UK Prime Minister's Office: Wealthy Abuse Charitable Deduction

Some wealthy people in Britain are making donations to charities that don't do a lot of charitable work in an effort to increase their charitable deduction, according to a report from the Prime Minister's office.

BBC News' report on this story came after Chancellor George Osborne announced a budget that placed a cap on tax relief from charitable donations. You might recall similar controversy in the U.S. from President Barack Obama's continuing desire to also cap charitable deduction. Osborne's Budget announced that starting in April 2013, the maximum amount that can be claimed from tax relief is £50,000 or 25 percent of the individual's income, depending on which is greater.

In an interview with the British paper The Daily Telegraph, Osborne said he was "shocked" by what he saw as a large scale attempt by the rich to avoid taxes through charitable donations. That interview, and the chancellor's budget, was criticized by leading philanthropists and charitable organizations. John Low, chief executive of the Charities Aid Foundation, told BBC News that the Chancellor is wrong to equate tax relief on major donations as tax avoidance. He went on to say that a blanket cap on deduction will cost charities millions by making it more difficult for donors to make major donations.

A spokesman for the Prime Minister's office defended the cap, saying it was necessary to prevent abuse by some wealthy citizens.

You can read the full story on BBC News' website.