By JOHN ROBERTSON
An historic spending cut was agreed yesterday when Shetland pensioners’ Christmas bonus was removed from those not on low incomes. The radical change to Shetland Charitable Trust’s flagship policy has been forced by a threat to its charitable status after the taxman began penalising it for dishing out the annual grant regardless of need.
After a long debate and three votes at yesterday’s trust meeting it was agreed by 14 votes to six to a introduce a much-reduced scheme, the details of which still have to be worked out. A special group of nine trustees which looked into the scheme had recommended fixing the grant at £300 and limiting it to over-60s on government pension credits, cutting the cost from £1.26 million a year to £589,000.
Chairman Bill Manson said the cut would reduce the trust’s spending on the elderly from 44 per cent of its budget to 39 per cent.
At the request of other trustees consideration is to be given to diluting the proposal to try to prevent too many people with genuine need slipping through the net. The trust will look at paying the grant to those on housing benefit and council tax relief rather than pension credits only. But another possibility is that the grant will be restricted even further by limiting it to pensioners over 70. The bonus is also paid to disabled people and they will continue to qualify as before.
Winners under the new scheme will be households of more than one pensioner on credits because they will each get the £300 grant.
A bonus has been paid out since 1987 as a token method of helping older folk share in the oil boom wealth. Until now it has been going to 3,300 households containing a pensioner or disabled person regardless of how well-off they were. But HM Revenue and Customs (HMRC) has begun levelling an annual tax demand of over £200,000 for what it regards as a non-charitable gift.
The trust was facing a tax bill of nearly £830,000 to cover the past three years of the scheme. After 18 months of negotiations HMRC has agreed to accept £605,000 of which £127,000 has already been paid over.
During negotiations HMRC told trust financial controller Jeff Goddard it was not aware of any other charity in the country which simply hands out cash without means testing.
Trustees agreed yesterday to settle the remainder of the bill, which requires them to fork out nearly £478,000. Mr Goddard said the deal was the best that could be achieved from long negotiations and he advised not bothering to challenge the demand through the courts.
The taxman started getting tough with the trust after charity laws were tightened and it began demanding tax be paid on 100 per cent of the grants instead of the previous level of 22.5 per cent because there was no evidence that recipients were in need of charitable donations. A compromise has been reached where 73.1 per cent of bonuses are considered not charitable and liable for tax, based on the percentage who do not to qualify for pension credits. The tax demand averages £201,740 for each of the past three years.
A number of trustees declared an interest as pensioners before taking part in yesterday’s debate.