Below is the text of Mr Major's written Parliamentary Answer on Separate Taxation on 17th January 1990.
Sir John Stanley To ask the Chancellor of the Exchequer what steps he will take to ensure that charities do not suffer a loss of income from covenants from married couples where one of the spouses is not paying income tax as a result of the introduction of separate taxation as from 1 April 1990.
Mr. Major [holding answer 21 December 1989]: A charity's claim to refunds of tax on payments received under covenants does not depend on whether the covenantor is, or is not, liable to pay tax on his or her own income.
A covenantor making a covenant payment to a charity deducts basic rate tax and pays over to the charity only the net amount. The charity is entitled to claim back that tax from the Inland Revenue.
If the covenantor is liable to tax on an equivalent amount of his income, he gets basic rate relief for the covenant payment by retaining the tax he has deducted from it. If he is not liable to tax on an equivalent amount of his income, he has to pay over to the Inland Revenue the tax he has deducted.
The introduction of independent taxation for married couples with effect from 6 April 1990 will mean that a husband and wife will become separate taxpayers. If one of them will not be liable to tax, the effect on his or her covenants will be no different from what happens now when a covenantor is a non-
For the past year, Inland Revenue publicity material has drawn attention to the fact that couples who find themselves in this situation may want to review their covenant arrangements. That is a matter between covenantors and the charities that they support.