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How Gift Aid Works - June 2009 |
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What is Self Assessment Giving? When an individual, sole trader or partnership gives money to a charity or Community Amateur Sports Clubs (CASC) through Gift Aid, you can take their donation – which is money they’ve already paid tax on – and reclaim basic rate tax from HM Revenue & Customs (HMRC) on its ‘gross’ equivalent – the amount before basic rate tax was deducted.
If a donor is a higher rate tax payer, they too can benefit from the tax relief as they can claim back the difference between the higher rate of tax at 40 per cent and the basic rate of tax at 20 per cent on the total value of their gross donation.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/GivingMoneyToCharity/DG_10015097 |
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Most people have their tax automatically deducted from their earnings or pensions through PAYE (Pay As You Earn).
However, income that is not taxed through PAYE, such as property or investments above a certain amount, or people that are not on PAYE, such as the self employed, have to account for this income through Self Assessment. Higher rate taxpayers are usually required to complete a self-assessment return for each tax year.
Through Self Assessment, taxpayers can reclaim any tax benefits from Gift Aid and make further donations to charity. Individuals can also choose to donate any tax repaid to them by HM Revenue and Customs (HMRC) to charity. To benefit fully from this, ensure your charity is eligible for donations by obtaining your unique code from HMRC and promoting this to your donors. Gift Aid If a donor pays tax at the higher rate of income tax (currently 40%) they can also claim tax relief for themselves at 20% of their gross donation, or 25p for every £1 they give through Gift Aid. 20% is the difference between the basic rate of income tax (20%) and the higher rate (40%).
The Provision of Transitional Relief does not affect the amount the donor can reclaim as it is a separate relief.
This tax relief can be claimed by entering the donation in the Gift Aid section of their Self Assessment tax return.
Alternatively, some donors may receive a Tax Review form (P810) on which they can make a claim or the donor can get in touch with the tax office that handles their affairs. Claims can be dealt with over the telephone. Donating tax repayments to charity via Self Assessment When completing a first version of a Self Assessment tax return, a donor may nominate a charity to receive all, or part, of their repayment.
If a donor wants to nominate a charity to receive all of the repayment, they should tick box 19A.
If the donor is unsure of the value of the repayment due, they can cap the amount of the donation by completing box 19A.2. This will prevent a donor giving more than they intended to. Donors cannot use Question 19A if they are filing an amended Tax Return.
If donors want Gift Aid to apply on this donation, they should tick box 19A.4. However, they should only tick box 19A.4 if they expect to pay enough tax in the subsequent year to cover the donation. Donations will be anonymous unless box 19A.5 is ticked
Eligibility for Self Assessment Donations A donor nominates a charity to receive their tax repayment by entering the HMRC code for the charity in box 19A.3.
You can get your code to participate in this scheme at www.hmrc.gov.uk or by telephoning the Helpline on 0845 9000 444 or contacting your local office. |
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