the Charity Tax Group has fears that this will be interpreted literally in the years to come, leading to too many legitimate charities being targeted for investigation into tax avoidance.

So is there some massive conspiracy on the part of the Government to stamp out charities once and for all in the UK? Hardly. For what it’s worth, I simply think that lawmakers and regulatory bodies are just so bloody daft that they don’t think of the consequences of what they’re doing, saying, or drafting into prospective new laws because of their zeal to appear tough on tax avoidance and tax evasion. Look at how much the contractor and freelancer community has suffered under recent pushes to eradicate tax avoidance for example – how many times have you heard of legitimate contract workers being dragged over the coals because of the way the regulations are worded? It’s a bloody mess there, and that madness could easily spread to the charity sector if this new regulation goes into effect unchanged. Well, I certainly hope that regulators will think long and hard on this issue before pressing forward blindly into the future!

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