Finance (No. 2) Bill (Fourth sitting)
Having debated so many clauses that tighten the rules and put up taxes on individuals and businesses, we finally reach something unusual for the Chancellor: a tax break. I will speak to the amendment—in my name and that of my hon. Friend the Member for Wyre Forest and the shadow Chancellor, my right hon. Friend the Member for Central Devon (Sir Mel Stride)—and to the clause. The clause addresses a long-standing phenomenon in the VAT rules governing the donations of goods to charity. In the present situation, when a VAT-registered business donates stock, those goods can sometimes be treated as if they were sold, triggering a VAT bill on a notional supply that never took place. Sensibly, the clause corrects that anomaly. It provides that qualifying charitable donations of goods will no longer count as taxable supplies for VAT purposes. In practical terms, that means that no output VAT charge will be liable simply because a business chooses to donate stock to a charity, provided that it meets the conditions and value limits set out in the legislation. I acknowledge that the change has been warmly welcomed across the charity sector, unlike some of the other provisions about which concerns have been raised. It represents a small but meaningful step towards encouraging more corporate donations. The Opposition, however, have tabled amendment 43, which would ensure that the £200 cap set out in the legislation would increase by the level of the consumer prices index in the previous tax year—as with amendment 41, that would mean that the measure would retain its value over time. The Opposition support the principle behind the measure. It is right to remove a barrier that discourages generosity and adds unnecessary complexity to charitable giving, but the Association of Taxation Technicians has already cited concerns. In its view, the changes do not fully match the existing relief for goods donated for resale. Businesses will still face different VAT treatments, depending on how a charity uses the donated items. Clause 80 adds yet another outcome, meaning that the system remains complex for what is, in simple terms, the same act of giving goods to charities—the charities across our constituencies. Practical guidance from His Majesty’s Revenue and Customs will therefore be vital, because businesses need to understand exactly when the new relief applies, how the value limits work and what evidence they must keep to stick on the right side of the rules. Without that clarity, many could decide that donating just is not worth the administrative hassle. Will the Minister commit to providing such guidance and working with the sector to produce it? According to the Budget documents, the measure will cost around £10 million to the Exchequer, which is a small price to pay for allowing more goods to reach charities and the communities they serve. However, amendment 43 would ensure that the measure retains its value over time. The current £200 limit risks eroding year by year as inflation drives up the cost of goods. Our amendment would simply link that cap to CPI, so that it keeps pace with prices, rather than becoming less generous each year. I think the Minister would have to agree that this is a modest and practical suggestion that would ensure the relief continues to operate as intended, so I hope he might agree to accept the amendment. To conclude, I will ask the Minister three things. What estimate has the Treasury made of the additional volume and value of goods expected to be donated following the change? Secondly, will HMRC commit to publishing clear and accessible guidance for small and medium-sized businesses so that they can use the relief with confidence? Finally, if the Government will not support our amendment, will they at least agree to review the £200 limit within a year or so, listening to evidence from charities and donors about how the policy is working in practice? In the end, the change is about making generosity easier, not harder. If we can make the tax system work just a little better for those who give and those who do so much vital work on the ground in our constituencies and communities, that is something that all members of the Committee would want to support. I look forward to the Minister’s response to what is a very modest and helpful amendment.