Gift Aid deduction for tax credits

Gift Aid deduction for tax credits

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Gift Aid is allowable for tax credit purposes. However, should the deduction be grossed up the standard rate (20%) or byt he amount the charity receives in total (22%). Guidance by HMRC does not make it clear:

http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04003.htm

I assume it is by the standard rate, anyone know any different?
Robin Dunne

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By thehaggis
29th Jan 2009 11:39

Basic rate
The payment you make is after basic rate tax has been deducted. If you pay £80, it means that you have really paid £100 less 20% tax.
The charity can claim back the £20 tax. If you pay tax at 40%, you can claim back the additional 20%.

http://www.hmrc.gov.uk/incometax/relief-gift-aid.htm

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By thehaggis
29th Jan 2009 22:43

Which year?
For 2007-08 the basic rate was 22%. The current rate is 20%.

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By ACDWebb
30th Jan 2009 12:22

Yes it is, and
No it doesn't

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By robindunne
30th Jan 2009 09:57

For this year 2008/09
It's for this year. With the basic rate now being 20%. I assume this what the Gift Aid contribution is grossed up by for the deduction.

I understand that the charity claims a further 2% from the State to compensate for the 2% drop in basic rate from last year. I just need to know if this has any implications on the grossed up amount.

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By User deleted
29th Jan 2009 12:56

Gift Aid
I use Tax Calc and their calcuation grosses up at 22%

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