Treasury could keep any gift aid revenue created through income tax rise in Scotland
Charities fear £100 million gift aid revenue will be at risk when Scotland takes control of its own income tax next year.
The introduction of a separate income tax system in Scotland will undermine the gift aid system because Scottish and UK taxes could soon diverge.
MSPs next April will have the powers to raise income tax.
But charities fear any rise could technically be kept and not passed on to Scots charities as the Treasury will keep control of collecting and distributing gift aid from Scottish taxpayers.
Now Labour’s Ian Murray, the shadow Scottish secretary, has tabled an urgent amendment to the Scotland bill urging Treasury ministers to agree to an immediate review of the possible risks to gift aid from any tax changes.
He said: “Many charities across Scotland have raised with me their concerns about the impact on gift aid. It’s essential that we get to the bottom of these issues before the new powers are implemented.”
We want a much more proactive approach; we don’t want to wait until problems emerge - Ruchir Shah
Gift aid works by allowing a charity to reclaim the 20% basic rate of tax already paid by a donor on their earnings or savings when they make a gift of clothing or toys to a charity shop, buy an entry ticket to an event or building or make a cash donation.
If income drops below 20% current rate that too will create problems as the Treasury will be forced to subsidise Scottish contributions to the standard UK income tax rate.
The Scottish Council for Voluntary Organisations (SCVO) fears that if Scotland pursued a higher rate tax without it being passed on through gift aid, donors would lose trust in the system and be discouraged from giving.
SCVO’s policy manager Ruchir Shah said: “No one knows what the situation really is going to be until the taxes are collected at the end of the tax year.
“But we want a much more proactive approach; we don’t want to wait until problems emerge.
“We’re not just concerned about how charities might lose out. We’re also concerned about the relationships with the Scottish donating public and if we lose that trust with the public, it really starts to create problems for us in the longer term.”
