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Keeping charitable donations tax-free

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Keeping charitable donations tax-free

Professor Kimberley Scharf at the ESRC Centre for Competitive Advantage in the Global Economy (CAGE) has been widely credited with helping to reverse government proposals of a cap on tax relief for charitable giving.

Before joining CAGE, Professor Scharf and Professor Sarah Smith at the University of Bristol completed a study of Gift Aid reform. CAGE actively promoted this work, disseminating four working papers on charitable giving, and co-funding a summer school on 'National and International Perspectives on Generosity and Wellbeing', with participants including economists from HM Treasury and HMRC.

In 2012 the Coalition Government announced in the Budget that from April 2013 it would introduce a cap on certain unlimited income tax reliefs, to avoid large donors using the unlimited relief for tax avoidance. Many charities and voluntary organisations raised concerns that this would undermine the incentives for those on higher incomes to make charitable donations.

In an early response, Professor Scharf challenged the lack of an evidence base for the proposal, drawing on her own research as well as joint research with Sarah Smith. In a widely quoted blog she also suggested the un-targeted nature of the cap had doubtful economic credential and lacked evidence about effectiveness in countering tax avoidance. She also questioned the lack of an administrative plan for implementing the policy.

This drew immediate comment and interest from the non-profit sector, including the influential Charities Aid Foundation and several charities such as the Red Cross.

In July 2012 a formal consultation on the cap was launched and in December 2012 the Government confirmed that it would proceed with this reform - but with charitable donations excluded. Provisions were made for this in the Finance Act 2013.


  • Charitable donations were excluded from the cap on unlimited income tax reliefs in the Finance Act 2013. Stakeholders suggest the impact stemmed from the timeliness of Professor Scharf's critical assessment, its research-based credibility, and the use of blogs and social media to disseminate her views.
  • Professor Scharf also maximised impact by drawing on a deep understanding of the sector, evidence of donor behaviour and the effects of taxation on attitudes to provide a public policy context.
  • Although ministers were responding to many influences in reversing this aspect of the policy, the evidence foundation provided by Professor Scharf and shared in many charities' responses added to the weight of evidence challenging the policy.