Client receives salary at the LEL and the rest as dividends. He wants to make a donation (as an individual) to a charity.
For Gift Aid, would he be regarded as a Tax payer on the basis that the dividend comes with a tax credit?
Have been searching on Google but cannot find the answer. Have phoned HMRC charities but got this: 'the person you need is in a meeting'
Thanks for the guidance on this.
Replies (5)
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Tax liability
Provided their tax liability for the year is as much as the gift aid addition they will be fine. So if all they get is lower rate dividends they will have no tax to pay and so will get a GA bill.
If some of the dividends are taxed at above 10% they may be ok.
I disagree ...
... with the above response.
And so does our software (not that that is necessarily conclusive of course).
I put in £5K salary, £20K divis, £1K gift aid. No liability
With kind regards
Clint Westwood
I agree with Clint
Intuitively, I think the donor has suffered the tax, therefore should be allowed to treat the tax credit on dividends received as 'paid'.
SA
I also agree with Clint
The individual does have a tax liability on the dividends - that in itself makes him a taxpayer - it is just that the liability is settled from the tax credit attached to it.
Though I do agree with the original respondent that there may be a problem if the tax on the gift aid is more than the tax "paid" by the individual.
Question about Gift Aid
I was wondering exactly the same question as this isn't clear from HMRC Gift Aid web site info. I called the Charities help line and was told that the tax on dividend income couldn't be used for Gift Aid relief. the person I spoke to implied this could be provided in writing if required. So, is the software wrong or not??
PS as usual, accountingweb tremendously helpful for so many questions that crop up ...